Senior Finance: Savings and Investment Rules Change–Part 2

Sep 4th, 2010 | By | Category: Senior Finances

This article is Part 2 of the Kiplinger’s Personal Finance post recently published by the Washington Post.  In this era of do-it-yourself retirement plans, we senior citizens need to look at our financial planning differently.  Kiplinger’s suggest the rules for savings and investments are changing.

  1. “Cut your credit-card debt, but not your cards. Minimizing credit-card debt is a great goal, but closing old accounts could hurt your credit score. About one-third of your FICO score (the credit score most lenders use) is based on your credit-utilization ratio, which is the total of your credit-card balances divided by the total of your credit-card limits. What counts is how much you’ve charged, regardless of whether you pay your balance in full each month. A good target is to use 20 percent — or even less — of your available credit.”  Millions of people in the United States are still having trouble controlling their credit card expenditures.  It’s just too easy to use the card and not think about the ever-increasing balance.  If you fall into that category of spenders, we suggest you ignore the second part of this suggestion and cut up your cards.  Your FICO score isn’t an issue if you cannot pay the debt. 
  2. “Think single-digit returns. Reality check: You should be happy to get 6 percent a year if you’ve dialed down risk in preparation for retirement and downright joyous if your overall investments earn 8 percent annually over the next 10 years. Think of the past no-growth decade as a bridge from the unsustainable high returns of the 1980s and 1990s to an era of more-moderate performance. It’s time to set a lower total-return target, not only for stocks but also for your other investments.”  Talk with your financial advisor about where your investments need to be to get six percent return. 
  3. Be sure to talk with your financial advisor about best options for your savings and investments.  Whether its moving your traditional IRA to a Roth IRA or how to create a predictable income stream to supplement your pension and Social Security benefit, your financial advisor is the best bet for figuring out what will work for you.

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