Thursday, September 2, 2010

Where to put the money when you move from wage-earner to retiree

A friend of mine looked over my investment portfolio the other day and told me he thought I'd done "a darn good job" of saving for retirement. I wish I felt the same way.
At nearly 64, my anxiety level has been climbing as I go through the process of shifting from a wage-earner to a semi-retiree. My nest egg is sitting where I left it in my former employer's 401(k) program, which offered me about eight investment fund choices including a large cap domestic stock fund, a bond fund, money market and some off-shore mutual funds. After giving myself a summer of fun with my boyfriend, (the motorcycle trip to Canada was a blast), I now must decide how to invest this money for the long-term. And I mean long-term. My mother at 95 shows no signs of saying goodbye to this earth. For most of my working life, I thought I'd be better off in retirement than my mother, but it's not turning out that way. She's got income streams from Social Security, my late father's state pension, stock dividends and her farm income. She reports more income to the IRS every year than I ever made at my full-time job. Meanwhile, she lost more value in her stock funds in the past three years than I've been able to accumulate in my 401(k) over my entire 30 years of work. Sigh.  My income streams are Social Security and a return on my nest egg savings.
Some options

Never the less, I'm retiring. In the next few months I will divine how best to invest my nest egg for the longer term. Options include managing it myself in several funds of my choice, using some of the money to buy an annuity or finding other options. A new idea has cropped up: Pay off my mortgage, which is costing me 6.3 percent in interest. Things get murky when I start looking into the nitty gritty of investment options. Brokers talk about annuities. But when I ask how the money will be invested, they get vague because they honestly don't really know what their companies do with the money. When I ask about mutual fund investments there's plenty of information about types of funds, what they are invested in and even management fee rates. But there's little information about payout. I finally found a site at that offers a chart showing payouts on various amounts of money over 20-, 30- and 40-year retirement time frames
So how do you plan your retirement income against a monthly household budget? Another friend of mine who is retired told me that he withdraws 4 percent from his retirement funds at the start of the year. That money, along with Social Security is what he lives on the rest of the year. OK...that's one strategy.
As I move through this process, I'll keep you posted. It's obvious to me that in order to take this on, I needed to quit my job to devote my full attention to making the transition.
Here are a few useful Web sites:
-  Retirement planning for women at
- Bloomberg Business news on retirement.
- Money Watch investment adviser  Larry Swedroe writes about Treasury Inflation-Protected Securities TIPS, which offer lower yield but safe haven
- Motley Fool talks about "Preserving Your Nest Egg."
- Motley Fool looks at dividend producing stocks at "income investor."
- How to avoid getting ripped off when investing your windfall or nest egg at the North American Securities Admininstration Association Web site.
- Living off your nest egg calculator at

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