Archive for August 2008

August 31, 2008

“Targeted Maturity” Funds: An Ideal Retirement Investment Vehicle?

Targeted investing

Many future retirees want to save for retirement, but don’t want to spend hours poring over charts, stock quotes, and investment guides figuring out where their money should be invested.

Mutual funds relieve individual investors of the task of picking individual stocks. All you have to do is decide what kind of investment you want (growth stocks, bonds, a mix of stocks that tracks the indexes, health care stocks, or whatever), and pick the appropriate fund.

But you’re still stuck with the problem of asset allocation. How much should be in stocks, how much in bonds? What kind of stocks, what kind of bonds? And on and on. Besides, you know that your asset allocation should change over time. Generally, the closer you get to when you’ll need the money (usually when you retire), the more you’ll shy away from stocks and lean toward bonds.

What if somebody took all of this into account, and set up a professionally managed fund for everyone who knows they’re going to need the money, say, in 12 years, in 2020. Then all you would have to do is invest regularly in the fund. You’d know that an expert was taking care of all the issues mentioned above, and your money will be ready for you when you need it.

This, exactly, is the thinking behind so-called “targeted maturity” or “target date” funds
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August 29, 2008

New Trend: Kids Depending on Grandparents for Clothes, Money


Another thing for future retirees to consider as they calculate the amount of money they’ll need in retirement: what about the grandkids?

According to a recent study by a demographic research firm, high spending on kid’s clothes is linked to the number of senior residents in any given community. Especially communities with retirement homes for the affluent like West Palm Beach, Fort Meyers, and even Juneau.

This trend cuts across economic lines. And it signifies more than grandparents’ traditional fondness for spoiling their grandkids. A related poll found that 71 percent of parents plan to cut back on school clothes shopping this year. As times get tougher, and parents can’t provide as much as they used to, grandparents are being tapped to help pay for the necessities of life.
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August 26, 2008

Social Security, Medicare, Veterans’ Benefits: Please Don’t Call Them “Entitlements”

Im entitled!
“I’m entitled!”

Social Security. Medicare. Veterans’ disability and other benefits. For tens of millions of Americans, they’ve come hard earned: through decades of work, hundreds of thousands of dollars in payroll tax payments, and through the sacrifice of health, mobility, sight, or other basic bodily functions most of us take for granted. These government programs are all that stands between many Americans and abject poverty.

For some politicians and opinion makers, however, they’re “entitlements,” or even “entitlement spending.”

Words mean things. They also imply and suggest things, often covertly. These words provide a particularly disturbing example of just how damaging a hidden emotional message that flies under the radar of critical thinking can be.

“Entitlement” sounds innocuous enough, but it’s objectionable because it conjures up the image of a privilege that neither was earned nor is really needed, but that the recipient refuses to forego because he or she is—well, entitled.

“Entitlement spending” takes this line of thought a step further. It suggests—and is intentionally portrayed as—a troublesome class of government programs that mindlessly crank out, as if on autopilot, ever increasing sums to the “entitled.” The high cost of these programs, so the reasoning goes, depletes the government’s coffers, and makes it necessary to cut funding in other areas where it is more urgently needed.

In reality, the exact opposite is true.
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August 23, 2008

Simple Advice on Tapping Into Your Retirement Fund Early: Don’t

It’s no secret that the economy is currently in the midst of a slowdown. How serious is it? The old joke about the difference between a recession and a depression comes to mind: If your neighbor’s out of work, it’s a recession. If you’re out of work, it’s a depression.

Regardless of what you call the current economic situation, you may find yourself short of cash and looking around for a place where you can make up the shortfall. Then, a statement from your 401(k) or 403(b) plan arrives in the mail, and you think: hey, there’s tens (or hundreds) of thousands of dollars “just sitting there.” If I could just take a little out now…
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August 22, 2008

Gold as a Retirement Investment?

When people think of retirement investments, gold rarely crosses their minds. After all, gold doesn’t provide any income, and the whole purpose of saving for retirement is to replace the income shortfall when you’re not working any more.

To be sure, gold makes little sense for those who are already retired, and are seeking an investment that will generate income for day-to-day living. Future retirees, however, are less interested in current income than in growth and security of their retirement nest egg. For them, gold can be a part of a comprehensive retirement saving strategy.
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