When changing employers, many workers leave money in the company retirement plan. But moving the dollars to your new firm or an IRA might be a better deal. Here’s how to decide.
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Financial Fluency: My first Month
BLOGGER: DEBORAH HEISER
Click this link to read the first article: Our Race to Retirement
Click this link to read the second article: Our Race to Retirement: The Preparation Begins
A bit more than a month has passed since Jackie, Judy and I purchased our first stocks. Here’s how it happened. We took a financial fluency course and were inspired to compete (using 1,000) to see who could do the best at picking stocks.
Jackie, Judy and I each set up accounts for 1,000. Here’s how we’ve done so far…
Debbie:
To start, I decided to use an old retirement account that had been doing poorly for many years (and I mean poorly – when I got it way more than 10 years ago, it had 5,000 in it. Since that time, it has dipped to less than 1,000). I wondered if I’d end up owing money on it and figured I couldn’t possibly do worse than the professionals who had managed it.
Then I looked around at what I like personally, and what I use personally on a regular basis. I continued to read the papers and online news: NY Times, CNN, WSJ, and I added something new. I looked at what I tend to purchase, what I like, and what I notice others doing and buying. Since I don’t’ eat out all that often, I didn’t feel comfortable buying fast food or restaurant/coffee shop stocks. I also don’t have major brand loyalty when it comes to major stores for shopping. I’ll go anywhere for the basics. So, that left me with my annual gift that I get from my husband. A handbag. If there is a major holiday or birthday, I’m sure to get a handbag. And, it is from Coach. Although this didn’t start based on brand loyalty (he couldn’t find the store he was originally looking for and stopped in at a Coach store and bought the bag in the window). I liked the bag, so rather than try something new, this bag purchase has become a tradition. I looked around and noticed a lot of other women toting Coach bags and accessories: on the subway, in the grocery store, on the street, and in airports. They are everywhere! So, I made my first purchase of nearly 500.00 (I found out you don’t get much for 500.00) and left the rest of the money in the account to see how I did with my first pick.
This was because I’ve always had HP printers, and everyone I know for the most part has HP printers. I realized this isn’t a good reason to pick a stock, but it worked for Coach, so why not. Anyway, it did well for a day or two and I felt like a stock picking winner. Then…the decline. Day after day, decline in both stocks. In fact, I kept reading the news and came to find out even Coach CEO and EVPs sold massive amounts of their personal stocks in the company. So, I am not considering myself a stock picking maven.
I did notice, though, the market has bounced back up and my stocks are about even with where they were when I purchased them. I’m going to just sit back and wait to see how they do. I’m not planning to impulsively sell them or do anything for now.
Judy:
Judy has a bit more knowledge than me (she is the smart one) and she bought her stocks when they got to a price per share she was comfortable with . In her words “I placed orders on all these stocks. I did a little research, saw the previous days lows and highs, and picked a figure a little higher than the low. Wouldn’t you know, the stocks kept climbing from that day on! It took a few days/weeks to secure my stocks at my order prices.” Judy bought Target, Diamond ETF (I have no idea what that is) and Panera (based on her 18 year-old daughter’s advice).
Target and Diamond ETF went down, but Panera went up.
Jackie:
She opened her account, bought her stock, and hasn’t checked it since, so we have no idea how she’s done. So, by default, unless she can prove otherwise, 
she moves behind me in this race.
So far…Race results are :
Judy
Debbie
Jackie
But don’t count anyone out yet. The race continues!!!!
If you’d like to join in on the “race” leave a comment.
And, we welcome advice!
To read the bio for Deborah Heiser, click here.
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Our Race to Retirement: The Preparation Begins
BLOGGER: DEBORAH HEISER
Click this link to read the first article: Our Race to Retirement
On our midlife quest to use our newly acquired basic (and I mean basic) financial knowledge about stocks, bonds, mutual funds and all sorts of other gobbly gook (I mean important information), Jackie, Judy and I have been preparing for May 1st . The- big day when we use our new financial skills to actually start trading! We’ve decided to take $1,000.00 and see if we can make it grow (and whoever does best…wins. I’m not sure what we win but anyway…).
I’ve been keeping track of what I’ve been doing since we took the course less than two weeks ago. Here’s what I’ve done so far:
Day 1
I came home at the end of the course filled with excitement. That evening I opened my binder. Then I closed it.
Day 2
The next day I got up and took out my binder again and opened it. Then I took a break and got a cup of coffee.
I came back and reopened the binder, took a deep breath and told myself it was now or never. I turned to the first tab: Day to Day Financial Planning. That was hard work. I needed another break, so I checked my email.
Once I got a grip on myself, I opened Excel and made myself sit at my desk. This was not easy. I got out the personal budget template, followed the category headings and made one for myself in Excel. Okay, not bad. I emailed Judy and Jackie to gloat…er…let them know I’d actually accomplished my first task. I felt pretty good!
Day 3
I was on fire. I turned the page in my binder and created my Personal Budget. This, I admit was not fun. Rationalizing all my take-out meals and other unnecessary necessities took a lot out of me. Granted, there wasn’t a real RED FLAG anywhere, all the spending just looks bad when it’s in black and white on a spreadsheet. Still, overall ICK.
Day 4
Drained from looking at spreadsheets, I took a day off to slack off a bit and tried to figure out how to rationalize my spending on take-out and eating in restaurants. This was tougher than I thought. So, I took anther day off to gather strength. Note, I didn’t even start to think about how I’d begin the investment part of the project.
Day 5
I still wasn’t thinking about investing, but figured I’d start thinking about the idea of thinking about investing. So, I set out to organize (which means open the file drawer) some of our accounts so I’d actually know what was in them. Lo and behold, I found an account I’d long ago forgotten about – an old Fidelity IRA account I had from a long ago job way before I even started grad school. It was one of those accounts where I received a statement in the mail periodically. I’d usually just throw it away, and ever so occasionally, I’d open it, see the amount had decreased yet again and then throw the statement away. That was the old me.
The new me phoned the company and asked all sorts of questions using my newly acquired financial lingo. I realized that I never called about my retirement accounts prior to this because I didn’t even know enough to know what kinds of questions to ask. I felt empowered.
I decided this account would be used as my starting point. My first steps were made – I have my $1,000 in an account and now I’m ready to start figuring out what stocks to buy. Wish me (oh yeah, and Jackie and Judy) luck!!!
If you have any tips or suggestions for us, please let us know.And…
Who do you think will win this competition?
Are you for Team Jackie, Team Judy or Team Debbie? Leave your pick in the comment box below and it will be posted!
To read the bio for Deborah Heiser, click here.
To become a Fan of ImagineAge on Facebook, click here!
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Our Race to Retirement
BLOGGER: DEBORAH HEISER
I’ve always had a fear of finance. Just the word scares me. I’m okay with balancing my checkbook and doing that kind of stuff, but when I hear about 401k plans, annuity funds, IRAs, and mutual funds, it all sounds like Charlie Brown’s teacher ‘s muffled “moia moia moia moia”. So, over the years, when people brought up the topic of retirement accounts, investing, and all that stuff, my eyes would glaze over, drool would form at the corner of my mouth, and I’d start to think about anything else. Laundry. Dinner, Vanilla. Well, I figured that now that I’m in my 40’s I’d best conquer my fear of finance. Take the bull by the horns (hehe). So, when my sister-in-law Jackie told me her best friend Judy was invited to a Financial Fluency course at her alma mater, Barnard, I decided it was worth it to pay 250 dollars to learn how to save money. Jackie, Judy and I all enrolled and took the two day course. Here’s what went down…
We all arrived, ate everything possible at the breakfast, guzzled enormous amounts of coffee, took about 7 free pens from the registration desk and went to our room to learn. The course had about 15 women in it, and the instructor that started it off was great. She made it seem perfectly easy for us all to achieve financial fluency – and beyond. This, however, was told to us after we learned that if we didn’t do anything about our finances, we could all end up eating cat food by the time we are in our 80s. Eeekkk…Fear and panic was an understatement. I made a note to myself. 1. Suck up to the kids so they’ll take care of me. 2. Tell husband he is never allowed to retire.
Jackie and I cowered as we learned we might have to learn to love Fancy Feast. Judy was more worried about keeping what she has (I don’t need to spell it out – but she’s the smart one of the three of us). Note to self. 1. Suck up to Judy. 2. Tell Jackie to suck up to Judy.
At the end of the first day, we felt empowered that we’d be able to learn about stocks, bonds, mutual funds and all the stuff you need to know about in order to be able to retire like the shop-aholic, vacation-loving ladies we are. I went home to my family to begin sucking up to my 4 and 5 year-olds and to tell my husband his working days were never going to end. Jackie and Judy, on the other hand, partied the night away. We all, however, were deeply inspired and ready to learn on the second day. We asked questions, we learned words and jargon, and we left at the end of day two with a mission.
The three of us felt so empowered, that we decided to each independently invest 1,000, beginning May 1st. We also decided to make it a competition to see who could do the best with their thousand dollars. So, we three novices are going to compete to see who can become the best investor after having a two day course on Financial Fluency. We are going to each open an account, put 1,000 in it and invest it. We’re going to track our progress each month. So follow along with us! We’ll keep you posted with our progress.
Here’s a little background on each of us:
Jackie is a single 40-something. Never invested anything but she can shop better than anyone I know.
Judy is a newly single 40-something with two children in college. She’s the smart one. She graduated from Barnard. She hasn’t invested before but knows people who do.
Debbie is a married 40-something with two young children and a husband who is never allowed to retire. Hasn’t invested and isn’t as good at shopping as Jackie.
If you have any tips or suggestions for us, please let us know. And…
Who do you think will win this competition?
Are you for Team Jackie, Team Judy or Team Debbie? Leave your pick in the comment box below and it will be posted!
To read the bio for Deborah Heiser, click here.
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SEVEN MYTHS ABOUT WOMEN OVER FIFTY
BLOGGERS: Renee Fisher, Joyce Kramer, and Jean Peelen
We three women over fifty decided some years ago to change the conversation about aging and dispel myths about women over fifty. These myths may have had validity when none of us humans lived much past age fifty or sixty. Remember our grandmothers? They looked old at forty. They wore housedresses and sturdy shoes. Their lives were all about raising their children, and when that was done it seemed that at least in society’s eyes, their lives were done.
Today we women over fifty have changed considerably. Our average life span is eighty-plus years. We are out in the world, making art, saving villages, improving our communities, keeping up with runway fashions, and living our lives. Yet somehow, myths remain. Here are the ones we keep encountering.
1. Women over fifty don’t care what they look like.
Since two out of the three of us are planning to have our next round of cosmetic surgery, we take exception to this. We now remember with fondness that construction workers used to give us wolf-whistles. We thought it obnoxious then. We miss it now. Women like us drag ourselves to the gym, where we get to compete with twenty-somethings for parking spaces and treadmills. We take Yoga and Pilates, go on diets, run marathons, go on diets, dye our hair, go on diets, get contact lenses, go on diets. We care. A lot.
2. Women over fifty don’t like sex.
Since one of the three of us is married, this is a touchy subject. The answer is, just let a healthy, willing, attractive male show up in our vicinity and we will be ready. Or, if even two out of three of those categories show up, we will be ready. Actually, “willing” might make up for any other shortfalls, depending on how long it’s been. And just think, since we can’t get pregnant, we can just zip past the pregnancy prevention shelf at the drug store.
3. Women over fifty find menopause terrible and debilitating.
YES! Menopause is TERRIBLE and DEBILITATING. It ruins our lives. It is the worst thing that has ever been invented in the history of the universe. It is worse than diet ice cream. OK, now that we have acknowledged that, can we please move on? The fact is that two of us didn’t even notice menopause, except that we could also zip right past the sanitary products shelf too. So, menopause exists and we’ll have it for awhile, and then we’ll get over it.
4. Women over fifty can’t keep up with the times.
Interesting, since women over fifty are the fastest growing group on Facebook. We three have six computers among us. We have and use PDAs, GPSs, and iPods. We have almost outgrown email, and are Facebooking and twittering. And let’s face it: Without us, a lot of the Help Lines would go out of business. We may have grown up in the Stone Age, but we have managed to survive into the computer age.
5. Women over fifty miss our children and only want to be with our grandchildren.
We love and adore our children. We love and adore our grandchildren. That’s the only acceptable answer, isn’t it, since this will be in print? We love them the most when they don’t ask us to baby sit too much. But seriously, we can love them and still want a life. That’s the bottom line.
6. Women over fifty fear change.
That’s really funny, since virtually everything about us is changing. Body parts are moving to different locations or vacating entirely. Hair is now appearing in places it never was and disappearing from places it used to be. We could go on and on. So, we say we don’t fear change. We are, and have been, the movers and shakers of our lives. Go to any art class and see who is involved in creative pursuit. Go to yoga or meditation classes to see the same. Look at the women starting new careers, or the ones running for office. Check out writing classes, art appreciation classes, cooking classes. Look at who is doing work in developing countries, starting foundations, traveling the world, raising money for causes, marching for causes. Change? Bring it on! We are well-practiced, and good at it.
7. Women over fifty are counting the days until retirement.
We agree with this statement. No matter how much we love our careers, we are chomping at the bit to have the time to travel, to explore, to start new businesses, to enroll in college, to volunteer, to write books, to inspire our daughters’ and granddaughters’ generations with the unlimited possibility we have. We can’t wait to retire so we can see what’s next. We have lived only the first half of our lives and are anxious to see what we will create in the second half.
So, let us bury the useless, outworn myths along with all other outmoded notions of who we women are and what we are up to in our lives. We are here. We’re living, laughing, loving, and planning to be so for the next fifty years.
All of these myths and more are dispelled in our new book Saving the Best for Last: Creating Our Lives After 50. You can read more about us and our books at www.invisiblenomore.com
Renee Fisher is a Realtor and writer who lives in the Washington, DC area. She is the co-author of two award-winning books about life after 50www.invisiblenomore.com and is the DC Boomer Humor columnist forexaminer.com DC-Boomer-Humor-Examiner.
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Finance Question Answered
Answered by: Arin Goldman
Vivian asked the question:
“Does one have to be retired to remove money without penalty from an IRA, 401K, 403B etc at age 59 1/2?”
Arin’s answer to Vivian’s question:
Once you reach age 59 1/2 you can start taking money out of your IRA or 401K in any amount you want. Keep in mind that you’ll owe tax on the amount you withdraw from a traditional account. The amount that you withdraw will be added to your other income and you will pay taxes based on your total income. With a Roth, there’s no tax at all provided your account has been open at least five years and you’re 59 1/2. Most advisors recommend that you hold off witdrawing funds from your retirement accounts until you’ve actually retired because at that point you will presumably be paying taxes at a lower rate and because you probably will need your retirement funds to last as long as possible. I recommend that you check with your financial advisor and/or accountant to make sure that withdrawing funds makes sense for you.
If you have additional questions, or have a comment to make about finance, please respond in the box below!
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BLOGGER: ARIN GOLDMAN
I am a professional saver, one of those people who stashes money away whenever possible. Don’t get me wrong, I also have a weakness for designer clothing and shoes but my shopping excesses never came at the expense of funding my retirement accounts. In my first post-college job I contributed to an IRA and when, after graduating from business school, I moved into the world of high finance I began funding my 401 K. I immediately bought into the benefit of pre-tax contributions and caught on quickly to the value of deferring taxes until that very, very distant day when my fund withdrawals would begin. All through the 1980s and 1990s I made those contributions paying scant attention to my balances. Mostly they were growing but despite my so-called financial sophistication I never had any sense for how much of this increase was due to actual investment growth and how much was due to the simple sum of my ongoing contributions. I totally bought into the theory that overtime equities would outperform other more predictable investments such as bonds and money markets so with youth on my side I allocated my 401 K and IRA funds to an assortment of equity mutual funds, nothing concentrated or high risk for me, just run-of-the mill US and International funds. I did not worry much about market dips and economic trends and pretty much ignored the impact of the October 1987 stock-market crash, the meltdown of the technology sector, 9-11, and the ongoing rise and fall of the emerging markets. Nose to the grindstone at work, I managed to ignore my retirement funds as much as possible. Surprising maybe, given my MBA in accounting and finance and chosen investment banking career, yet I suspect fairly typical. After all it is hard to dwell too much on something as mundane as retirement funding when you are sailing through your twenties and thirties.
Not surprisingly, my investment banking career did not last forever. After a 20 year sojourn on Wall Street I hit my wall, exiting in 2002. There I was in my forties, figuring out what to do with the rest of my life and now totally focused on the adequacy of my financial assets. I became fixated on daily movements in those 401 K balances. Always an early riser, I checked my now bookmarked 401 K website daily. Some time around 3 AM the gremlins in benefits land would roll the balances forward to reflect the prior day’s market activity and there I was noting every change. Still years away from 59 ½, the earliest age for penalty-free withdrawals, and even further away from 70 ½, the age when I would have to start withdrawing, I had become keenly aware that only investment growth would contribute to an increase in my retirement funds. Further feeding my neuroses, in 2002 the market was still suffering the effects of the Enron debacle making it a rough year to be both unemployed and pathologically focused on 401 K assets. Nevertheless, time passed, markets steadied and my funds really did grow. Within five years my retirement assets had grown 65%. By then with visions of substantial wealth ahead I had lost my 401 K fixation and gone back to only occasional balance checks.
Then the tsunami of 2008 hit. I tried to shrug off the increasing market volatility, steep declines and the erosion of the whole financial sector. After all hadn’t my strategy of remaining on the sidelines worked well enough during previous market drops? Was this market storm any worse than prior catastrophes? Unfortunately, this time around seems really different. Does anyone really understand a credit derivative or appreciate the finer points of a sub-prime mortgage? These are the true weapons of mass destruction and they seem to have landed right on top of my 401 K, wiping out virtually all the gains of the past six years. Knowing that my pain is widely shared and it is not just my retirement funds that have been hit does not make me feel any better.
What now? I wish I had an answer. I am trying to avoid those 3 AM checks of the benefits website. Still my blind trust in the historical market trends that were supposed to assure my future security seems awfully naïve right now. I know I am still very fortunate. After all I was lucky enough to have a high paying career, and though I have sustained investment losses I have what I hope are still adequate savings. Still those withdrawal dates are a lot closer than they used to be and this major step backwards appears less like a theoretical bump in the road and more like a coordinated attack on my future standard of living. Somehow or other I suspect that my accounts will start to grow again at some point, when that will be I don’t know and I am less confident about that future.
Remember the big debate about moving our social security funds into equities? Now there is an idea that I hope never sees light of day again!
ps. A few things that might help just a little:
1. If you are 50 or over and qualify to make contributions into an IRA, you can contribute an extra $1000 for a total of $6000.
2. Congress passed legislation in late 2008 waiving mandatory withdrawals from IRAs and 401Ks for 2009. This applies to individuals over 70 1/2 and only applies to 2009. Check out the details and applicability with your accountant and/or financial advisor.
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