Questions. I get questions. By telephone, by letter, by electronic mail and now in "Live Online" sessions at www.washingtonpost.com. Everybody, it seems, has a question about retirement.
And that's a good thing. Asking questions is the first step to acquiring the information you need when you're planning for retirement, or when you're already retired. In an effort to shed a little light on some of those issues, here's a sampling of my answers to the questions that have come my way recently:
Q: I retired this past March and have kept up my savings, but it's not enjoyable watching the market take large bites. I have this great urge to take it all out of the market and stick it in a bank for 3 to 4 percent interest. Do you have any comments?
-- Silver Spring
A: Yes, indeed. Resist that urge. Running back and forth between the financial markets and the banks is not the way to manage your money in retirement. The better way is to develop an investment plan--call it a road map--that will help you reach your retirement goals.
You will have several basic investment choices: You can use your savings to provide additional income for living expenses. You can try to make your nest egg grow so that you stay ahead of inflation. Or you can try to do both, using a mix of investments.
If you are 65 and expect to spend 20 or 25 years in retirement, you might consider putting 60 percent of your money in stocks or stock funds, 30 percent in bonds or bond funds and 10 percent in money market funds for emergencies or special purchases.
As you move into your seventies and eighties, it might be prudent to increase the percentage in bonds and decrease the amount in stocks. Timing is important, so talk to an investment adviser.
Your investment mix will vary with your age, as will your feelings about risk and how many years you need to make your savings last.
In any event, don't base your investment decisions on the daily gyrations of the financial markets. Develop an investment plan that makes sense for you and stick to it.
Q: Do you have or recommend long-term care insurance?
-- Portland, Maine
A: My wife and I do have long-term care insurance. It is a group policy that we bought through The Washington Post while I was still working. It pays $110 a day for nursing home expenses and $55 a day for care received at home. It costs about $2,000 a year for both of us. The cost is relatively low because it is a group policy.
I think a long-term care policy is a good idea if you can afford it without putting too much strain on your retirement budget.
The cost of such a policy is closely related to your age and the features in the policy.
For instance, up to age 65, the cost is $500 to $2,000 a year; up to age 75, from $1,500 to $3,500 a year; over age 75, from $2,500 to $6,000 a year, according to Leta S. Blank, director of the Montgomery County Senior Health Insurance Assistance Program.
While some of those policies are quite costly, so are nursing homes. In the Washington area, they cost about $150 a day, or $54,750 a year--and that can deplete one's assets pretty quickly. However, fewer than half of the people over 65 will enter a nursing home at some time in their lives.
Blank's view is that individuals should buy long-term care policies only if their annual incomes are more than $30,000 and if they have assets of $100,000 to $500,000--not including their homes.
In short, there are two groups of people who don't seem to need long-term care policies: those who are well off enough to pay for nursing home costs and those who are not well off, because they are likely to wind up on Medicaid, a state-run program that pays for nursing home care. To qualify for Medicaid, individuals must first spend almost all of their money paying for their own care.
Thus, the folks in the middle are the ones who need long-term care insurance but are likely to have a tough time paying for it.
Q: My husband retired from a very stressful job two years ago and says he is really happy just sleeping, eating and doing desk work. I retired so we could travel and we try to do as much of this as the purse allows. I worry that this sedentary kind of life will be a quick downhill road. How do retired folks find an interest that gets them moving?
A: I have known many people who decided they worked so hard for so long that they want to spend their retirement days simply "playing" or at least not doing anything stressful. I guess that's fine, if that's what works for you. On the other hand, many experts say it is important for retirees, especially those who have led active business lives, to remain busy and involved with people.
There are many things a retiree can do. There is an endless list of civic, religious and charitable organizations that welcome volunteers. Many people pursue hobbies full time and some even turn their hobbies into businesses. Other people find part-time jobs that interest them.
The point is that if you're lucky, you can be retired for 20 or 25 years. It's a good idea to fill up those years with endeavors that bring you satisfaction and a sense of accomplishment.
Q: Was wondering if you debated issues about where you would retire, whether being near family was a controlling factor, or whether you discussed lifestyle issues? Is this area, with its traffic, etc., a good place for you in retirement?
A: My wife, Sara, and I spent some time thinking seriously about whether we wanted to move to Florida, where we have many relatives and friends. However, our children and grandchildren live in this area, so we decided to remain here where we could be close to them. In my research, I found the cost of living in Florida might be somewhat lower than in the Washington area but our desire to be close to our immediate family outweighed the economic considerations.
We also felt that one of the great advantages of living in the Washington area is the easy access to world-class museums, theaters and other cultural attractions. I recently received a letter from a New York couple that searched far and wide for a good place to live in retirement--and finally decided to retire to Washington because of its cultural offerings.
Q: My husband and I currently have approximately $100,000 saved in our two 401(k) plans. I am 28 and he is 31. By the time we reach retirement age, will we have enough money to retire comfortably? We are both contributing between 6 and 10 percent of our salaries and both our companies match 50 cents on the dollar, up to 6 percent.
-- Frazer, Pa.
A: It is hard to say how much anyone will need to retire comfortably 30 or 35 years from now. But you certainly have made a good start--far better than I did at your age. My calculator tells me that if you earn 8 percent a year on your $100,000 nest egg for the next 30 years, it will grow to more than $1 million.
Also, I figure that if you each save $200 a month in your 401(k) plans and earn 8 percent a year for the next 30 years, you will each wind up with $298,000 or a total of $596,000. That, plus the $1 million, should give you a comfortable retirement. I wish there had been 401(k) plans when I was your age.
Q: We would like to downsize from our house. We figure that if we purchase a condo, it will use up the entire net gain that we realize on our house. Should we pay cash for the condo or take a mortgage--with either a large or small down payment?
A: This is both a financial question and a lifestyle question. I know many people who are more comfortable knowing they do not have a mortgage and don't have to worry about monthly payments. Other people prefer to invest the profit from a house sale to obtain additional income. They also like being able to deduct their mortgage interest from their taxes. You may want to ask a tax preparer to help you weigh the choices in light of your income, assets and tax bracket.
My wife and I faced a similar choice when we sold our house and bought a condo. We took a small mortgage so we would have money available to furnish our new apartment and pay for the costs of relocating. We found that most of the furniture in our large house didn't fit in our small apartment. So that meant buying new furniture. And since we hadn't bought new furniture in many years, we got quite a shock when we saw the prices. If you buy a condo, remember to include the costs of furnishing and relocating.
Q: How do I go about finding a financial planner I can trust?
A: The easiest way, perhaps, is by a personal recommendation from a friend or relative. We've all chosen doctors or lawyers or auto mechanics that way. It's reassuring to know that someone you know had a good experience with an individual you may hire.
In your search, you may want to look for an individual who holds the designation "certified financial planner" (CFP), which indicates that he or she has completed a rigorous course of financial studies.
It's also possible to find a CFP by getting a list of planners in your community and interviewing several individuals before making a choice. You can obtain these names from the Institute of Certified Financial Planners (ICFP) at 1-800-282-7526 or on their Web site at www.icfp.org. If you phone, the names of several planners in your area will be mailed to you.
Planners generally are compensated in one of several ways: by salaries from the company the planners work for; by commissions the planners receive from investment products they recommend to clients; or on a "fee-only" basis, meaning a flat fee the planners charge for advice. Sometimes, planners get both commissions and fees.
Fee-only planners also are represented by the National Association of Personal Financial Advisors. To obtain a list of fee-only planners in your home area, call 1-888-333-6659 and a list will be mailed to you. The list also is available on NAPFA's Web site at www.napfa.org.
Retirement Journal columnist Stan Hinden will host a live Web discussion at 2 p.m. tomorrow to answer readers' questions about financial planning. To join, visit www.washingtonpost.com.