The Value of your Real Estate in Retirement Planning--Still the largest part of your Net Worth
Working with clients in the Bay Area, it is not unusual to see the value of a client's primary residence as the largest part of their net worth. Sometimes, the analysis of retirement planning results in the question of what to do with all that equity in your house. Should it be a source for retirement planning?
The issues/questions to consider when it comes to the use of housing wealth are:
• Paying off the mortgage to reduce overall expenses
• Sell and downsize to a smaller home, freeing up funds for investment
• Sell your home, invest the proceeds and then rent
• Secure a home equity loan or secondary mortgage on the house
• Get a reverse mortgage
• Rent out extra rooms
• Rent out your primary residence and live elsewhere at a lower cost
• Keep the house mortgage-free, and let its value serve as an emergency fund if needed
Because of the emotion that is usually wrapped up in the primary residence, the ultimate question of what to do with housing wealth often becomes difficult. The best recipe for success with investment and retirement planning is to plan with unemotional assets.
Friday, November 20, 2009
Monday, November 9, 2009
Really?, Retire the 401k?
Time Magazine Feature: Why It's Time to Retire the 401(k)
An interesting read...
Much of the focus of the article is about the fact that there aren’t any protection features in the 401k. The message from government over the past 15 years has been that the onus is on us to find the way to fund our own retirement.
The biggest lacking feature in company 401k s is the fact that the vast majority do not have a plan advisor attached to them. They are “unserviced” investment accounts without a professional minding the overall asset allocation. Under this regime, not only is the funding of your retirement on you, so is the professional investment management. If plan participants had the option to work with an advisor, the asset allocation should be adjusted as the participant moves closer to retirement. Over 90% of investment success is determined by asset allocation.
The other major focus of the article is retirement insurance—the idea that we should pay premiums for a “just-in-case” income policy. Retirement insurance already exists in the form of living benefit annuities.
In my opinion, the problem with retirement funding is not the investment vehicles, but the lack of planning.
An interesting read...
Much of the focus of the article is about the fact that there aren’t any protection features in the 401k. The message from government over the past 15 years has been that the onus is on us to find the way to fund our own retirement.
The biggest lacking feature in company 401k s is the fact that the vast majority do not have a plan advisor attached to them. They are “unserviced” investment accounts without a professional minding the overall asset allocation. Under this regime, not only is the funding of your retirement on you, so is the professional investment management. If plan participants had the option to work with an advisor, the asset allocation should be adjusted as the participant moves closer to retirement. Over 90% of investment success is determined by asset allocation.
The other major focus of the article is retirement insurance—the idea that we should pay premiums for a “just-in-case” income policy. Retirement insurance already exists in the form of living benefit annuities.
In my opinion, the problem with retirement funding is not the investment vehicles, but the lack of planning.
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