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Examiner
  • You’ve saved for retirement — now what?

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  • The baby boomer generation — Americans born between 1946, the end of World War II, and 1964 — is the largest in U.S. history. A celebrated and confident group, boomers need to take care in how they manage their finances as they head into their senior years. Money Crashers Personal Finance founder and co-owner Andrew Schrage offers some insight to the following retirement questions:
    • Many people seem to consider retirement as hitting the goal line, but should people be concerned about simply coasting along on their portfolio?
    People should be wary of simply coasting along – they should take particular care to shift their investments, usually to a larger focus on bonds and other safer investments, as they approach retirement age.
    • Can overspending during the first few years be a problem for some people?
    Overspending can absolutely be a problem for some people – especially those who are healthy and likely to live a longer retirement. The common rule of thumb used to be that using 4 percent of your portfolio in your first year of retirement was a good goal, but with lower yields of late, many experts are now recommending ratcheting that down to 3 percent.
    • After retirement, should people wait a while before taking money out of their 401(k) plans?
    Annual distributions are required by law from a 401(k) plan starting at age 70½ (unless you continue to work past that age). Folks should put off taking distributions as long as possible to allow that money to grow, up until the age when distributions are required.
    • Do you think retirees need to have a grasp of what inflation may be like in the future? How can they determine how much purchasing power they will have?
    Retirees should be cognizant of inflation rates. With an average rate of inflation of 3 percent, over the course of 20 years, purchasing power lowers by 43 percent if they have $1 million of uninvested funds and are spending it evenly over a 30-year period. Retirees should also understand that inflation rates in categories relevant to them, such as health care and travel, are currently outpacing the average overall inflation rate.
    • Any other things people should do or avoid to keep their credit in good shape though retirement?
    Pay your bills on time, keep old lines of credit open, and keep credit card debt as low as possible.

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