Free Retirement Help You're Probably Ignoring In late October, the Labor Department issued a rule that allows companies to offer more personalized retirement planning advice to workers enrolled in 401(k) plans. The advice must be set up in a way that ensures it's unbiased and in the worker's best interest.

That's the good news. The bad news is that most people probably won't take advantage of this terrific opportunity. The Wall Street Journal recently reported that just a quarter of workers who currently have access to such advice use it.

I found this astonishing, because retirement investing requires the average worker to morph into a financial wiz. You have to ballpark how long you expect to live, and get a sense of how much risk you're comfortable taking. You have to be familiar with terms like asset allocation, mutual fund, stock, bond, growth, value, small-cap, large-cap. And it helps enormously to understand how to minimize the costs of investing, which means learning to decipher an expense ratio.

But most people don't even know what a money-market fund is, according to Shlomo Benartzi, a UCLA behavioral finance expert and creator of Save More Tomorrow, a program that helps workers increase their 401(k) contributions gradually over time. The most successful 401(k) plans, he says, automatically enroll people at a high percentage of salary, boost their contributions every year, and default the money into a target-date fund, which invests in a mix of stocks and bonds, and becomes more conservative as the participants near retirement and need the money. (I have issues with target-date funds, but they're a better option than defaulting worker contributions into a money market account.)

But the majority of plans aren't set up that way -- which is why taking advantage of good advice is so crucial. So if advice becomes a benefit at your job, set up an appointment. But first, ask yourself a few questions about what you value:

  • What does your ideal retirement look like? Where do you live? How do you spend your time? Who do you spend it with? What aspects of retirement are you looking forward to the most? What experiences would you enjoy most? What activities will give you a sense of purpose and meaning? Write down your ideal day in retirement. Research has found when people are asked to come up with concrete images of retirement, they contribute more to their 401(k) plans.
  • How much does my life cost right now on a monthly basis? What costs do I expect to disappear in retirement (i.e., work- and child-related costs) and show up (travel, dining out, etc.) The best first step to retirement planning is tracking exactly where your money goes now, so you have a ballpark idea of the monthly income you will need to sustain your lifestyle in retirement.
  • How much do you expect to receive in Social Security benefits? You can estimate them here.
Now ask the planner:
  • What's my number? How much do I need to save overall to maintain my lifestyle in retirement? What percentage of my salary do I need to set aside every paycheck in the 401(k) plan to achieve my desired monthly income in retirement?
  • How can I figure out my comfort level with investment risk?
  • What's the best, low-cost mix of diversified investments to achieve my goal? How often should I check back in with a planner to review their performance and make changes?
  • What's the best way to balance my need to save for retirement with other goals, such as saving for college or paying off my mortgage?
  • I'll spend my working years building this nest egg. What are the recommended strategies to spend it down? What do I need to think about in terms of taxes?
  • Finally, ask the planner what happens if you can't save the recommended percentage of salary. What kinds of lifestyle adjustments and tradeoffs does he or she see people who are close to retirement making because they are short of their goals? Then ask yourself honestly if you're willing to do the same -- or make some changes to your spending now to improve your outcome down the road.

For more free advice, check out the Labor Department's guide Taking the Mystery Out of Retirement Planning.

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November 16 2011 at 1:02 AM Report abuse rate up rate down Reply

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November 14 2011 at 10:42 PM Report abuse rate up rate down Reply

The problem with general guidance is that almost everyone is different. I started drawing my military pension at age 40. I retired completely at age 51 for health reasons. I am now 63 and my entire income is my pension and disability I draw from the VA. I qualify for full social security at age 66. It will be smaller than average because of my not working the last 15 years before I start drawing from it. When I quit working I set up my 401(k) like I wanted it and have not changed it since. Between 1999 when I retired till just before the nosedive in 2008 my 401(k) had increased by 60% on the investment alone. I have not donated since I retired but I do keep an eye on it. I took a hit in 2008 but gained it all back in a year and a half to two years and then it started increasing again. I took another small hit in 2011 but am confident it will come back up soon. So far (in 2011) it has not dropped to my pre-2008 maximum yet. I do not expect to touch my 401(k) until I reach 70 unless my heath goes south again. I see no reason to pay some young advisor to tell me how to manage my retirement when I am happy with the way I did it myself.

November 14 2011 at 10:17 PM Report abuse rate up rate down Reply
1 reply to cqdeed's comment

No, you qualify for Social Security at 62, just at a reduced rate.

November 15 2011 at 7:41 AM Report abuse rate up rate down Reply

Oh, one thing I forgot to mention. The thing that worked for me was one-third split of the total 401k amount. One-third each to low risk, medium risk and high risk. The older one gets, the more in mutual funds you should be. Always remember, recovery time is vital and the older one gets, the less recovery you have.

November 14 2011 at 9:42 PM Report abuse rate up rate down Reply

One reason folks aren't jumping on the band wagon may be trust. I retired a couple years ago. Through the years, I managed my own 401k then "financial advisors" tried to get me to let them manage my money. The question I always ask is, "is your plan FDIC covered"? Most of the time it is not. Annuties are their next argument but the problem there is long term commitment. You can't get to your money for ten to twenty years. If I'm sixty-five, the likelihood is that I'll never see my money again. Better to take the smaller ROI (return on investment) at the bank than to risk it all for a little higher return. When one reaches retirement age, there's no time to recover. I rolled my 401k to an IRA when I retired and have gotten along fairly well with it. The thing about political influence is that it changes with every election. Don't be to concerned about what this administration does. It'll change to something else and hopefully be better for WE THE PEOPLE.

November 14 2011 at 9:32 PM Report abuse rate up rate down Reply

right on vanguard index funds have been loser for 10 years what kind of advice was that

November 14 2011 at 9:30 PM Report abuse -1 rate up rate down Reply

How many people nowadays have any funds to set aside for retirement?!

November 14 2011 at 9:28 PM Report abuse rate up rate down Reply

Yeah, sit down with some 25 year old kid and get your financial advice. Right now if I make another thousand dollars in my 401 I will be back where I was 10 years ago. Who do you know that got rich off mutual funds? The Vanguard "stay the course" doesn't seem to be working any more. Of course if you are a wall St "insider" you will seem to do well. Hmmmm I think I get it now....

November 14 2011 at 8:22 PM Report abuse rate up rate down Reply

You can also save money on gas, lunches, clothing and daycare by working as an employee at home. The FREE website “Best Top Jobs”has a FREE list of hundreds of companies hiring people to work from their homes. The positions include customer service rep, accountant, sales engineer, or claims adjuster. There are even jobs in the health field. There are both entry level and skilled level positions listed.

November 14 2011 at 8:20 PM Report abuse -2 rate up rate down Reply
Ken Daniels

keep in retirement ffolder

November 14 2011 at 7:20 PM Report abuse rate up rate down Reply