Take that Monthly Retirement Projection With a Grain of Salt

Also: The 50 Best Places to Live in the U.S.
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October 4, 2022
Retire with Money

Say you’ve been dutifully socking away money from every paycheck for your eventual retirement so you can live reasonably well later in life.

But how do you know those years of savings are going to work out to a decent sum you can actually live on? If only there were some way to take that accumulated balance in your 401(k) and turn it into something more like a regular paycheck.

Thanks to the SECURE Act, 401(k) statements will now show you a figure called the lifetime income illustration. It’s based on turning your accumulated balance into an annuity — an insurance product that pays out a series of regular payments — and the monthly income you’d get from that annuity.

Problem is, it’s just a snapshot. “It doesn’t take into account outside savings and tries to predict an unpredictable future,” says Carolyn McCLanahan, a certified financial planner and founder of Life Planning Partners. “To me, those income statements are a waste of paper and have no bearing on real life.”

Douglas Boneparth, a CFP and president of Bone Fide Wealth, is torn. “Giving people more information regarding their financial life is generally a good thing,” he says. “It might motivate someone to save more for retirement.”

A plan needs context. “There’s so much more that goes into retirement planning [than one piece of data],” Boneparth says.

Several factors — Social Security, rate-of-return assumptions, inflation — go into proper retirement planning, Boneparth says. “This is also why there are professionals that can help.”

So take a deep breath before you look at your next 401(k) statement. If you’re under 40, remember that you have many more years to add to your retirement nest egg. If you’re closer to retirement, realize that this one statement from one account doesn’t factor in Social Security, individual retirement accounts or post-tax brokerage investment accounts.

For more, read this story from our writer, Mary Ellen Cagnassola, who explains what goes into the math.

— Jill Cornfield, deputy editor

P.S. If you got this newsletter from a friend, sign up here for email delivery to make sure you don't miss the next issue.

 

Timely Retirement News, Insights and Advice

 

If you’re spending more on your credit cards each month because of higher prices, you're not alone. Credit card balances increased in the past year at the fastest rate in two decades. Spending more likely means you're inching closer to your credit card limit, and that, experts say, means it could be a good time to ask for a higher limit.

 

When the Federal Reserve announced it was again raising interest rates, Chairman Jerome Powell said the housing market needs to go through a “correction.” Powell said home prices rose at an “unsustainably fast level” during the pandemic, as the Fed chair expressed hope that a housing market correction will make prices affordable again.

 

It’s officially a terrible year for stocks. The S&P 500 hit a new low for the year last week, and all three major indexes ended that day in a bear market. The commonly accepted definition of a bear market is when a stock market index drops at least 20% from a previous high. But what exactly does it mean in the grand scheme that all three indexes are now in a bear market?

 

In our annual ranking of the top places to live, we look at the things that matter most to people: economic opportunities, quality of life, diversity, and where the best futures lie. Explore the many different locations — and see if your town made it!

 

Retirement News From Around the Web

 

The Real Reason Mark Cuban Keeps Working, Even Though He Wanted to Retire at 35
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Older Workers are Struggling with a New Disability: Long COVID
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Congress Fixed (a Piece of) Medicare. It Only Took a Few Decades (podcast)
AN ARM AND A LEG

 

GOP Lawmakers Introduce Bill Allowing Crypto in 401(k) Retirement Plans
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Issue #163: Christmas shopping with a PSL in hand

Wednesday, October 5, 2022

plus a Missouri sign war + bear snack ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌

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And the best place to live is... ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌

Issue #162: Everyone is over overdraft fees

Wednesday, September 28, 2022

plus Cardi B hot takes + unstreamable songs ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌

Issue #161: Just how high can they climb?

Wednesday, September 21, 2022

plus free ballet classes + a relaxed raccoon ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌

A Retirement Savings Problem That No One Talks About

Tuesday, September 20, 2022

Also: America's Heating Bills Are Expected to Spike Again This Winter ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌

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