Raising your living standard

By Humberto Cruz

I keep the family financial records current and organized. Still, it took me nearly two hours to find and enter the copious and detailed information requested by the financial planning software I just tried.

It was by far the most exhaustive and at times exhausting personal finance program I’ve used. But it was also the most thorough, earning my faith and respect.

The program I used is developed by Economic Security Planning, Inc., a company headed by Laurence J. Kotlikoff, professor of economics at Boston University.

Unlike other programs that merely ask a few quick questions, ESPlanner software doesn’t assume we will spend a set percentage of our pre-retirement income in retirement.

Lord knows that with unemployment at 10%, there are lots of us looking for jobs in places to which we hadn't dreamed of moving. But even in good times, Americans are constantly changing jobs. Indeed, one-fifth of the work force typically switches jobs in a given year, many to different cities in a different state.

SENIORS CAN BOOST THEIR SOCIAL SECURITY BENEFITS BY 'RE-RETIRING'

People who began collecting Social Security at age 62 and restart their retirement benefits at 70 would get about 76% more a month. The catch is that they must repay what they had already received.

Kathy M. Kristof

Personal Finance

November 1, 2009

The Social Security Administration recently announced that retirees would get no cost-of-living adjustments this year -- and maybe not even next year -- because the inflation measure it uses to determine them has declined for the first time in more than three decades.

MONEY MATTERS
Nest-Egg Maneuvers

By KELLY GREENE

Editor's note: Our cover story in the June issue of Encore—a look at new rules involving Roth IRAs—prompted numerous emails from readers. What follows are answers to some of the most frequently asked questions.

By Sandra Block, USA TODAY

Darla Horn, 26, acknowledges she didn't give much thought to the cost of college when she enrolled at State University of New York in Purchase.

"My plans were to get out of Texas, and college became incidental," says Horn, who grew up in Nacogdoches, a city of about 32,000 near the Louisiana border. Because she didn't qualify for financial aid, she took out student loans, graduating in 2005 with a double major in journalism and anthropology and more than $80,000 in debt.

CRUNCHING THE NUMBERS: Does it pay to go to college?
BEST VALUE COLLEGES: Top 100 for 2009
COLLEGE BLOG: Beyond rankings: Curricula and censorship

Forbes: 05.10.09, 1:00 PM ET

Laurence J. Kotlikoff

"Birds do it, bees do it, educated fleas do it. Let's shack up with mom." The Italians have been singing this version of Cole Porter's classic for decades. Over half of Italian men 25 to 35 now live with their moms (and dads).

Makes sense. Moms cook, clean and iron. And they can fend off unhappy girlfriends. But moms are getting something from the deal as well--a higher living standard assuming junior helps pay for his room and board.

Given how things are going with our economy, we may all start living this peculiar dolce vita.

May 1, 2009
By Laurence J. Kotlikoff

The stock market may be a wild and crazy ride, but it's generally (about 70 percent of the time) an uphill one. The trouble is, market averages lie. Where one ends up capital accumulation-wise depends not just on the market, but on the extent of one's spending along the way. Seems obvious, but too often spending is ignored in discussions of investment performance. For example, when we talk about market returns ­ “the S&P 500 did this-and-that over this-and-that period” ­ we assume every penny of income was reinvested over time.

Expert View
Resurrect Your Retirement
Laurence J. Kotlikoff, 04.07.09, 12:00 PM EDT
An economist offers five steps to get one couple's plan back on track.

If you're like me, you've watched your assets get massacred by the malfeasance system we call American capitalism. Insider rating, captured politicians, regulatory "restraint," director kickbacks, off-balance sheet accounting, non-disclosure, fraud, moral hazard, thieving CEOs, Ponzi schemes ... you name it, we've got it.

Kim Norton dutifully contributed to 401(k)-type plans for almost 20 years, routinely hitting the maximum contribution ceiling as she built a six-figure nest egg. But the aftermath of the tech bubble convinced her she’d need a bigger security blanket. So the Denver real-estate agent tore up the savings playbook; she started buying property with her IRA funds and flipping it to earn big returns. It’s more risky than traditional retirement investing, but Norton’s willing to take bigger risks for higher rewards—especially now that she’s resolved to build her savings to $2.5 million.

Kim interviews Dr. Larry Kotlikoff, an economist from Boston University and developer of the financial-planning software ESPlanner. The software is based on the concept of "consumption smoothing."

Listen to the Interview

Length: 29:01

Notes:
2:00 The problems with conventional financial planning -- it typically sets the wrong target for retirement spending and saving.
3:57 Even a 10% mistake in determining your target can lead to huge mistakes in savings amounts, life insurance, etc.