Twenty questions and answers

1. “I can’t afford to save.” It’s easy: Put savings first, and then figure out what you can and can’t afford.

2. “Where do I invest my money?” Low-cost stock index mutual funds. Start mixing in some bond funds as you close in on retirement. Also check out the target-date funds you’ll probably find in your 401(k) plan. If you’re a tad more of a risk taker, buy a few stocks with good dividend-paying records and build an income stream.

3. “I don’t make enough money.” Look for a better job, up your skills, get a second job, start a small side business, work overtime. Perhaps even collect scrap metal with that F-150 you just had to have. Yup, I’m being sarcastic.

4. “How much can I withdraw from retirement savings before retirement?” Do you mean how much should you withdraw? That money isn’t an emergency or vacation fund. It’s for retirement.

Read the next 16 questions on this link.


  1. #18 Island of Wheretheheckarewe. I always wondered what these people plan is when Hurricane WhatsHerName wipes them off the island. I am assuming that they didn’t have enough money to stay in the states in the first place so how are they going to rebuild their lives?


  2. Good advice for many, perhaps almost everyone. But, a couple of quibbles:

    1. “I can’t afford to save.” It’s easy: Put savings first, and then figure out what you can and can’t afford.

    Too late. I already dug myself into a debt hole. And, because of that, I am living payday to payday.
    What now? Well, if you have access to an employer-sponsored, tax-favored, retirement savings plan (401(k), 403(b)), look up the liquidity provisions regarding loans from the plan. If you can access that money in an emergency, go ahead and save anyway. 75% of Americans get a tax refund each year, averaging over $2,700 (averages can be deceiving), and then, almost everyone spends it. If that is you, consider increasing your contributions to your employer-sponsored savings plan, and, as necessary, reduce your withholding from your paycheck – in that way, you will save today instead of giving the federal government an interest free loan.

    4. “How much can I withdraw from retirement savings before retirement?” Do you mean how much should you withdraw? That money isn’t an emergency or vacation fund. It’s for retirement.

    However, don’t confuse withdrawals (the above is 100% correct) with plan loans. A plan loan is an investment in yourself. You become the lender and the borrower. You have to save first to accumulate assets. If you borrow, you have to repay the loan; otherwise, the only individual you hurt is the lender (that’s you!). It is better to save in your retirement savings plan (tax preferences, employer match, etc.) than in a checking or savings account. That is true regardless of the reason why you are “saving up” for retirement, for emergencies, for a vacation, to purchase a home, or even that F-150 you just have to have. Just remember that when you borrow from yourself, it is your money … and failure to pay yourself back (and continuing to contribute to your plan at the same time) only injures your future self.

    7. “How do I calculate what to take from retirement funds?” Well, there’s the 4% guideline, which says start by taking 4% of your retirement assets in the first year of retirement and thereafter increase that amount by inflation each year.

    There are many, some would say better options. The 4% rule has worked most of the time – most people who use that rule don’t run out of money in retirement. However, some do. And, remember, the past is not our future.

    9. “When should I start taking Social Security?” When you absolutely need the money to live on. That may mean age 62 or 70, or somewhere in between. Don’t take it simply because you can or because you think it won’t be there for you later. Remember, when you’re 75 or 80, the highest possible Social Security benefit may come in handy.

    If you don’t have a pension or some other form of regular monthly income besides Social Security, you may want to spending savings as a means of deferring commencement of Social Security benefits to your Social Security Normal Retirement Age or even up to age 70. For most middle-class Americans who need more guaranteed, inflation indexed income in retirement, deferring commencement of Social Security is often the most financially favorable option available.

    10. “What do I do if the stock market takes a big tumble?” Nothing, except keep up your periodic investing. It isn’t a disaster, it’s an opportunity. It’s also why you minimize risk when you’re close to retirement by diversifying into nonstock investments.

    For 20 or 30 or 40 or more years you will be a retirement fund saver. After you retire, for 10, 15, 20, 25, 30 or more years, you will be a retirement funds spender. But, you will always be a retirement assets investor. Investing doesn’t stop as you approach, and transition into retirement.

    11. “How much will Medicare cost me?” The basic monthly individual Medicare Part B premium is projected to be some $144 in 2020, a $9 increase. Individuals with incomes of $85,000 or more will see increases of about $25 to $30 a month. You can find the premium schedule on A Part D prescription drug plan will cost most people about $30 a month in 2020. But like Medicare Part B, it’s based on income.

    Medicare will cost you MORE in the future. The $85,000 threshold is for single taxpayers.

    12. “Is Medicare all I need?” Probably not. Medicare has deductibles and copays, plus there’s no out-of-pocket limit. Most people have some form of supplemental Medigap coverage. Only 23% don’t.

    Don’t forget that today, we have choices – traditional Medicare and Medicare Advantage options.

    13. “I heard some guy harping on about an emergency fund in retirement. What gives?” That would be me. Here’s the deal: You have $800,000 in your retirement fund and you expect to use $32,000 a year to live. Next month, your car dies or your roof needs replacing. Take that money from your nest egg and your retirement income plan is kaput. Need I say more?

    If you hadn’t retired, how would you have financed that car purchase or roof replacement? Sounds like you might borrow and repay the loan over a period of years, using some of that $32,000 per year income.

    14. “I say we don’t need life insurance when we retire. My spouse disagrees. What do I do?” Simple. If you have folks dependent on you for support, how will you provide for them upon your demise? You might do so with life insurance, a survivor annuity or lots of savings, or some combination thereof. If a married couple makes it to age 65, there’s a 45% chance one of them will reach 90.

    If there is a married couple, don’t forget the Social Security benefit to the surviving spouse.

    15. “I don’t have much, so I don’t need a will, right?” Wrong. The fact is, you need a will and maybe a living trust. Those beneficiary designations you may have made are crucial, but not sufficient.

    But, remember that the will provisions generally won’t apply to your pension plan or 401(k) or IRA or 403(b) unless the will is identified for beneficiary purposes. Think twice before using the will that way.


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