Retirement Planning For Dummies

Matt Krantz is an investment writer with decades of experience writing for publications including Investor’s Business Daily, USA TODAY, and The Motley Fool. He’s the author or co-author of four For Dummies books, including Investing Online For Dummies, Fundamental Analysis For Dummies, and Investment Banking For Dummies.

• Introduction 1About This Book 2Foolish Assumptions 2Icons Used in This Book 2Beyond the Book 3Where to Go from Here 3Part 1: Getting Started with Retirement Planning 5Chapter 1: Retirement Planning Is Up to You 7Blazing Your Own Retirement Plan 8Measuring Your Lifespan 9Social Security Administration’s Life Expectancy Calculator 10Bankrate’s Life Expectancy Calculator 11Living to 100 Life Expectancy Calculator 13Retirement Planning Beginnings: The Pension 13Changing Times: The 401(k) 14Behold the power of the 401(k) 17An opportunity to save 18Social Security: The De Facto Safety Net 19Chapter 2: Determining How Much You Spend 21Finding Out Where Your Money Goes 22Eyeing your expenses 22Tracking your money’s every move 23Spending guidelines 24Measuring Your Spending 25Using your credit card company or bank’s online resources 25Diving into the world of third-party apps and online tools 27Checking out other money-tracking options 30Doing something with all this data 32Putting Your Spending in Context 32Using government statistics as a guide 32Seeing how spending changes as you age 34Improving Your Numbers 36Figuring out if your latte is ruining your retirement 37Finding easy ways to stop wasting money 38Boosting your income with a side gig 39Table of Contents iiiChapter 3: Calculating How Much You Need to Retire 43Getting to Know the 4 Percent Rule 44How the 4 percent rule works 45The magical power of the 4 percent rule 47Shortcomings of the 4 percent rule 47Using Online Retirement Calculators 51Getting started 51Exploring retirement calculators from mutual fund companies 54Drilling in with detailed retirement calculators 56Avoid gambling with retirement: Monte Carlo analysis 58Understanding Why Starting Early Is Important 59Compounding: The most powerful force in the universe 59Inspiration to start retirement planning now 60The race to $1 million: Doable if you start soon 61Chapter 4: Choosing the Right Account 63Retirement Planning in a Nutshell 63Getting started 64What about pensions and Social Security? 65Things Change with SECURE Act 67A Great Place to Start: 401(k)s 67Advantages of 401(k) plans 67Drawbacks of 401(k) plans 69The Roth: An interesting twist on retirement savings 70IRAs: A Cornerstone of Retirement Planning 71Advantages of IRA plans 71Drawbacks of IRA plans 73A few IRA odds and ends 75Self-Employed Plans 75The spectacular SEP-IRA 76The 401(k) for one: A one-participant 401(k) 77Keeping it SIMPLE 77What’s the Catch? 78Tax-deferred isn’t tax-free 78Beware the 10 percent early withdrawal penalty 79Don’t mortgage your future: Retirement plan loans 79Chapter 5: Gauging Your Appetite for Risk 81Getting a Handle on Your Risk Tolerance 82Determining your investor type 82Understanding risk tolerance 84Looking at risk tolerance differently 85Using risk-assessment tools 86The ABCs of Asset Classes 88Putting stocks in a box 89Adding bonds 91Including a few other asset classes 92Seeing how risk tolerance and returns work together 93Chapter 6: Opening Your Accounts 95Getting Your 401(k) Up and Running 96Understanding target-date funds 98Knowing the people involved in your 401(k) 99Getting familiar with your 401(k) plan 99Plugging into Your IRA 100Knowing what you’d like to own 100Choosing someone to handle your IRA 101Mutual fund companies 101Traditional and discount online brokerages 104Robo-advisors 107Connecting with a Financial Planner 112Finding a financial planner 113Deciding what is right for you 115Part 2: Using Online Resources 117Chapter 7: Managing and Optimizing Your 401(k) 119Getting Online 120Registering for 401(k) access 120Getting to know your 401(k) tools 124Checking your performance 125Checking Your Portfolio Allocation 127Understanding the key asset classes 128Looking at your current mix without using a calculator 130Finding your optimal asset class mix 132Changing your asset allocation 133Powering Your 401(k) with Contributions 135Inspecting your current contribution level 135Deciding how much to contribute 136Seeing the power of putting more away 137Discovering Other Nifty Aspects of Your 401(k) Plan Site 138Locating information on plan loans and withdrawals 138Digging into the statements 139Finding various plan documents 140Chapter 8: Taking Your IRA to the Next Level 141Getting Online with Your IRA Provider 142Opening your IRA account 142Logging in and looking around 143Understanding your portfolio holdings 145Checking Your Portfolio Asset Allocation 145Understanding correlation 146Viewing your asset allocation on your provider’s website 147Enhancing your asset allocation 148Understanding Your IRA Contributions 152Setting up IRA deposits 152Roll over Beethoven: IRA rollovers 154Funding an IRA with a Roth conversion 154Taking Money out of Your IRA 155Getting money out early: 72(t) distributions 156Taking your required minimum distribution 156Setting up a beneficiary 157A word about inherited IRAs 158Chapter 9: Optimizing Your Retirement with Third-Party Offerings 159Understanding Fees 160Improving success with lower fees 160Knowing the types of fees 160Uncovering the shocking truth about fees 162Examining Your Portfolio Using Morningstar 163Pulling up individual funds that you own 163Putting your entire portfolio to the test 170Grading Your Retirement Plans in Other Ways 173Getting up close and personal with Empower 174Going mobile with Quicken Simplifi 176Chapter 10: Digging into Social Security 177Discovering All the Benefits of Social Security 178Disability coverage (SSDI): The forgotten bonus of Social Security 178Medicare for All 180Survivors benefits 181Retirement benefits 181Managing Social Security Information Online 183Examining what you’re paying into Social Security 183Signing up for and accessing Social Security information online 185Understanding your history of Social Security credits 188Planning for Social Security in Retirement 190Claiming your Social Security benefit 191Applying for benefits 193Part 3: Maximizing Your Retirement Knowledge 195Chapter 11: Balancing Other Needs with Retirement Savings 197Cleaning Up Your Personal Balance Sheet 198Building an emergency fund 199Cutting loose the debt anchor 206Opening a taxable brokerage account 211Saving for a Home 212How your retirement plans can help you buy a house 213Knowing how much home you can afford 214Budgeting for homeownership 216Saving For College — If You Can 217Why your college-savings help matters 218Choosing a college-savings account 219Choosing a 529 provider 220Figuring out how much you should save 221Chapter 12: Fine-Tuning Your Asset Allocation 223Exploring Stock Strategies 224Understanding small versus large companies 225Knowing where your money is: international, global, and emerging markets 227Trusting real estate investment trusts 229Diving for Income 231Getting to know bonds better 232Going to town with municipal bonds 234Using Morningstar to study bonds 235It’s Easy Being Green: The Rise of ESG 237Deciding whether to include ESG in your retirement plan 238Understanding ESG investments 239Buying into an ESG 240Chapter 13: Keeping Your Retirement on Track 243Tracking Your Portfolio’s Health 244Measuring returns and asset allocation 245Modifying your plan 251Tracking and Updating Your Goals 253Assessing your goals 253Seeing if your goals change your plans 254Tracking retirement progress and milestones 259Chapter 14: Gearing Up for Retirement 261Creating a Retirement Budget 262Test-driving your budget 262Keeping your stock exposure 264Waiting until 70 to collect Social Security 264Having a healthcare plan 265Knowing the bucket strategy 266Working longer 266Thinking about Annuities 268Understanding the types of annuities 269Finding an immediate annuity 271Running sample annuity numbers 273Unlocking a Goldmine: Reverse Mortgage 276Understanding reverse mortgages 276Understanding the drawbacks of reverse mortgages 277Using a reverse mortgage 278Chapter 15: Understanding Pensions 281Checking a Private Pension’s Funding 282Understanding the Problems with Public Pensions 283Understanding Pensions Inside-Out 286Choosing a lump sum versus ongoing payments 286Choosing single life versus survivor 288Managing Your Pension 291Using online tools 291Calculating the value of a lump sum payment 292Rolling over a pension 293Chapter 16: Getting Insurance 297Building a Health Insurance Plan 298Unlocking the health savings account 298Understanding Medicare supplemental plans 302Exploring the exchanges 304Considering long-term care insurance 305Defending Your Money with Insurance 307Checking property and casualty coverages 307Getting ready for a rainy day: Umbrella insurance 308Protecting your family with life insurance 310Part 4: the Part of Tens 315Chapter 17: Top Ten Retirement Mistakes 317Waiting to Save 317Ignoring Fees 318Not Securing Your Information 318Prioritizing College Savings Over Retirement 319Not Diversifying Your Portfolio 319Waiting for the “Right Time” to Invest 319Having Inadequate Insurance 319Taking Money from Your Accounts Early 320Not Checking Your Social Security Benefit 320Not Thinking about Income 320Chapter 18: Top Ten Retirement Questions 321How Much Money Do I Need? 321Is Medicare Enough? 322What Will I Do with My Free Time? 322Will I Run Out of Money? 323Should I Have a Roth or Traditional IRA? 323How Good Is My 401(k)? 324What’s an RMD? 324Can Retirement Rules Change? 324What Can I Do If I’m Near Retirement Age and Don’t Have a Plan? 325Do I Need a Financial Advisor? 326Index 327