I hope to have $4 million saved by the time I retire in 30 years. That sounds like a lot of money, but how much would that be in today's dollars? -- Brian

It would seem as if $4 million should be enough to fund a comfy retirement 30 years from now. But you're right not to assume it will be sufficient.

One key issue is the purchasing power of future dollars versus today's dollars. Most people are not accustomed to thinking of money in real, or inflation-adjusted, terms. They use a calculator, plug in the amount they plan to invest for the next 10, 20 or 30 years, throw in a rate of return (often too high) and come away with a big six- or seven-figure projected nest egg that they think shows they'll have it made in the shade in retirement.

But psychologists and behavioral economists are familiar with our tendency to overestimate the value of future dollars. They even have a name for this phenomenon: money illusion.

Four million bucks does sound like a lot of money -- and it still will be even 30 years from now. But it won't be worth anything close to $4 million today.

Unless we go through a sustained period of deflation, inflation will erode the future purchasing power of that sum until, to quote that great economic thinker Yogi Berra, "a nickel ain't worth a dime anymore."

Even if inflation were a relatively modest 2% a year, $4 million in 30 years would have the purchasing power of about $2.2 million today. And if inflation heats up to a 4% annual pace, $4 million in 30 years would be the equivalent to about $1.2 million today. Hardly chicken feed, but a long way from $4 million.

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If you'd like to see what any sum in the future is worth today at different rates of inflation, check out this present value calculator.

Another key issue is our propensity to view the goal of retirement planning as accumulating a single large sum. The best example of this way of looking at retirement is the too-often-heard phrase, "What's Your Number?"

It's better to focus on the annual income you'll need in retirement rather than some big lump sum. Yes, both are estimates, but income is something that's more easily translated to a lifestyle. Besides, a big number can give you a false impression of how well off you are, as it may not generate nearly as much annual income throughout retirement as you think.

For example, using the 4% rule, a common metric for turning assets into income with a high probability of it lasting at least 30 years, a $4 million nest egg would generate about $160,000 in annual retirement income.

That's in 2042 dollars, however. In terms of purchasing power, $160,000 would be the equivalent of about $88,000 today, assuming 2% inflation over the next 30 years, or roughly $49,000, at 4% inflation. Still meaningful sums, but they don't conjure up that feeling of having hit the jackpot that $4 million does.

One more issue that goes to the heart of retirement planning -- how do you know whether you're saving enough to give yourself a realistic shot at a secure retirement?

You hope to have $4 million socked away by the time you retire in 30 years. But what does that figure represent? Is it the amount you project having based on how much you save and what you expect your investments to earn? Is it the amount you think you'll need to maintain your pre-retirement lifestyle?

Should I contribute to a traditional or Roth 401(k)?

It's hard to get an accurate fix on how much you'll need to save for a retirement that won't begin for several decades. There are a lot of unknowns -- how much you'll earn in the future, what sort of lifestyle you'll lead over the next 30 years, how long you'll live.

You may not be able to save as much as you envision due to layoffs or higher-than-expected living expenses. Your investments might not earn what you expect. You could be forced into retirement earlier than you wish by health problems or a "rightsizing" at work. No one can foresee how things will shake out over the next 10 years, let alone the next 30. By going to a tool like our Retirement Planner or T. Rowe Price's Retirement Income Calculator, you can make some reasonable assumptions about how much you'll need for retirement, how much you should save and how you should invest. From that, you can get a sense of your chances of achieving a secure retirement.

Your assumptions aren't going to be spot on. Life and the financial markets are too unpredictable. But updating your information and assumptions in light of actual experience and re-doing this exercise every couple of years will help monitor your progress. You can make adjustments in the amount you save, how you invest or your planned retirement date. By making a number of small course corrections over the years, you'll reduce the chances of having to make dramatic changes on the eve of retirement.

Ask the Help Desk your retirement planning questions

Instead of wondering what $4 million will be worth in 30 years, I recommend that you focus on getting a realistic idea of how much you should be saving and how you should be investing to retire in comfort -- however many years from now that may be and however large a nest egg you'll eventually need.

MONEY magazine is researching an article on ways to reduce the financial pain of college. We're looking for families that can talk about new and creative ways that they're raising cash for college and cutting costs while they're there. Sound like you? Tell us your story and you might even get your picture in the magazine! E-mail Beth_Braverman@moneymail.com.

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Retirement savings: Will $4 million be enough?

Retirement saving is a long-term game, and we need to start preparing as soon as possible. It is getting more difficult every year to retire. Pensions are disappearing and Social Security payments might be reduced. And, according to Vanguard, the average 401(k) balance is less than $80,000, far below what is needed to retire comfortably.

[See The 10 Best Places to Retire in 2012.]

It is essential to keep retirement in mind as soon as you get your first full time job. You might not be able to save a lot right away, but there are two key things you can do to set aside funds for your retirement:

Avoid lifestyle inflation. Most of us are not saving enough. From new college grads to mid-career office workers, we are spending too much of our income without knowing where it all goes. There are so many things to spend money on, including luxury cars, expensive clothes, and the latest gadgets. All these things were not necessary 20 years ago, so why do we feel the need to spend so much money on such items now?

I'm not saying you need to live like a pauper. But if you carry a credit card balance, then you should re-examine your spending habits. Cutting back on unnecessary luxuries can allow you to save more for your future and avoid lifestyle inflation. One easy thing that you can do is to allocate a portion of any raises or bonuses you may receive toward your savings instead of spending it. This way you will increase your savings rate every year.

[See How to Save for Retirement on a Low Income.]

Build wealth. The other essential component to retirement saving is to build wealth. There are many ways to accomplish this over the long term. Many people focus on doing a great job at work and subsequently climb the corporate ladder. But it is important to be aware of other avenues of wealth building, too. You could learn to invest in the stock market, become the landlord of a rental property, or freelance on the side. Many people return to school and invest in an advanced degree to increase their earning potential. Some of us even make a bit of extra money from blogging and other online ventures.

Once you have increased your personal income, you need to learn to invest it. That way the funds will keep on growing with a minimum amount of effort on your part.

[See How to Take Advantage of New 401(k) Fee Disclosures.]

Building retirement savings is not easy, so the earlier you start, the better off you will be. A new college grad may not earn enough money to save much of it, but if she keeps her lifestyle inflation down and takes advantage of wealth-building opportunities, then she will be able to grow her retirement savings steadily over her working life. If we increase our efforts to save a bit every year and also take steps to earn more, retirement may not be so far out of reach.

Joe Udo is planning an exit strategy from his corporate job by reducing expenses and increasing passive income. He blogs about his journey to early retirement at Retire by 40.

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Start Saving for Retirement Early

WINDSOR, Conn., Feb. 2, 2012 /PRNewswire/ -- ING U.S. released key findings today from a comprehensive study(1) commissioned by the ING Retirement Research Institute that examined the attitudes, behaviors and preparedness of different ethnic groups, including African-Americans, Asians and Hispanics, regarding their future retirement.  The research showed that while Americans of all backgrounds encounter similar barriers to saving and planning, cultural differences account for disparate experiences among the groups.  For additional information or to view the report, visit http://ing.us.

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According to the study, Retirement Revealed, all populations found retirement planning to be a daunting task.  However, ING's research showed that Hispanics feel the least prepared, with 54 percent indicating they feel "not very" or "not at all" prepared.  This compares with 50 percent of African-Americans, 48 percent of white and 44 percent of Asian respondents indicating that they don't feel prepared.  These feelings correspond with the amount saved in employer-sponsored retirement plans, where Hispanic respondents reported having the lowest average balances ($54,000) in their retirement plans.  This amount was considerably less than the average balance across all groups ($69,000).  In contrast, Asian respondents reported having the highest average plan balances ($81,000).

"All Americans face the growing responsibility of planning and saving for retirement.  However, there are distinct cultural differences that may affect some groups more than others when it comes to getting or staying on the right path," said Maliz Beams, CEO of ING U.S. Retirement.  "As a leading retirement provider at the workplace and in the retail market, our mission is to help individuals retire with the dignity and financial security they deserve.  Our goal is to take the important cultural reference points from this study and turn them into customized solutions that help all our customers become better prepared — regardless of their background."

Other key findings from the Retirement Revealed study include the following:

Financial Information:

Non-whites were more likely than whites to get their investment information and guidance from the Internet and media.  African-Americans (54 percent), Asians (53 percent) and Hispanics (50 percent) indicated that the media and Internet were the primary source of getting advice and guidance compared to 45 percent of white respondents. Whites were more likely to use a financial professional.   While nearly one-in-three (28 percent) of overall respondents are currently working with a financial professional, only three-quarters (75 percent) of this group indicated their adviser looks at their complete financial picture.  Face-to-face communication with a financial professional is ranked the highest in terms of value provided in getting information about their retirement plan and other employee benefits.

Barriers to Saving: 

Nearly three-quarters (73 percent) of respondents admitted to having barriers to saving.  Among the groups, African-Americans said debt was their biggest barrier.  Needing to know more about their savings options is a greater barrier to savings for Hispanics than for any other group.

Planning Goals:  

Hispanic respondents were less focused on their future retirement goals — well over half (57 percent) have never calculated how much money they will need to continue their current lifestyle upon retirement. Seven-in-10 (70 percent) Hispanics did not have a formal investment plan to reach those goals. Only three-in-10 (29 percent) of overall respondents have a formal investment plan; African-Americans are most likely to have one (32 percent); whites are least likely (28 percent).

Emergency Savings:  

Just under half (41 percent) have virtually no emergency savings (one month or less).  This increases to nearly half for Hispanics (47 percent) and 50 percent for African-Americans, while only one-in-four Asians have one month or less saved for emergencies.  

Purchasing Priorities: 

Asians appear to be most prepared for retirement, but had a tendency to place a higher priority on lifestyle choices, such as purchasing a nice house or car, than planning for retirement.

"There are certainly more similarities than differences among the ethnic groups when it comes to retirement planning, but distinctions do exist and understanding them can be critical to future retirement success," added Fabian Gonzalez, vice president of Multicultural Sales at ING U.S.  "For example, many times in the Hispanic community, parents will sacrifice their own financial future in order for their children to advance.  By researching and learning about the rationale behind decisions like this, we can better understand our customers and help them achieve their financial goals."

Additional findings from the study include:

Nearly one-in-four African-Americans (23 percent) have life insurance coverage equal to four to five times their salary, higher than the total population (18 percent).  This corresponds with African-American respondents indicating that they were the most likely to leave life insurance proceeds to their heirs (70 percent vs. 53 percent of the total sample). More than six-in-10 (63 percent) of African-Americans cite reducing debt as their most important short-term financial goal. Hispanics are the most likely (57 percent) to want more education about investments and retirement options from their employer, compared to all respondent groups (47 percent). Asians are the least likely to have a last will and testament (26 percent), compared with 31 percent for Hispanics and 37 percent for white respondents.

For additional information on the ING's Retirement Revealed study and to read the report, visit http://ing.us.

(1) Findings are from an online survey conducted by ORC International during the period of Oct. 5-13, 2011.  Respondents were 4,050 adults (including 500 African-Americans, 500 Hispanics and 350 Asians) between the ages of 25 and 69 who are employed full-time with an annual household income of $40,000 or greater.  Data were weighted to make the results representative of the U.S. population.

About ING
ING U.S. is a subsidiary of Dutch-based ING Groep N.V.  In the U.S., the ING (NYSE: ING - News) family of companies offers a comprehensive array of financial services to retail and institutional clients, which includes retirement plans, life insurance, mutual funds, managed accounts, alternative investments, institutional investment management, annuities, employee benefits and financial planning. ING holds top-tier rankings in key U.S. markets and serves approximately 15 million customers across the nation. For more information, visit http://ing.us.

 

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ING Study: Cultural Influences Impact Retirement Planning and Decision-Making

TORONTO, ONTARIO--(Marketwire -02/02/12)- As the February 29th deadline approaches to make a contribution to a Registered Retirement Savings Plan (RRSP) and as part of its ongoing commitment to improving financial literacy, BMO Financial Group will be providing daily retirement tips during the month of February from BMO Retirement Institute Head Tina Di Vito's new book 52 Ways To Wreck Your Retirement...And How To Rescue It.

Tip Number Three:

Use common sense

Many Canadians understand that good money management includes saving, not over-spending and investing carefully. The problem is we often don't exercise common sense with our money, which can lead to spending too much, accumulating debt and making bad investment choices. Some tried and true tips for using common sense include:

-- Don't spend more than you earn. Try to save for purchases instead of
borrowing.
-- Be informed before making a financial decision; if it sounds too good to
be true, it probably is.
-- Pay yourself first by setting up an automatic contribution plan.

Tip Number Four:

Save for tomorrow rather than only living for today

When we live for today, we value things we can have right now more than those we will enjoy later on. As a result we often don't prioritize saving for retirement.

While retirement seems far away it should be a top priority. Establishing monthly savings goals will help get you on the right track, as will setting up automatic withdrawals from your paycheque into an RRSP. Start with small contributions - but not too small - especially if you want to give your savings a boost.

For more information on retirement: http://www.bmo.com/retirement.

Get the latest BMO press releases via Twitter by following @BMOmedia.

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BMO Retirement Tips of the Day: Using Your Common Sense and Planning Ahead Will Help Secure Your Retirement Nest Egg

Video Link: https://www.youtube.com/watch?v=G1CVy2Ti7KM

08-01-2012 11:54 What if the common sense of retirement planning didn't seem so, well, uncommon? bit.ly Imagine a retirement plan that fits your changing needs. We did. It's why TD Ameritrade provides the tools and objective guidance to help you create a personalized plan that fits your life. Market volatility, volume and system availability may delay account access and trade executions. Brokerage services provided by TD Ameritrade, Inc., member FINRA/SIPC/NFA. Offer valid through 6/30/2012. Minimum funding within 60 days. Funding/rollover of $25000-$99999 receives $100, funding/rollover of $100000-$249000 receives $300, funding/rollover of $250000 or more receives $600. Cash bonus subject to 9 month funding duration condition. See Web site for details and other restrictions/conditions. This is not an offer or solicitation in any jurisdiction where we are not authorized to do business.

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TD Ameritrade Retirement Planning - Video

We've been talking a lot about retirement lately, partly because the numbers are just so terrifying: Most Americans have less than $25,000 saved. On average, we save between 5.5 and 7 percent of our pre-tax salaries in 401(k) accounts, when we probably need to save at least double that for a decent retirement. And the stock market, with its paltry returns over the last decade, isn't helping us out.

[50 Ways to Improve Your Finances in 2012]

To help alleviate our fears--or at least tell us what to do about them--we turned to Olivia Mitchell, director of the Pension Research Council at the University of Pennsylvania. As the mother of two twenty-something daughters and wife of a recent retiree, she's wrestling with retirement questions in her personal as well as professional life. Here are her 10 suggestions for how we can give ourselves a chance at a comfortable retirement:

Build a bigger nest egg.

Retirement isn't what it used to be, says Mitchell, largely because our standards for what life should be like at age 70 and 80 have changed drastically over the last century. That means the old standard advice, that one should plan to replace around three-quarters of one's pre-retirement income, is no longer sufficient.

"Many boomers have been thinking of doing different things in retirement, and those things will cost money. They're not going to be sitting on the front porch on a rocking chair. They're going to do volunteer work, travel, and do part-time work. Healthcare costs are likely to be a lot higher in the future as well. So it's not obvious our expenses will be easily cut, and taxes will likely go up to help bail out the deficit we're confronting. So a 100 percent replacement rate is a safer place to start," Mitchell says.

Retire at age 65 or later.

The concept of retiring at age 62 is not realistic for many Americans. "A significant portion of the baby boom generation--more than half--is not adequately prepared for retirement, especially if they retire young.... If you delay retirement, benefits will be higher, and you've deferred eating into that nest egg for more years. My husband just quit work at 63, and I said he couldn't claim Social Security until he's 70," says Mitchell.

[See the 10 Best Places to Retire in 2012.]

Don't try to follow your parents' example.

That's because mid-career workers today are unlikely to see a repeat of what their parents experienced: housing prices that grew quickly and substantially. A stock market that blossomed for much of their working lives. And in some cases, generous pensions.

"If we were to extrapolate from our parents' generation, we might think, 'We really don't have to save that much because it's happening automatically.' [But] we now realize that putting all our money in one house is a really silly thing to do. It's not diversified and values can plummet. We saw what happened to the stock market, on top of Social Security and Medicare facing extraordinary financial challenges," says Mitchell.

That's why we can't look to past generations for guidance, and one reason why boomers feel so much angst about their retirement prospects. "They really wish that the past would be replicated in the future, and it probably won't be," she adds.

Save at least a quarter of your income.

Mitchell encourages her own two twentysomething daughters to put aside between 15 and 25 percent of their income now. "If we're all going to live to 100, we're just going to have to put aside a whole lot more money than in the past," she says.

In response, her daughters ask why they should bother, given the low-to-nonexistent interest rates paid on savings accounts and paltry stock market returns. Mitchell acknowledges that there are no easy answers. "That's a huge obstacle we're going to face when it comes to convincing the younger generation to save," she says.

Plan on a second (or third) career for retirement.

"You'll need to retrain, retool, and potentially return to school for a new career. You can't afford to be 50 and have no marketable skills. You have to always push yourself and encourage yourself to take the next step, whatever it is--software on the computer, skills in a profession. If you don't, you won't be employable," says Mitchell.

Proceed as if you're living to 100.

No one knows how long they'll live, which means we should all assume we're living for a long time--and prepare accordingly. "It's very, very expensive to live to be 100, and you don't know if you will be one of those or not," says Mitchell. She adds that women born today have a 1 in 4 chance of living to age 95, especially if they are educated and have access to healthcare. That means setting aside as large a chunk of your income each year as you can manage-- perhaps as much as 40 percent, given the low returns savers and investors currently face.

Invest, even if you feel slightly uncomfortable.

[How to Save Enough for Retirement]

Target-date funds that shift assets into more conservative investments as a target retirement date approaches can help investors who feel overwhelmed to the point of paralysis when it comes to picking funds. "Not doing anything is the wrong response. It's better to save something and put it in a diversified fun with a professional manager who's managing the glide path for you than to do nothing. At least you have a prayer of building up savings," says Mitchell.

Meditate on your future self.

"Saving is just no fun at all. In this world, we feel rewarded by shopping, by spending--you get to try it on and wear it to the next party. Whereas saving is the reverse. You're telling yourself you cannot consume something today, you have to set it aside for a rainy day, or for when you're 90 years old. So it's hard for young people to visualize," says Mitchell.

That's why she's intrigued by new research that suggests that showing people an aged picture of themselves, depicting how they'll look at an older age, helps them decide to save more now. "The idea is to put you in touch with your future self, so you might begin to care about that future self and take good care of that person," she says.

Learn the basics.

"Most of us will never be mathematicians, but we have found that a little bit of knowledge goes a long way," says Mitchell. Her research has found that even a simple financial literacy class in high school, for example, can increase savings rates later in life.

Know that it's not just about the money.

Says Mitchell: "It's worthwhile to invest not just in saving and pension accounts, but in your human capital--you need training to be successful in that last third of life. And I also encourage people to invest in friendships, communities, families, because it is those networks that will help us age more successfully."

Twitter: @alphaconsumer

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10 Ways to Save Your Retirement

As you prepare for retirement you will make many decisions, such as the suitability of hiring a financial adviser, which asset allocation strategy is best, and how much money to withdraw each year in retirement. But numbers alone do not determine your ability to achieve a comfortable retirement. Try these three strategies that will help maintain your health, so that you will be able to enjoy retirement.

[See The 10 Best Places to Retire in 2012.]

1. You should start exercising. There's no question that staying fit will help give you the health to enjoy retirement. The increased energy you get from regular exercise will also help you to feel better, and perhaps waste less money on impulse purchases. Staying healthy has the added bonus of helping you to be more productive at work, which can potentially increase your earnings power over the course of your working life.

[See The Growing Challenge of Funding Retirement.]

2. Carefully spend more frequently. Spending more frequently while saving for retirement initially sounds counterproductive. But always trying to conserve cash could actually cause you to burn out. For some people, the effort required to save can lead to a huge shopping spree, or even spending on a credit card that cannot be quickly repaid.

The key to this strategy is to spend often, but in small amounts each time. Instead of taking an expensive annual vacation, try to go on a few mini trips. Consider a staycation or short road trips. Put everything on the table as long as it's fun. Skip buying a brand new gadget every year, and buy more lattes if that makes you happy. You won't be spending more money this way, but you will feel happier because you aren't depriving yourself as often. This will ultimately allow you to feel good about sustaining your savings plan.

[See How to Finance Life Until 100.]

3. Try to sleep more too. Most people cite not having enough time as the main reason they don't get enough sleep. Yet, there's time for TV, daydreaming, and multiple visits to the coffee machine each and every day. When you have enough sleep, you will feel better, become more productive, and maybe even have fewer arguments with people around you. This doesn't sound like something that's related to your retirement, but getting enough sleep can keep you healthier, help you to perform better at work, and have positive effects on your social life.

So, instead of spending extra time looking through your retirement numbers, start improving your retirement prospects. Financial freedom is definitely achievable, but you need to have good health to enjoy it.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.

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3 Ways to Prepare for a Healthy Retirement

ATLANTA, Feb. 1, 2012 /PRNewswire/ -- Baby boomers appear to be taking a second look at their life insurance policies as an alternative financial solution to paying for retirement. Retirees can sell an unneeded life insurance policy for a portion of the face amount. These transactions, known as life settlements, have become mainstream in the past several years, particularly as baby boomers begin exploring all financial options to paying for retirement, including previously unconventional alternatives.

To view the multimedia assets, please click: http://www.multivu.com/mnr/54032-betty-white-boomers-life-insurance-settlements-fund-retirement

(Photo:  http://photos.prnewswire.com/prnh/20120201/MM42234&nbsp😉

Company spokesperson Betty White, appearing in a YouTube music video with over one million hits comments, "It's the hottest program for spicing your golden years." The 90 year "young" star recently celebrated her 90th birthday White and was honored with a SAG Award as "Best Female Actor in a TV Comedy Series."

In a survey conducted by International Communications Research (ICR), an astounding 79 percent of respondents felt that their insurance professional and financial planners should be informing their clients about LIFE SETTLEMENTS as a means to fund their retirement (rather than letting policy's lapse).  And, more than half (55 percent) expressed concern they will have to continue working past the age of 65.

Betty White video and research at http://www.thelifeline.com

"Many people didn't know selling their life insurance policy was even an option; however, boomers are demanding more education from their financial advisors, said Wm. Scott Page, president and CEO of The Lifeline Program. The leading life settlement provider commissioned International Communications Research to survey sentiments regarding retirement, life insurance and familiarity with life settlements among baby boomers.

The Lifeline Program survey results echo data the company published last year in a white paper, "How Life Insurance Can Save Your Retirement," which discusses how boomers are ill-prepared for retirement.  The new survey also suggests that boomer confidence in being able to retire at age 65 is waning.  An Associated Press study last year reported 44 percent lacked confidence in being able to retire while the ICR study pegs that number rising to 55 percent.

Founded in 1989, The Lifeline Program offers life settlements and financial planning options to retirees.  The company partners with insurance agents, broker dealers and financial planners to establish life settlement business lines.  For more information contact Stephen Terrell of The Lifeline Program at 770-724-7300.

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Betty White to Boomers: Consider Life Insurance Policies to Fund Retirement

Video Link: https://www.youtube.com/watch?v=AVWB9SnQlP0

02-01-2012 19:44 Copyright Disclaimer Under Section 107 of the Copyright Act 1976, allowance is made for "fair use" for purposes such as criticism, comment, news reporting, teaching, scholarship, and research. Fair use is a use permitted by copyright statute that might otherwise be infringing. Non-profit, educational or personal use tips the balance in favor of fair use.

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All I Want to do is Retire - 20 Years on Wall Street - Video

Video Link: https://www.youtube.com/watch?v=3kgOv-EJ7bo

26-01-2012 17:54 After years of saving and investing, you can finally see your retirement on the horizon. But before kicking back, you still have some important planning to do.

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Money Matters: FAQs About Retiring - Video