Quick Takes

>>REALDEALRETIREMENT ON YOUTUBE  For practical tips on how to save, invest and create income in retirement, check out this YouTube video of RealDealRetirement editor Walter Updegrave’s participation in an Experian online forum on preparing for retirement. To access the retirement tools and resources mentioned in the video, go to RDR’s Retirement Toolbox.

>>ARE YOU GUILTY OF FINANCIAL INFIDELITY?  According to a survey by the National Endowment for Financial Education, 42% of Americans confess to “financial infidelity,” which includes hiding a purchase, bank account, bill or cash from a partner and spouse or lying about the amount of debt they owe or income they earn. NEFE says such deception can cause arguments, erode trust and even result in separation or divorce.

>>WHAT ARE THE ODDS YOU’LL MAKE MONEY IN STOCKS? The longer you stay invested, the greater the odds you’ll profit by investing in stocks. According to research by Dan Wiener and Jeff DeMaso of The Independent Advisor for Vanguard Investors, invest for one day and you have about a 54% chance of making money in the stock market. Invest for 12 months and the chance increases to 68%, and over a ten-year period the chance of coming out ahead rises to 87%. The figures are based on stock returns from 1927 through 2014.

>>PASSING UP FREE MONEY  Fully a third of participants in the 401(k) plans that Vanguard oversees failed to contribute enough to receive their the full employer match, according to the Vanguard Center for Retirement Research. The percentage of those failing to take full advantage of the match was significanatly higher (55%) in 401(K)s that automatically enrolled participants.

>>RIGHT TO MARRY COULD BOOST SAME-SEX COUPLES’ SOCIAL SECURITY BENEFITS $250,000 OR MORE  In anticipation of the Supreme Court’s ruling guaranteeing same-sex couples nationwide the right to marry, Financial Engines released research showing that, depending on their situation, same sex-couples could increase their combined lifetime Social Security benefit by $20,000 to more than $250,000. In one example, Financial Engines showed how a hypothetical married couple, Henry and Logan, could receive an extra $343,000 in benefits compared to what they’d receive as singles.

>>HOW WOULD AMERICANS HANDLE A SOCIAL SECURITY CUT?  Not well. When the Senior Citizens League asked Social Security recipients and others with an interest in Social Security retirement, survivors, or disability insurance benefits how a 20% benefit cut would affect them, 57% said they wouldn’t be able to afford one or more essential needs like housing, food or medicine, while 27% said they would have to spend through savings faster than planned. All the more reason to do as much as you can to have income options beyond Social Security before you retire.

>>WOULD YOU WALK AWAY FROM FREE MONEY?… Apparently many people do. New research from 401(k) management firm Financial Engines shows that American workers forgo some $24 billion-yes, billion—in 401(k) employer matching funds each year. Which is a shame, since a company match makes it easier to meet the oft-recommended savings target of 15% of pay per year.

>>SO MUCH FOR HEDGE FUND “MYSTIQUE”… Despite annual pay that can exceed $1 billion in some cases, hedge fund managers overall underperformed a basic 60% stocks-40% bonds portfolio for both the five and 10 years through January, 2015. Another reason to stick to broad index funds and ETFs.

>>TALK ABOUT UNREALISTIC EXPECTATIONS… Individual investors told researchers for the Natixis Global Asset Management Survey that they need annual returns of 9.7% above inflation to meet their financial goals. Given today’s low yields, stock valuations and growth prospects, they’ll be lucky to get half that from a diversified portfolio—and even then only if they keep costs down by investing in low-cost index funds and ETFs.

>>TOP 10 INVESTMENT SCAMS  The best way to avoid getting ripped off is to understand how investment scams work so you can spot them ahead of time. Toward that end, Investor Watchdog gives a rundown of the key features of 10 of the most popular scams, flim-flams and investment ruses being inflicted on investors today.

>>THE UNDERAPPRECIATED IRA  A recent LIMRA Secure Retirement Institute survey finds that more than 70% of workers don’t contribute to an IRA. The reason most often cited is that they can’t afford to, although nearly a quarter say it’s because they’re contributing to another type of retirement plan. In fact, a traditional deductible or Roth IRA can be an excellent way for many people to start saving even small amounts for retirement or supplement a company plan. The IRA Calculator in the RealDealRetirement Toolbox can tell you what type of IRA you qualify for and how much you can contribute.

>>5 BEHAVIORS SABOTAGE SAVING Why is it so hard for people to save? Prudential Retirement lists five behaviors that undermine our efforts: immediate gratification, procrastination, peer pressure to buy, overconfidence and underestimating longevity. Check out these 10 Tips To Turbocharge Your Savings.

>>401(k) FEES DROP, BUT REMAIN HIGH IN MANY PLANS  The 15th edition of the 401(k) Averages Book says 401(k) investment fees dropped slightly overall, but there’s still a huge range in costs between high- and low-cost plans: 0.43% to 1.88% a year in small plans and 0.31% to 1.38% in large plans. Reducing fees by even one extra percentage point a year over a 35-year career can boost the size of your nest egg by roughly 25%.

>>RETIREMENT INCOME DISCONNECT?  84% of Americans say they want a guaranteed check in retirement, but only 14% have bought an annuity, says a new TIAA-CREF survey. Troubling? TIAA thinks so. I say maybe, maybe not. But if you want more assured income than Social Security alone will provide, it makes sense to at least consider an immediate annuity.

>>WOULDA, COULDA, SHOULDA  Two out of four retirees say they didn’t realize they were behind in their retirement planning until it was too late, according to this Squared Away Blog post. Here’s how to tell if you’re on track to a secure retirement.

>>HOW MUCH IS ENOUGH?  A new HSBC survey says 41% of American retirees didn’t know during their careers how how much to save for retirement. To make sure you’re saving enough, check out this column.

>>WHO SHOULD YOU TRUST?  96% of financial pros admit that the public doesn’t trust the financial services industry, with nearly two-thirds saying that’s because the industry lacks an “ethical culture.” If you’re in the market for honest and competent financial advice, check out this story.

>>INDEXING IS HOT  If money flows are any indication—and I think they are—investors increasingly see the value of indexing over stock picking. You can harness the power of low-cost indexing with these simple-but-effective two- or three-fund index portfolios.

>>REBALANCING RULES Turns out rebalancing works as well as more complicated “bucket” and “decision rules” strategies when drawing money from a portfolio during retirement, according to a recent article by financial planner and Nerds Eye View blogger Michael Kitces. Once again, it seems keeping it simple is the way to go.

>>JACK BOGLE CALLS IT LIKE HE SEES IT  You can agree or disagree with him (I usually agree), but you can’t accuse Vanguard founder Jack Bogle of equivocating. To get his non-nonsense calls on topics ranging from foreign investing to target-date funds to low expenses (and more), check out this interview.

>>70% DON’T KNOW THE 4% RULE  Or much else about retirement income, according to a recent survey by The American College of Financial Services. When people 60 to 75 years old were asked basic questions about generating income in retirement, only 20% received a passing grade. If you need to bone up, check out RDR’s Retirement Income section.

>>IS RELOCATION THE NEW RETIREMENT DREAM? Research Magazine seems to think it might be, although I think that’s a bit of a stretch. Still, as I explain in this story, moving to an area with lower living costs can be an effective way to stretch your nest egg.

>>WANT BETTER RETURNS IN YOUR 401(k)? IGNORE IT Paradoxical as it may seem, laissez-faire may be the best investment strategy. Research by Columbia University economist Michaela Pagel shows that investors who check their retirement portfolios less often aren’t as likely to undermine performance with poor decisions made in the heat of the moment. So once you set your long-term investing strategy, leave it alone, except for periodic rebalancing. Or to put it another way: set it and forget it.

>>DO INVESTORS NEED BETA BLOCKERS? ETF expert Rick Ferri warns against expecting too much from funds and ETFs that sport names like Smart Beta, Strategic Beta, Alternative Beta, etc. Even if such funds deliver higher returns—and that’s a big if—it may be because they’re just taking more risk.

>> MORE REASON TO PLAN FOR A LONG RETIREMENT  Based on new projections just released by the Society of Actuaries, the life expectancies for a 65-year-old woman and a 65-year-old man are 88.8 and 86.6 years respectively. That’s an increase of 2.4 years for women and 2 years for men since SOA’s estimate in 2000. The upshot: Plan for a long retirement, as roughly half of people live beyond life expectancy.

>>THINK BROADER, NOT NARROWER, FOR INDEX FUNDS  If you’re building your investing portfolio with index funds—and I think you should—you’re better off getting your stock exposure through a broad total stock market index fund rather than combining, say, an S&P 500 and a small-cap index fund, says Morningstar. The potential benefits: lower expenses, fewer transaction costs (within the fund) and greater tax-efficiency (for taxable accounts). I’d add another advantage: less hassle.

>>2015 401(k) CONTRIBUTION LIMIT RISES, IRA MAX THE SAME Good news for 401(k) participants with cash and the will to save: The IRS announced that the contribution limit for 401(k)s will rise to $18,000 next year, plus a $6,000 catch-up contribution if you’re 50 or older, up from this year’s $17,500 and $5,500 (plans can set a lower max, however). The IRA limits remain $5,500 plus a $1,00 catch-up.

  >> LOW COSTS,  SKIN IN THE GAME  If you’re going to invest in actively managed funds, focus on those that have low annual expenses and managers who own a relatively high number of the fund’s shares. Active funds with those two traits tend to outperform their peers, according to a recent American Funds study.

  >> BEWARE THE “PLANNING FALLACY”  Planning for retirement is a good thing, but it’s also important not to overestimate our ability to shape our financial future. When it comes to preparing for retirement, overconfidence is a major risk and too often we are our own worst enemies.

  >> FINALLY! AN HONEST ANSWER  Asked what effect the rising U.S. dollar will have on the stock market, Jeffries & Co. chief market strategist David Zervos told the Wall Street Journal, “The honest truth is no one really knows. A strong move in the dollar can have so many varying effects.” So refreshing to find such candor in the investing world.

  >> CONSIDERING A ROTH?  Before you contribute to a Roth IRA, Roth 401(k) or convert a traditional account to a Roth, read my Wall Street Journal story and this piece by financial planner Michael Kitces.

  >> SHOULD BOND INVESTORS FOLLOW BILL GROSS?  I see no compelling reason to, especially if selling shares of Pimco Total Return would trigger taxes. But the whole Gross episode highlights another advantage of index funds: It doesn’t really matter if the manager leaves.

  >> MONEY FROM HOME  If you’re thinking of downsizing or doing a reverse mortgage, check out Using Your House For Income In Retirement from the Boston College Center For Retirement Research. Good advice about both options and a helpful comparison of the two.

  >> RETIREES’ BIGGEST BUDGET ITEM: HOUSING  Health care gets all the attention, but a new EBRI study says shows that roughly 40% of retirees’ spending goes toward house-related expenses, more than double that of health care for most of retirement. Unlike housing costs, though, health care expenses rise throughout retirement, and really take off   in one’s 80s.

  >> HEALTHY CONCERN  81% of retirees say good health is key to retirement happiness, according to a Merrill Lynch-Age Wave retirement survey. But retirees and pre-retirees also rank unpredictable health care costs as their biggest financial concern. For a quick gauge of health care costs, check out Health View Services’ Health Estimator.

  >> INDEX FUNDS ANYONE?  Standard & Poor’s latest SPIVA Scorecard shows that more than 70% of U.S. actively managed stock funds trailed their benchmarks over the past five years. International funds didn’t do so hot either. If low-cost, broadly diversified index funds aren’t part of your retirement portfolio, they should be.

  >>OLD-SCHOOL PENSIONS STILL ON DECLINE  Consulting firm Towers Watson says the number of providing defined-benefit pensions continues to fall, although fewer companies moved away from such plans last year than in any other year over the past decade. If you want to work for a private-sector company that still offers a traditional plan, insurers and utility companies are your best bet.

  >>HOW MUCH WILL $100 GET YOU?  Depends on where you spend it. A new analysis of cost-of-living data shows that $100 will get you $109 worth of goods and services in North Carolina, but only $88 in New Jersey. To see where your retirement income might go furthest, check out the Tax Foundation’s interactive maps that show what a hundred bucks will buy in each state and in various metro areas.

  >>CHECK OUT THE NEW TOOL  I’ve added a tool to RDR’s Retirement Toobox: Morningstar’s Portfolio Manager. Enter all the mutual funds, ETFs, stocks and bonds you own and it will help you track your portfolio’s performance and allow you to see whether you’re truly diversified.

  >>HOW TO PLAY CATCH-UP Have you fallen behind in your retirement savings? Don’t panic. Even if you’re late into your career, a few relatively modest but well-planned moves can help you make up for lost ground. My Wall Street Journal story and this video explain what you can do to get back on track.

  >>DO YOU HAVE A WITHDRAWAL PLAN? More than half of retirees don’t, according to a new T. Rowe Price study on retiree spending. And nearly half drew 5% or more from their savings in the past 12 months. That combo could result in many people depleting their savings prematurely. Click here for guidance on how to manage withdrawals in retirement, and here for advice about ways to assure you’ll have income however long you live.

  >>OK, WHO UNDERSTANDS VARIABLE ANNUITIES? We already know that most consumers are mystified by variable annuities. But a recent Wall Street Journal story says that many advisers don’t understand the ins and outs of these often complicated products either. Just another reason I think combining a plain-vanilla immediate annuity with a portfolio mutual funds or ETFs is a better way to go if you want assured lifetime income and growth.

  >>SIMPLER IS BETTER You don’t have to own all the exotic investment options Wall Street churns out to invest your savings effectively. As I explain in a recent Wall Street Journal article, diversifying too broadly may not help—and could hurt you. Best strategy: build a basic stocks-bonds mix and keep costs down.

  >>MATCH POINTS Fidelity reports that employer matching funds make a big difference in retirement savings balances, accounting for 35% of total contributions to 401(k) and similar accounts. But while contributing enough to get the full match is smart, stopping there could leave you with a stunted nest egg. Try to save enough so that your contribution plus any match equals at least 10% and preferably 15% of pay.

  >>ARE YOUNG SAVERS ROLE MODELS? A July report labeling Millennials “Super Savers” may have gone a bit overboard, but many young adults are cultivating good savings habits. Example: A new TIAA-CREF survey found that Millennials (age 18-34) were more likely than other age groups to boost the amount they save in their workplace plan after getting a raise. And many of those who didn’t save more couldn’t; they were already doing the max. To see how saving more can improve your retirement prospects, go to RDR’s Retirement Toolbox.

  >>TEMPTED TO BITE INTO BITCOIN? Before you join the swelling ranks of people using virtual currencies like Bitcoin, XRP and Dogecoin, check out this Consumer Protection Finance Board Consumer Advisory. Among the potential dangers it cites: large fluctuations in value, scamsters trying to capitalize on the hype surrounding these currencies and higher costs than you’ll face with regular cash or credit cards.

  >>BEWARE STRETCHING FOR YIELD With interest rates so low, “financial engineers” are back to cooking up exotic derivatives to appeal to investors seeking higher safe returns. But any investment touting higher payouts—even ultra-short-term bond funds—also has a downside, as we saw during the financial crisis. Higher yield always means higher risk.

  >>RETIREES WANT INCOME…AND MORE Retirees and pre-retirees are looking for guaranteed income, growth potential and the ability to adjust the amount of retirement income they receive, says a LIMRA survey. For advice on how to get all three, check out RDR’s Retirement Income section and my Wall Street Journal piece on managing withdrawals.

  >>CAN YOU USE AN EXTRA $190,000? A Mercer-Stanford Center on Longevity report says  retirees can boost their lifetime Social Security payout by $100,000 or more (and their spouse’s payments by $90,000 or more) by delaying the start of Social Security benefits. RDR’s Retirement Toolbox has two tools that can help you evaluate different claiming strategies.

  >>WISDOM OF THE AGED Only 8% of grandparents are likely to start a talk with grandkids about money and saving, yet 85% of young adults are open to such discussions, says a TIAA-CREF survey. Seniors have a lot of hard-won wisdom to share about finances. Young adults should tap it.

  >>SOCIAL SECURITY MAZE  Social Security has 2,728 rules and thousands more to explain those rules, which makes it hard for people to integrate it into their retirement planning, economist Larry Kotlikoff (yes, the same guy as below) told a House Ways and Means Subcommittee last week. All the more reason to consult the Social Security tools listed in our Retirement Toolbox before claiming benefits.

  >>UNCLE SAM’S DODGY ACCOUNTING Economist Larry Kotlikoff’s sobering NYT Op-ed shows how the feds’ bookkeeping understates government liabilities, raising questions about long-term sustainability of Social Security and other programs. I’m no Social Security alarmist—indeed, you should take it into account when planning—but try to save more on your own too just in case benefits are trimmed.

  >>FORGET THE MARKET—FOCUS ON SAVING  Yesterday’s stock setback may dominate the headlines, but the amount you save ultimately drives the value of your nest egg. To see how an above-average savings rate can boost the value of your retirement savings accounts as much as 45% over the course of a career, check out my story in the Wall Street Journal.

  >>ARE YOU FUNDING TRIPS TO MAUI? “Recognition junkets,” or trips tied to advisers’ sales of investment products or services, are back after a hiatus during the financial crisis, according to a Wall Street Journal story. Don’t be shy about asking advisers for a detailed breakdown of all fees and commissions you pay—and whether he or she gets other incentives that might affect recommendations.

  >>RETIREMENT AND DEPRESSION Men who have trouble transferring their sense of identity and value from their career to new interests after retiring may be at risk of suffering from depression, according to Financial Advisor magazine. This is just one reason I’ve long recommended doing “lifestyle planning”—including creating strong social support networks—before calling it a career.

  >>ANNUITY WHA??? 53% of Americans said they were not familiar with annuities, according to a recent survey by the Phoenix Cos. I’m surprised the number wasn’t higher. If you’re among the 53%—or the 32% who said they were only “somewhat familiar”—you’ll want to check out this story explaining how they work.

  >>RETIREMENT ADVICE FROM THE ONION Well, not exactly. In a spoof of the many gloom-and-doom news stories on retirement preparedness (or lack of it) , the satirical news site quotes from a fictional EBRI report that concludes “the majority of Americans have saved enough for retirement to live comfortably on the streets.” But as with other Onion parodies on financial topics—my favorite is “Recession-Plagued Nation Demands New Bubble to Invest In”—there is an underlying lesson: Unless you want to spend your “golden years in relatively stable destitution,” you’d better do some retirement planning.

>>WANT TO MAKE IT TO 100?  BMO Wealth Institute’s new report, The Four Keys to Longevity, outlines ways you may be able to improve your odds of living a longer life. I wouldn’t say the advice is revolutionary (don’t smoke, get adequate sleep, keep active physically and mentally), but the sections dealing with maintaining social relationships, learning new skills building a strong support network are worth a read. Just remember: the longer you live, the bigger the nest egg you’ll need and the more carefully you’ll have to manage it during retirement.

>>MATCH POINT  Nearly a third of 401(k) participants contribute exactly enough to maximize the employer match, says Aon Hewitt. That may seem smart, but doing so could leave you short of the savings needed to assure a secure retirement. For example, if your plan requires a 6% contribution to get the employer’s maximum match of 3%, contributing just enough to get the full match results in total savings of 9% of salary, well short of the 15% the Boston College Center For Retirement Research recommends. It’s easy to come up with excuses not to save more. But the closer you can get to that 15% benchmark—or even exceed it—the better your chances of having a secure and comfortable retirement.

>>KEEP CALM, CARRY ON  The S&P 500 closed at another record high yesterday, finishing up 7.5% from its level at the beginning of the year. That’s great, but you shouldn’t let this affect your retirement investing strategy, either by taking the new highs as a sign to get more aggressive and load up on stocks, or by doing the opposite and viewing the move into record territory as a reason to become more conservative for fear the market’s getting frothy. As long as you’ve got a broadly diversified portfolio of stocks and bonds that reflects your risk tolerance, you don’t need to do anything differently just because the market’s on a roll. If you don’t have a real strategy and you’re just winging it, now’s the time to create one,

>>INSURANCE AGAINST LIVING TOO LONG  “Longevity” annuities got a boost today when the U.S. Treasury Department issued new rules that will allow people to buy them within a 401(k) or IRA. Unlike an immediate annuity, which starts making payments soon after you purchase it, a longevity annuity may not begin making payouts for 10, 15 or even 20 or more years down the road. The advantage: by waiting to collect you can collect large future payments with a much smaller upfront sum than with an immediate annuity. Previously, longevity annuities weren’t widely available for  401(k)s or IRAs, as federal rules require account holders to make minimum withdrawals starting at age 70½. The new regs allow you to buy a longevity annuity within a 401(k) or IRA without violating minimum distribution requirements, as long as you begin receiving payments by age 85 and invest no more than $125,000 or 25% of your account value, whichever is less. That limit that will rise with inflation.

>>AVOIDING RETIREMENT REVERSALS Recent research from the Employee Benefit Research Institute (EBRI) says that the lowest-income households can experience financial difficulties quite early in retirement, with as many as 43% running short of money in the first year after retiring. By contrast only 2% of highest-income households are likely to run short of money even 10 years into retirement. Clearly, low-income households face special challenges when it comes to retirement planning. But whatever your income, the surest way to reduce your chances of running into problems early or even later in retirement is to gauge whether you’re financially ready to retire before you actually do so. Several tools in the Retirement Income section of our Retirement Toolbox can help you make that assessment.

>>DOES THIS STRATEGY HOLD WATER? When E*Trade recently polled more than 800 investors, asking them which of 10 investing themes they were most likely to put money into, their answer was….Water. Apparently, investors felt that the combination of growing demand and a potential shortage due to climate change made good old H2O a compelling investment opportunity. Who knows, maybe they’re right. But I’m still wary of “theme” investing. Even if they’re right about future demand, it doesn’t mean water-related investments are selling at compelling prices. In fact, the more attention the theme gets, the less likely that will be the case.

>>PLUG THOSE LEAKS  A new analysis from EBRI estimates that 7% to 9% of young workers who otherwise would have been able to replace 80% of their income in retirement may fall short due to “leakage” in their 401(k) accounts. The main culprits are cashing out early, hardship withdrawals and defaulting on 401(k) loans. Takeaway: The more you can restrain yourself from tapping savings during your career, the more you’ll have to live on afterwards.

>>THE SMORGASBORD PORTFOLIO Some 74%—74%!—of plan participants polled in MFS’s 2014 DC Pulse Survey said investing a little bit of money in every option on their 401(k) investment menu was the best way to diversify. Sorry, but that approach no more results in a well-rounded portfolio than eating every dish at a smorgasbord buffet gives you a balanced diet. If you’re unsure about how to invest, go with a target-date portfolio in your plan. If your plan doesn’t have one, check out the Vanguard or T. Rowe Price target-date fund for someone your age and use its allocations to different stock and bond investments as a guide to creating your own mix.