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The 6 Best Vanguard Funds to Own in a Bear Market

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My Comments: Much of my retirement money is at Vanguard. At some point I’m going to decide we’ve hit bottom and move it back into Vanguard growth funds or ETFs.

But right now, if you have the courage of your convictions, here are five low cost funds that you can use. If you are still a few years away from retirement, all the more reason to try and avoid significant losses since I don’t think we’re at the bottom of the current correction.

by Steven Goldberg \ Kiplinger \ November 19, 2018

If you’ve built a solid portfolio of funds, the last thing you want to do is tear it apart and build a new one simply because the stock market is doing one of its periodic swan dives.

But that doesn’t mean you shouldn’t tinker around the edges in a market that acts like it wants to go down. You might cut, say, 5% of your stock allocation and put the proceeds into a low-risk bond fund.

If you think your investments need more rearranging, you might take your most volatile fund and replace it with a lower-risk offering.

Where to look for a replacement? Vanguard funds include a fistful of first-rate defensive offerings that, while they’ll still likely lose money in a bear market, they should still hold up better than most other funds.

Vanguard Wellesley Income (VWINX , $26.12) is a fund that even the most nervous investor will find easy to hold onto – no matter how badly the stock market behaves. Over the past three years, Wellesley, which is run by Wellington Management, has been a little more than half as volatile as Standard & Poor’s 500-stock index. Roughly 61% of the fund is in bonds, and the remainder is in blue-chip stocks.

John Keogh, the bond manager, sticks largely to issues rated single-A and above. Less than 20% is in Baa bonds, which are still investment-grade. Most of the bond portfolio is in corporates and governments, along with a smattering of asset-backed bonds. Keogh does own some long-term bonds. VWINX’s portfolio has a duration of 6.3 years, meaning that portion of the fund should fall 6.3 percentage points in price when rates tick up one percentage point.

Michael Reckmeyer, the chief stockpicker, buys mainly mega-caps. He hunts for stocks that pay relatively generous dividends and can keep raising those payouts. He’s careful to buy stocks only when they’re fairly cheap, which gives the fund a distinct value tilt. Its biggest sectors are health care (18.4% of stocks), financial services (14.5%) and consumer staples (13.3%), with JPMorgan Chase (JPM), Verizon (VZ) and Johnson & Johnson (JNJ) the top three holdings at the moment.

Despite its conservative nature, the fund has returned an annualized 8.8% over the past 10 years. That includes a loss of 1% so far this year. VWINX yields 3.4%.

Vanguard Wellington (VWELX, $41.62) is much more aggressive than Wellesley, but it’s still a relatively tame beast. With 65% of the fund in stocks and the remainder in bonds, it’s a classic balanced fund – with the same allocation between stocks and bonds that many investment advisors recommend for the majority of their clients. It’s about two-thirds as volatile as the Russell 1000 Value Index.

The bond portfolio is virtually a carbon copy of Wellesley’s, as well it should be given that John Keogh manages the bond portion of both funds. As with Wellesley, he sticks largely to single-A bonds and above with less than 20% in Baa-rated debt. The duration is 6.3 years, identical to Wellesley’s. The fund yields a little less, though, at 2.7%.

Edward Bousa, the equity manager, is slightly more aggressive than Wellesley’s Reckmeyer. He’s willing to buy growth stocks after they’ve been knocked down in price. For instance, he bought Alphabet (GOOGL) when its price was depressed toward the end of 2014, and it continues to be a top-10 holding.

But the fund still leans toward value. Bousa, like Reckmeyer, looks for solid dividend payers. As far as sectors, he currently likes financials (22.7% of stocks), health care (15.5%) and technology (12.1%).

Wellington is the better pick for most investors, except for those in the later years of retirement or others who may need to spend their money relatively soon. Over the past 10 years, the fund has returned an annualized 11.04%.

Vanguard Short-Term Corporate Bond ETF (VCSH, $77.74) is a low-risk index bond exchange-traded fund that offers investors a healthy yield of 3.6%.

The fund, which tracks the Barclays US 1-5 Year Corporate index, takes little credit risk. All its holdings are investment-grade bonds from the likes of Anheuser-Busch InBev (BUD), CVS Health (CVS) and Bank of America (BAC), although 40% are rated only Baa or below. Duration is just 2.7 years – almost a full percentage point less than the yield. That means VCSH should make money on a total return basis even if rates rise one percentage point.

A small risk: More than 40% of the fund’s assets are in financial-sector debt.

Also note that this is available as an Admiral class mutual fund (VSCSX).

Want safer still? Consider the index ETF’s near-clone, Vanguard Short-Term Investment-Grade Fund (VFSTX, $10.40).

Using the same benchmark, this fund is actively managed by Vanguard’s Samuel Martinez and Daniel Shaykevich. It’s a little safer than the ETF because it owns not only corporates, but some Treasuries. Also, only 21% of its assets are Baa or below, and it doesn’t have nearly as much in financials.

But VFSTX is a very similar fund. It yields a bit less at 3.27% and has a slightly shorter duration of 2.6 years. It is a bit more expensive, though, at 0.20% in fees.

Vanguard Global Minimum Volatility (VMVFX, $14.00) is a fascinating, if complicated, fund that could be just the ticket for investors who want to dial down risk.

Run in-house by Antonio Picca, it takes a quantitative approach to delivering lower risk-adjusted returns than its benchmark, the FTSE Global All Cap Index. It invests roughly half its assets in foreign stocks, and the other half in U.S. stocks. It hedges away all foreign currency risk.

The fund takes several steps designed to limit volatility. It tilts toward stocks with historically low volatility and stocks that have low correlations with one another. The manager keeps sector weights within five percentage points of their FTSE index weightings, but he overweights defensive sectors, such as consumer staples and health care, which together account for a quarter of assets.

The FTSE index lost 12.1% from June 2015 through February 2016, but the Vanguard fund lost just 4.6%, according to Morningstar.

If you buy this fund, remember: It will almost sure lag during bull markets. From January 2014 through July 2018, the fund captured 40% of the market’s declines but only 77% of its advance, Morningstar says.

Over the past three years, the fund has been about halfway between Wellington and Wellesley in terms of volatility. It has been less volatile than Wellington but more volatile than Wellesley. Since inception, the fund, which was launched in late 2013, has returned an annualized 10%.

Just keep in mind that VMVFX is relatively new and hasn’t been tested in a bear market, while Wellington and Wellesley have been.

Vanguard Limited-Term Tax-Exempt (VMLTX, $10.79) is a plain vanilla, short-term municipal bond fund. It yields 2.2% and its duration is 2.6 years, meaning it should just lose only a little bit should rates rise by one percentage point.

Run in-house by Adam Ferguson, the fund tracks Barclays 1-5 Year Municipal Bond Index. Ferguson and the rest of Vanguard’s fixed-income team make big-picture judgments, which they use to adjust the duration and credit quality of the fund. The vast majority of VLTMX’s bonds are single-A or above, with just about 11% below.

The trick to this fund is hiding in plain sight: Its low expense ratio. Ferguson doesn’t have to do anything fancy to beat most of his peers – he just has to avoiding making big bets that turn sour. So he doesn’t make big bets. Over the past 10 years, the fund has returned an annualized 2.0%, almost exactly equaling the index.

Buy the Admiral shares (VMLUX) if you can handle the minimum initial investment of $50,000. They charge just 0.09%.

Source URL: https://www.kiplinger.com/slideshow/investing/T041-S001-the-6-best-vanguard-funds-to-own-in-a-bear-market/index.html

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Retirees Will Spend a Third of Their Social Security on This One Big Expense

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My Comments: My efforts to coach people to start thinking seriously about their future retirement is complicated. For every positive associated with retirement there are just as many negatives. This is one of them.

Unless you plan to die before you reach retirement, you should find time to get your ducks lined up well in advance.

by Christy Bieber \ Nov 17, 2018

You probably have lots of plans for your retirement. Unfortunately, if you’re counting on spending your Social Security benefits on enjoying retirement, you may be surprised to find much of your money is eaten up by one expense that isn’t very much fun but that’s very necessary. 

That cost: healthcare. A new study from the Center for Retirement Research (CRR) shows that seniors spend an average of almost $4,300 annually per person on out-of-pocket healthcare costs.

These expenditures consume around one-third of the total amount of monthly benefits seniors receive from Social Security.

Your Social Security benefits will be consumed by healthcare expenses

According to the CRR, the average senior’s annual out-of-pocket spending on healthcare totals $4,274 per person, with $2,965 of that money going to insurance premiums.

Premiums generally must be paid for Medicare Parts B and D. Some seniors opt for Medicare Part C plans or Medigap plans that charge higher premiums but reduce coinsurance costs for care.  

Spending so much on healthcare significantly reduces income available to retirees. The CRR revealed the average retiree had just 65.7% of Social Security benefits remaining after paying out-of-pocket healthcare costs and just 82.2% of total household income remaining after paying for care.

And, for many senior households, things are even worse. Close to one-fifth of all retirees had less than half their Social Security income left after healthcare spending, and 6% of retirees spent more than half of total household income from all sources on healthcare.

Spending this much is a major problem, especially when many seniors are overly reliant on Social Security and have too little income to begin with. 

How can you keep healthcare costs down?

The best way to make sure you can afford your care as a senior is to save money specifically earmarked for healthcare.

If you’re eligible to contribute to a Health Savings Account, you can get big tax benefits. If you aren’t, you should set aside extra money in other tax-advantaged accounts, such as a 401(k) or IRA, specifically for care. 

Unfortunately, if you’re already in retirement and don’t have a fortune saved to cover healthcare, you’ll need to find ways to keep costs as low as possible. Some of the best ways to keep your healthcare expenditures low include:

  • Talking with your doctor: Medical professionals can often help you find generic versions of expensive medications, may have prescription drug coupons to offer, and can otherwise find ways to help you reduce spending if you’re struggling. 
  • Taking steps to stay healthy: The healthier you are, the lower your care costs. To stay healthy, get preventive screenings (which are often free under Medicare) so you can fix little problems before they turn into big ones. Avoid smoking, exercise regularly, and get help managing chronic conditions. 
  • Matching your insurance coverage to your needs. You have the option to buy a Medicare Part C plan to replace original Medicare, and some of these policies provide more comprehensive coverage. You can also opt for a Medigap plan to supplement traditional Medicare. By comparing what different policies cover — and cost — you can either choose to pay higher premiums for more coverage or reduce premiums and get a skimpier plan if you don’t use many medical services during the year. 
  • Determining if you can qualify for Medicaid. Medicaid can help you to more easily afford your care. Depending upon your income, Medicaid may provide help with Medicare premiums and coinsurance costs. Medicaid can also cover certain kinds of care Medicare doesn’t pay for, such as unskilled nursing home care. 

It’s up to you to find ways to keep healthcare costs as low as possible if you don’t want to lose a third — or more — of your Social Security benefits to healthcare costs. 

Healthcare is expensive — so make a plan

The new data from the CRR makes clear just how much of your money will be eaten up by healthcare. Experts have been warning for a long time that seniors will need a lot of money to pay for their care.

The sooner you start making a plan for taking care of your health needs as a senior, the more easily you’ll be able to afford them without skimping on everything else you’d hoped to spend money on during retirement. 

Source: https://www.fool.com/retirement/2018/11/17/retirees-will-spend-13-of-their-social-security-on.aspx

Do You Know These Basic Financial Terms?

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My Comments: The lack of financial literacy for most people is an existential risk when thinking about money and the role it plays in peoples everyday lives. And it becomes even greater when the idea of retirement surfaces and what has to be put in place long before that day arrives. Here’s a start…

by Danielle Directo-Meston \ September 18, 2017

Does the mere thought of calculating your cut of the dinner tab or logging into your bank account online send shivers down your spine? It turns out that money anxiety disorder is a thing, but you don’t need to be a Wall Street pro to know that being smart with your finances pays off. Think about it: There’s no reason the funds in your checking account should sit idly by, especially if you’re dreaming of saving up for a vacation as you’re clocking into the office every day. If you’re a finance newbie who wants to take control of your money, then getting to know some of the most basic financial terms is the best place to start.

To get more insight into the top money words to know—and ultimately learn how to make your money work for you—we turned to LearnVest founder and CEO Alexa von Tobel. “Just because you are learning the basics doesn’t mean you should feel intimidated to ask questions or talk about your finances,” she tells MyDomaine. In a 2016 survey, the financial planning website found that nearly half of Americans don’t know the balances of their partner’s investment accounts, while a third have no idea how much their significant other earns in a year, proving that money continues to be a sensitive topic even among people in intimate relationships. (In fact, the study also found that 68% of Americans would rather share their weight than their credit score with friends.)

“I know that talking about money can be difficult, but for your own financial well-being, it’s important to feel comfortable talking about it with your friends, family, and partners,” the certified financial planner explains. Not a math whiz? Don’t worry—you don’t need to be an expert at crunching numbers to tackle topics like retirement accounts, investing, and banking.

It’s time to stop being a money newbie—these are the nine basic financial terms everyone should know, straight from an expert.

Retirement Account Terms to Know

1. 401(k): A retirement account that you can only get through an employer, this type of fund pulls money directly from your paychecks, and some employers will “match” your contributions. “Traditional 401(k) plans grow tax-deferred, meaning that you’ll pay taxes when you take the money out, not when you put the money in,” says von Tobel.

2. Roth IRA: With this type of retirement account, “you pay taxes up-front at today’s tax rates,” explains von Tobel. “So while you don’t get any tax breaks today, you never have to pay taxes on your investment earnings.”

3. Traditional IRA: “[This] is set up so that your contribution each year is tax deductible (if you’re under a certain income limit), and you aren’t taxed on the income you make as it grows,” von Tobel says. “You pay those taxes when you withdraw it for retirement, which you’re required to start at age 70 and a half. Anyone with earned income can open a traditional IRA.”

Banking Terms to Know

4. Compound Interest: “When you’re investing or saving, this is the interest that you earn on the amount you deposit, plus any interest you’ve accumulated over time,” says von Tobel. “It will make your savings or debt grow at a faster rate than simple interest, which is calculated on the principal amount alone.” If you’re borrowing money, this interest is charged on the original amount you are loaned in addition to any interest that’s added to your outstanding balance over time. “Think of it as ‘interest on interest.'” she explains.

5. FICO Score: An acronym for the Fair Isaac Corporation, this number measures borrowers’ creditworthiness and calculates your credit score based on your payment history, length of your credit history, and the total amount of money owed. “FICO scores range from 300 to 850, and the higher the score, the better the terms you may receive on your next loan or credit card,” says von Tobel. “People with scores below 620 may have a harder time securing credit at a favorable interest rate.”

6. Net Worth: The difference between your assets and liabilities, this can be calculated by “adding up all the money or investments you have, including the current market value of your home and car, as well as the balances in any checking, savings, retirement, or other investment accounts,” says von Tobel. “Then subtract all your debt, including your mortgage balance, credit card balances, and any other loans or obligations. The resulting net worth number helps you take the pulse of your overall financial health.”

Investing Terms to Know

7. Asset Allocation: “[This is] the process by which you choose what proportion of your portfolio you’d like to dedicate to various asset classes, based on your goals, personal risk tolerance, and time horizon,” says von Tobel. The three major types of asset classes are stocks, bonds, and cash or cash alternatives (like certificates of deposit), “and each of these reacts differently to market cycles and economic conditions.” For example, investing in stocks may result in strong growth over the long-term, but they’re also subject to more volatility. “A common investment strategy is to diversify your portfolio across multiple asset classes in order to spread out risk while taking advantage of growth,” she adds.

8. Bonds: Usually referred to as fixed-income securities, this type of asset class tends to have slower growth but is usually perceived to be less risky. “Bonds are essentially debt investments—When you buy a bond, you lend money to an entity, typically the government or a corporation, for a specified period of time at a fixed interest rate (also called a coupon),” explains von Tobel. “You then receive periodic interest payments over time, and get back the loaned amount at the bond’s maturity date.”

9. Capital Gains: “This is the increase in the value of an asset or investment (like a stock or real estate) above its original purchase price,” says von Tobel. “The gain, however, is only on paper until the asset is sold. A capital loss, by contrast, is a decrease in the asset’s or investment’s value. You pay taxes on both short-term capital gains (a year or less) and long-term capital gains (more than a year) when you sell an investment.” It’s worth noting that a capital loss could also help reduce your taxes.

A Retirement Plan for Workaholics – 5 Tips

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My Comments: If you’re still a working stiff, the idea of eventual retirement crosses your mind from time to time.

In years past, we thought of live as having two phases: childhood and adulthood. In childhood we are dependent on others and in adulthood we are dependent on ourselves. Adults worked until they died or found someone to look after them.

In the mid 19th Century, the idea of ‘retirement’ surfaced and became a third phase of life if you had not already died. Here in the 21st Century it’s the norm. Having enough money to live another 30 years without working is the game plan for most people.

What to do if you’re someone who loves to work, is happy working, and probably has enough money saved to make some kind of retirement possible. Here are five tips for you.

by Douglas Dubitsky \ July 5, 2017

Can a workaholic ever retire?

Many workaholics genuinely enjoy the rush of starting and completing projects and continuing the nonstop cycle. So it may also be difficult for them to contemplate what life may be like in retirement once they are officially out of the workforce.

If you’re a workaholic, smoothing your transition to retirement means uncovering the answer to the question: What part of the end of your job will you miss the most? It might be the people. Or the challenges. Or having purpose. Once you know which it is, you can focus on how to reap the same benefits — and feelings — while not holding down full-time employment.

Here are 5 tips to help workaholics ease into retirement:

1. Start slowly. If you jump into retirement all at once, the shock to your routine might be too much to handle. Instead, look for opportunities where you can work part-time, even with your current employer.

Cut back on your work hours gradually and your nonworking life could just slip into place. Look for a weekend job, or an after-hours job, to start while you’re employed full time. This could turn into part-time employment that you may want to pursue during retirement.

You might want to find out if your current employer would consider keeping you on as a consultant in retirement. This may help your employer retain your institutional knowledge while you enjoy a more flexible schedule.

If you plan to take Social Security retirement benefits before Full Retirement Age (between 66 and 67, depending on when you were born) and work at the same time, however, your benefit will be reduced if you make more than the yearly earnings limit. In 2017, the Social Security earnings limit is $16,920. Social Security deducts $1 from your benefit payments for every $2 you earn above the earnings limit.

2. Experiment and schedule. As you wean yourself away from work, look for new ways to occupy your mind. This could be as simple as taking a cooking class, volunteering or exercising every morning before breakfast.

Also, at least in the beginning, either schedule your days down to the hour so you always have something to do or time-block the beginning or ending half of the day.

Has your spouse or any of your friends retired recently? Retirement may prove to be a great opportunity for you to spend more time with him or her. The same goes if you have children or grandchildren. You can reroute the attention you gave to your job to your family and friends.

3. Give yourself a break. A recent study by my company, The Guardian Life Insurance Company of America, found that one in six Americans is very dissatisfied with his or her life. Often, workaholics feel guilty about not having spent enough time with their families during their careers. Some didn’t pay attention to themselves either, or to the physical and mental benefits that come with rest.

So as you ease into retirement, don’t forget to take care of your own needs even as you strive to care more for those around you.

4. Talk it out. If you find that postwork life is more difficult than you anticipated — or even worse, that you’re feeling depressed or overwhelmed — don’t hesitate to get help. It’s important that you talk about your feelings with friends, family or other retirees going through similar transitions.

5. Look ahead. Most retirees find it doesn’t take long to adjust to life without a full-time job. Keep this in mind as you look toward your personal retirement plan. Focus on your retirement the way you’ve focused on your work and the years ahead can be your best ever.

https://www.marketwatch.com/story/a-retirement-plan-for-workaholics-2017-07-05

A Glossary of Basic Investment Terms

My Comments: Financial literacy has to start somewhere.

If you are planning for an eventual retirement and want to grow your money between now and then, a degree of financial literacy is mandatory. Start here…

by Emma Johnson \ June 1, 2018

If you’ve ever scanned the business headlines, you’re probably familiar with terms like the S&P 500, ETFs and bull markets. But do you actually know what they mean, or how they compare to related investing lingo like the Dow, mutual funds and bear markets?

If you said no, you’ve got plenty of company. In one recent Bankrate survey, nearly half of those 25 and younger said a lack of knowledge about investing kept them from putting money in the market. And in a recent Harris Poll, 69% of adults 35 and younger said they found investing, and the accompanying jargon, complex and confusing.

So we’ve rounded up 19 common investing terms you’ve probably heard, but may not really understand, and given you the lowdown on all of them.

Bear vs. bull market
A bull market is when everything is just wonderful: Markets are on the rise and investors are confident that strong results will continue. Though the market can have “bullish” days, technically, a bull market is when the market increases in value at least 20%. Hint: Bull market means “up” because real-life bulls attack by driving their horns up in the air.

A bear market is the inverse: The market—and investor confidence—is declining. The job and housing markets may also be down. The upside, however is that bear markets are a bonanza for savvy investors, as prices have recovered historically (and then some) after every bear market. You can remember that it means “down” because bears attack their victims by swiping their paws downward.

Stock vs. bond
Stocks, or shares of a publicly traded company, are a fundamental element of most investment portfolios. The value goes up and down with the company’s financial well-being—and with shareholders’ perception of that company’s well-being. They’re risky, but potentially rewarding.

Bonds are essentially loans that you give to the issuer, which can be a corporation, municipality or the federal government. When you buy, you do so with the expectation of getting paid back, with interest, in a certain amount of time—criteria that render bonds a low-risk, if boring investment.

ETFs vs. mutual funds
An ETF is a stock, bond or commodity fund that usually tracks an index. Because they’re more passively run, they tend to charge lower fees. They’re also traded like common stocks at varying prices throughout the day.

A mutual fund—which pools your money with other investors to purchase stocks, bonds and other assets—is professionally managed and therefore tends to come with higher fees. Shares are priced once based on their net asset value (NAV) at the end of the trading day.

Money market vs. savings account
A money market account (MMA) is a bank account that typically pays a higher interest rate than checking and many savings accounts (for which the average interest rate is currently less than .50%). MMAs have check-writing abilities, as well as ATM or debit cards; and, like savings accounts, federal regulations restrict you to no more than six withdrawals a month. There’s usually a higher minimum balance requirement for MMAs compared with savings accounts.

Passive vs. active funds
Calling an investment fund “passive” or “active” refers to how it’s managed. Passive funds are run with a hands-off approach, and therefore generally come with lower fees. Index funds, for example, are set up to move in tandem with associated indexes, like the S&P 500, and mirror their returns.

Active funds, on the other hand, are handled by investment managers, who attempt to beat their benchmarks by making a wider variety of investments. You’ll pay more in fees in exchange for their expertise.

Growth vs. value stocks
Growth or value? Both, if you want a balanced investment portfolio.

Growth stocks have a recent history of above-average performance. While all signs suggest these investments (think: newer companies, especially ones in the tech sector) will continue growing, they’re risky because you’re solely relying on the company’s success for your investment to appreciate.

Value stocks are investments that trade at a lower price than their fundamentals, like high dividend payments and company earnings, might indicate. That effectively puts these stocks in the bargain bin, and savvy investors may be able to capitalize.

Investing vs. trading
Both investing and trading are means to the same goal: making money from the financial markets. Yet they represent different functions.

Investing typically refers to “buy and hold,” meaning investors create a balanced portfolio of stocks and bonds, and hold on to them for the long-term—gaining from the power of compound interest and weathering the natural up-and-down market cycles.

Trading, by contrast, is a much more active effort to profit, requiring a trader to frequently buy and sell investments with the aim of beating out buy-and-hold investors. It also comes with more risks.

401(k) vs. IRA
A 401(k) is an employer-sponsored retirement savings account, where you can contribute a maximum of $18,000 pretax ($24,000 if you’re over 50) in 2016. As an incentive to save, many employers match a portion of your contributions. (Free money!)

An IRA, which stands for individual retirement account, is accessible to anyone. This year, you can contribute up to $5,500 pretax (plus another $1,000 if you’re 50 or older) in a traditional IRA.

With a few notable exceptions, you’ll pay a 10% penalty for withdrawing funds from either of these retirement accounts before age 59½.

Roth IRAs are a bit different. Provided you don’t earn more than the income limits, you can contribute up to $5,500 ($1,000 more if you’re 50 or older) posttax dollars, but it grows tax-free. You’re allowed to withdraw funds you contribute—but not any gains—anytime without penalty.

S&P 500 vs. Dow vs. Nasdaq
The Dow Jones Industrial Average, DJIA, -0.43% a.k.a “the Dow,” is an index that tracks 30 large, established, U.S.-based companies across all sectors. Today, these include companies like 3M, MMM, +0.31% Coca-Cola, COKE, +0.76% Apple, AAPL, -6.63% Nike NKE, -0.27% and Walmart.
WMT, +0.76% As such, the state of the Dow often serves as a general pulse of the economy in the minds of the media, investors and general public.

When people refer to “The Nasdaq,” NDAQ, +0.00% they’re typically talking about the Nasdaq Composite—a price-weighted index of more than 3,000 companies listed on the exchange of the same name. Because it’s is so much bigger than the Dow, a glance at the day’s Nasdaq can give a broader view of the economy, though it’s skewed toward the tech sector.

The S&P 500 refers to the Standard & Poor’s 500 index, which includes, yes, 500 primarily large-cap stocks selected by a team of analysts and economists at Standard & Poor’s. It’s often used as a benchmark for the stock market because it includes a significant portion of the market’s total value.

My source: https://www.marketwatch.com/story/confused-about-these-investing-terms-youre-not-alone-2018-05-10

11 Proven Ways to Boost Your Retirement Income

My Comments: Personally, I’m completely invested in #4, #6, #8, and #9. I’m working hard on #1 and #10. What you choose is entirely up to you.

Boosting your retirement income is not about accumulating more stuff. It’s about enjoying life, completing your bucket list of things to do, and having money to pay your bills. Remember, you’ll have your GO-GO years, your SLOW-GO years and your NO-GO years. All require money.

by Selena Maranjian | Apr 8, 2018

Many Americans feel they’re on shaky financial ground these days. Fully 39% said that they feel not too confident or not at all confident that they’ll have enough money with which to live comfortably in retirement, according to the 2017 Retirement Confidence Survey.

How much money will you need for retirement? The answer will be different for different people, and many of us will not amass our needed amount. Fortunately, we can boost our odds of having a happy retirement by taking some steps. Here are 11 strategies you might employ now or later to increase your retirement income.

1. Get rid of debt

For starters, aim to enter retirement without a mortgage or any other costly debt, as that can weigh on you when you’re surviving on a fixed or limited income. Having to make debt payments while retired can hurt your ability to make other necessary payments. If you can pay off such debt before retiring, you can enjoy more income in retirement.

2. Make the most of retirement savings accounts

Tax-advantaged retirement savings accounts such as IRAs and 401(k)s are another good way to boost retirement income, as the more money you contribute to them while working, the more you’ll have in retirement. There are two main kinds of IRA: the Roth IRA and the traditional IRA. In 2018, the contribution limit is $5,500 for most people and $6,500 for those 50 and older in both types of accounts. You can amass even more with a 401(k) account, as it has much more generous contribution limits — for 2018 the limit is $18,500 for most people and $24,500 for those 50 or older. Give particular consideration to Roth IRAs and Roth 401(k)s (which are increasingly available), as they let you withdraw money in retirement tax-free.

The table below shows how much money you can accumulate over various periods socking away various amounts:
Growing at 8% … $5,000 Invested Annually     $10,000 Invested Annually
10 years              $78,227                                   $156,455
15 years              $146,621                                 $293,243
20 years              $247,115                                 $494,229
25 years              $394,772                                 $789,544
30 years              $611,729                                 $1.2 million
Calculations by author.

3. Set yourself up with dividend income

Fill your portfolio with a bunch of dividend-paying stocks, and you can collect income from it without having to sell off any or many shares to generate funds. A $400,000 portfolio, for example, that sports an overall average yield of 3% will generate about $12,000 per year — a solid $1,000 per month.

Dividend income isn’t guaranteed, but if you spread your money across a bunch of healthy and growing companies, you’ll likely receive regular — and growing — payments. Here are a few well-regarded stocks with significant dividend yields:

Stock                      Recent Dividend Yield
Amgen                    2.8%
General Motors    4.2%
National Grid        5.1%
PepsiCo                  2.9%
Pfizer                      3.7%
Verizon                   4.9%
Data source: The Motley Fool (April, 2018).

A dividend-focused exchange-traded fund (ETF) can be a fine option, too, offering instant diversification. The iShares Select Dividend ETF (DVY), for example, recently yielded about 3.2%. Preferred stock is another way to go. The iShares U.S. Preferred Stock ETF (PFF) recently yielded 5.6%.

4. Keep working in retirement

Another way to boost your retirement income is to work during the first years of your retirement — at least a little. Working just 12 hours per week at $10 per hour will generate about $500 per month. Also, given that many retirees can find themselves restless and a bit lonely in retirement, a part-time job can help by offering more daily structure and regular opportunities for socializing.

Here are some possibilities: You could be a cashier at a local retailer or deliver newspapers. You might do some freelance writing or editing or graphic design work. You might tutor kids in subjects you know well, or perhaps give adults or kids music or language lessons. Make and sell furniture or sweaters or candles. Do some consulting — perhaps even for your former employer. Babysit, walk dogs, or take on some handy person jobs. These days the internet offers even more options. You might make jewelry, soaps, or jigsaw puzzles and sell them online, or write e-books that you self-publish online.

5. Lock in income with fixed annuities

Give fixed annuities some consideration, as they can deliver regular income, and favor them over variable annuities and indexed annuities that often charge steep fees and sport restrictive terms. Fixed annuities are much simpler instruments and they can start paying you immediately or on a deferred basis. Below are examples of the kind of income that various people might be able to secure in the form of an immediate fixed annuity in the current economic environment. (You’ll generally be offered higher payments in times of higher prevailing interest rates.)

Person/People            Cost       Monthly Income      Annual Income Equivalent
65-year-old man       $100,000       $546                         $6,552
65-year-old man       $100,000       $522                          $6,264
70-year-old man       $100,000       $628                          $7,536
70-year-old woman  $100,000       $588                          $7,056
65-year-old couple   $200,000       $929                         $11,148
70-year-old couple   $200,000     $1,028                        $12,336
75-year-old couple   $200,000     $1,180                        $14,160
Data source: immediateannuities.com.

A deferred annuity can also be smart, starting to pay you at a future point, such as when you turn a certain age.

6. Consider a reverse mortgage

Look into a reverse mortgage, too. It’s essentially a loan secured by your home. A lender will provide (often tax-free) income during your retirement, and that money doesn’t have to be paid back until you no longer live in your home — such as after you move into a nursing home or die. It has some drawbacks, such as requiring your heirs to sell your home unless they can afford to pay off the loan, but if you’re really pinched for funds and no one is counting on inheriting your home, it can be a solid solution.

7. Borrow against your life insurance

Many people don’t think of this strategy, but in the right circumstances, it can deliver needed income. If you have a life insurance policy that no one is depending on — such as if the children you meant to protect with it are now grown and independent — you might consider borrowing against it. This can work if you’ve bought “permanent” insurance such as whole life or universal life, and not term life insurance that generally only lasts as long as you’re paying for it. You’ll be reducing or wiping out the value of the policy with your withdrawal(s), but if no one really needs the ultimate payout, it can make sense. Plus, the income is typically tax-free.

8. Move to a less expensive home or region

You can also beef up your retirement income by spending less in retirement on your home. You can achieve this by downsizing into a smaller home and/or moving to a region with lower taxes or cost of living. This strategy can shrink your property taxes, insurance costs, home maintenance expenses, utility costs, landscaping bills, and so on. The median home value in Massachusetts, for example, was recently about $341,000, but it was only $264,600 in Colorado, only $143,600 in South Carolina, and $114,700 in Arkansas.

9. Collect interest

Parking money in interest-generating investments is a strategy that varies in its effectiveness as the economic environment changes. When interest rates are high, it’s great. In times like these, not so much. If you park $100,000 in certificates of deposit paying 1.5% in interest, you’ll collect $1,500 per year, not a very helpful sum. Back in 1984, though, rates for five-year, one-year, and six-month CDs were in the double digits. If you could get 10% on a $100,000 investment, you’d enjoy $10,000 per year, equivalent to about $830 per month. If interest rates are sufficiently low, they won’t even keep up with inflation, which has averaged about 3% annually over long periods.

Bonds are another interest-paying option, but the safest ones (from the U.S. government) tend to pay modest interest rates, especially in low-interest-rate environments. Still, if you have a lot of money, you might make this strategy work by buying a variety of bonds that will mature at different times, generating income over many years.

10. Retire later

Here’s a very powerful strategy, but one that many people would rather not employ: Retire later than you planned to. If you can work two or three more years, your nest egg can grow while you put off starting to tap it. (In other words, it can ultimately deliver more income, and it will have to do so for fewer years.) You might enjoy your employer-sponsored health insurance for a few more years, too, perhaps while also collecting a few more years’ worth of matching funds in your 401(k).

Imagine that you sock away $10,000 per year for 20 years and it grows by an annual average of 8%, growing to about $494,000. If you can keep going for another three years, still averaging 8%, you’ll end up with more than $657,000! That’s more than $160,000 extra just for delaying retirement for a few years.

11. Maximize Social Security

There are a bunch of ways to boost your Social Security income, too. You can increase or decrease your benefits by starting to collect Social Security earlier or later than your full retirement age, which is 66 or 67 for most of us, and you can make some smart moves by coordinating with your spouse when you each start collecting.

If you and your spouse have very different earnings records, for example, you might start collecting the benefits of the spouse with the lower lifetime earnings record on time or early, while delaying starting to collect the benefits of the higher-earning spouse. That way, you both get to enjoy some income earlier, and when the higher earner hits 70, you can collect their extra-large checks. Also, should that higher-earning spouse die first, the spouse with the smaller earnings history can collect those bigger benefit checks.

When to Take Social Security: The Complete Guide

My Comments: Social Security is a complicated issue for almost everyone in the retirement planning process. There are so many variables it’s hard to get your arms around what is in your best interest. Many people just say to hell with it and sign up at age 62.

And that can be a huge mistake. You’ll probably end up with less money over your lifetime, not because you’ll get less in total from the Social Security Administration, but because it may cause you to pay more in taxes. And if you have a surviving spouse, it could hurt them too.

What you pay in taxes cannot be used to pay your bills. And retirement is all about being able to pay your bills and enjoy your life.

By Amy Fontinelle | March 12, 2018

If you’re about to retire, you might be wondering if you should start claiming your hard-earned Social Security benefits. If you need the income and you’re at least 62 – the minimum age to claim – the answer is obvious. But if you have enough other income to keep you going until you’re older, how do you decide?

Benefit Amount
The size of your monthly benefit payment depends on the year you were born and your age when you start claiming, down to the month. You receive your full monthly benefit if you start claiming when you reach full retirement age. To find your full retirement age, see the chart below.

Let’s say your full retirement age is 66. If you start claiming benefits at 66 and your full monthly benefit is $2,000, you’ll get $2,000 per month. If you start claiming benefits at age 62, which is 48 months early, your benefit will be reduced to 75% of your full monthly benefit (also called your primary insurance amount). In other words, you’ll get 25% less per month and your check will be $1,500. You’ll receive that reduced benefit not just until you turn 66, but for the rest of your life (though it will go up slightly over time with cost-of-living adjustments). The easiest way to do the math for your own situation is to use the Social Security Administration’s (SSA) Early or Late Retirement calculator (scroll down the linked page to find it).

If you wait until you’re 70 to start claiming benefits, you’ll get an extra 8% per year, and in total, you’ll get 132% of your primary insurance amount, or $2,640 per month, for the rest of your life. Claiming after you turn 70 doesn’t increase your benefits any further, so there’s no reason to wait longer.

The SSA’s many retirement calculators can also help you determine your full retirement age, the SSA’s estimate of your life expectancy for benefit calculations, rough estimates of your retirement benefits, actual projections of your retirement benefits based on your work record and more.

The longer you can afford to wait, the larger your check will be. But you’ll also have no money coming in from Social Security during the months when you postpone claiming. Waiting as long as possible to start claiming benefits doesn’t necessarily mean you’ll come out ahead overall, though, for several reasons: expected longevity, spousal benefits, taxes, investment opportunity and health insurance.

Expected Longevity
So much of our strategizing about how to maximize Social Security retirement benefits depends on guesses about how long we’ll live. Any of us could die in a car accident or get a terminal cancer diagnosis next week. But putting aside these unpredictable possibilities, how long do you think you’ll live? What is your health like now, and what has your relatives’ longevity looked like? Have you had a physical and blood work lately? How are your blood pressure, cholesterol, weight and other markers of health? If you predict an above-average life expectancy for yourself, you may come out ahead by waiting to claim benefits. If not, you might want to claim as soon as you’re eligible.

To make an educated guess about how to come out ahead, you’ll need to do a break-even analysis. What do we mean by breaking even? It’s the point where your lifetime benefits are the same given different initial claim ages. The question is this: Will you be better off – that is, will you get a higher total lifetime payout – getting more checks for a smaller amount (by claiming at 62, for example), or fewer checks for a larger amount (by claiming as late as age 70)?

The Social Security website will tell you that regardless of when you start claiming, your lifetime benefits will be similar if you live as long as the average retiree. The problem is that most people will not have an average life expectancy, hence all the different claiming strategies.

Spousal Benefits
Being married further complicates the decision of when to take Social Security because of the program’s spousal benefits. Certain divorcees are also entitled to benefits.

Spouses who didn’t work or who didn’t earn enough credits to qualify for Social Security on their own are eligible to receive benefits starting at age 62 based on their spouse’s work record. As with claiming benefits on your own record, your spousal benefit will be reduced if you claim benefits before reaching full retirement age (though not at the same rate as claiming your own benefits early). The highest spousal benefit you can receive is half the benefit your spouse is entitled to at their full retirement age.

While spouses will get a lower benefit if they claim before reaching their own full retirement age, they will not get a larger spousal benefit by waiting to claim after full retirement age – say, at age 70. But a nonworking or lower-earning spouse can get a larger spousal benefit if the working spouse has some late-career, high-earning years that boost benefits.

When one spouse dies, the surviving spouse is entitled to receive the higher of their own benefit or their deceased spouse’s benefit, but not both. That’s why financial planners often advise the higher-earning spouse to delay claiming. If the higher-earning spouse dies first, the surviving, lower-earning spouse will receive a larger Social Security check for life.

When the surviving spouse hasn’t reached full retirement age, he or she will be entitled to prorated amounts starting at age 60. At full retirement age, the surviving spouse is entitled to 100% of the deceased spouse’s benefit or to their own benefit, whichever is higher.

A claiming strategy called file and suspend used to allow married couples of full retirement age to receive spousal benefits and delayed retirement credits at the same time. This strategy, which ended as of May 1, 2016, helped some couples receive tens of thousands more from Social Security.

Here’s the next-best thing for older, dual-income couples: Individuals who turned 62 by January 1, 2016, can use a strategy called restricted application. Spouse A claims benefits first; spouse B claims spousal benefits. Once spouse B turns 70, spouse B claims their own benefit instead. Spouse A then claims spousal benefits, which are now higher than their own benefit because of how much spouse B’s benefit has grown by waiting to claim until age 70.

Taxes
Social Security benefits become taxable at rather low income thresholds. No matter how much you make, the first 15% of your benefit payments are not taxable. But income from interest, dividends and taxable retirement accounts such as 401(k)s and traditional IRAs can quickly push you over the tax threshold.
The Social Security Administration calculates your “combined income” as follows:

Your adjusted gross income
+ Nontaxable interest (for example, municipal bond interest)
+ ½ of your Social Security benefits
= Your “combined income”

If you file your federal tax return as an individual and your combined income is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $34,000, you may have to pay income tax on up to 85% of your benefits.

If you’re married filing a joint return and you and your spouse’s combined income is $32,000 to $44,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $44,000, you may have to pay income tax on up to 85% of your benefits.

Because the math isn’t at all straightforward, the best way to calculate your tax liability is to use a calculator like the Motley Fool’s Social Security tax calculator. It gives you a detailed breakdown of how the result is calculated after you enter your numbers.

Let’s say you receive the maximum Social Security benefit for a worker retiring at full retirement age in 2018: $2,788 per month. Your spouse receives half as much, or $1,394 per month. Together, you receive $4,182 per month, or $50,184 per year. Half of that, or $25,092, counts toward your “combined income” for the purpose of determining whether you pay tax on part of your Social Security benefits. Let’s further assume that you don’t have any nontaxable interest, wages or other income except for your traditional IRA’s required minimum distribution (RMD) of $10,000 for the year.

Your combined income would be $60,184 (your Social Security income plus your IRA income), which would make up to 85% of your Social Security benefits taxable because $60,184 is more than $44,000. Now, you’re probably thinking, 85% of $50,184, is $42,656, and I’m in the 22% tax bracket, so my tax on my Social Security benefit will be $9,384. Fortunately, that’s completely wrong. By using an online calculator, you’ll see that your tax will really be a mere $340. You can read all about the taxation of your Social Security benefits in IRS publication 915. A Roth conversion could help you lower your tax bill.

How do all of these tax calculations affect when you should apply for Social Security benefits? You’ll lose less of your Social Security benefits to taxes if you can wait until your income is lower to claim.

Investment Opportunity
Are you a disciplined, savvy investor who thinks you can earn more by claiming early and investing your benefit than by claiming later and receiving Social Security’s guaranteed higher benefit? Then you may want to claim early instead of waiting until age 70.

Most investors, however, are neither disciplined nor savvy. People take early benefit payments intending to invest the money, then use it to tour Europe instead. And even savvy investors cannot predict how their investments will perform over the first decade or two of their retirement.

If you claim early, invest in the stock market and average an 8% annual return – which is far from guaranteed – you will almost certainly come out ahead compared with claiming late, according to an analysis by Dan Caplinger, director of investment planning for Motley Fool. But if your returns are lower, if you receive reduced Social Security benefits because you continue working past age 62, if you have to pay taxes on your Social Security income or if you have a spouse who would benefit from claiming Social Security benefits based on your record, then all bets are off. Most people, in other words, will not benefit from this strategy – but it is a strategy to be aware of in case you’re one of the few who might.

Effect on Health Insurance
Here’s another factor to consider: Do you have a health savings account (HSA) that you want to keep contributing to? If so and if you’re 65 or older, receiving Social Security benefits requires you to sign up for Medicare Part A. The problem with signing up for Medicare Part A is that you’ll no longer be allowed to add funds to your HSA.

The Social Security Administration cautions that even if you delay receiving Social Security benefits until after age 65, you might still need to apply for Medicare benefits within three months of turning 65 to avoid paying higher premiums for life for Medicare Part B and Part D. If you are still receiving health insurance from your employer, you might not have to enroll in Medicare yet.

The Bottom Line
You don’t have to take Social Security just because you’re retired. If you can live without the income until age 70, you will ensure the maximum payment for yourself and lock in the maximum spousal payment. Just be sure you have enough other income to keep you going and that your health is good enough that you are likely to benefit from the wait. When you’re ready, you can apply for benefits online, by phone or at your local Social Security office.

Source article: Read it HERE!