I have a feeling many retiree's were able to sit back and get over 5% on money market and CD's last year.  It was easy.  That 5% is probably a good feeling if you have a chunk of cash in your IRA or 401k retirement account. 

2008 is a different story-you've seen our Friday Market Updates here and all the stock index's are negative so far.  Bonds, CD, and money markets are a haven but the yields are hovering around 3.5% and the Fed may cut interest rates again when they meet next Tuesday.  It's got to be difficult as many retiree's have the bulk of their portfolio's in these conservative investments and rely on this for income..

Here's a recap of money market yields from several mutual fund companies: 

Vanguard Prime                    (VMMXX) 3.52%

Fidelity Cash Reserves         (FDRXX) 3.48% 

T. Rowe Prime Reserves       (PRRXX) 3.01% 

Schwab Investor MM              (SW2XX) 3.12% 

 

 

I've looked at several articles recently that indicate more and more people are borrowing from their 401k plan or doing distributions from their IRA accounts.  Often, these people are actually rolling over old 401k or 403b plans into IRA accounts so they can do withdrawals.  The money is used for mortgage payments or just paying off credit card debts. 

It's probably a necessity for many but a recent SmartMoney.com article offered several good suggestions to consider.  Borrowing From 401k Should Be Last Resort

Alternatives to Raiding Your 401(k)

Dipping into your 401(k) or 403(b) should be a loan of last resort. Before you derail your retirement, make sure you've explored other possibilities. Of course, you should also aim to curb spending and cut out unnecessary expense.

Borrow against insurance. If you have a cash value life insurance policy (and more than half of those sold are) you can borrow against it without paying any tax penalty, says Levin. Your death benefit will be diminished by the amount of the loan, including interest, until it's repaid.

Temporarily halt 401(k) contributions. The average worker stashes 7% of his salary in a 401(k), according to Fidelity Investments. For someone making $55,000 a year, temporarily halting contributions would put an extra $111 in their after-tax paycheck every two weeks. This still isn't a great option — you'll be forfeiting any company match and limiting future compounding — but you'll at least maintain the earning power of your current balance.

A 65-year-old couple retiring this year will need about $225,000 to cover medical expenses in retirement, according to a health care cost estimate released by Boston-based Fidelity Investments.

This figure is a 4.7% increase over the 2007 estimate of $215,000.

The 2008 figure also assumes that the couple doesn’t have employer-sponsored retiree health care coverage and makes life expectancy assumptions of 17 years for a male and 20 years for a female.

InvestmentNews.com: Couples need $225,000 to retire 

Okay, I'm trying to be an optimist here on this site but you'll have to admit there has been some grim news lately; a looming recession, inflation, stagflation, a falling dollar and oil and gold soaring to record highs.  I mentioned it would be a great idea to get some help on your retirement portfolio.  Mine needs all the help it can get! 

MSN Money must have heard my plea for help.  Looks like Jim Jubak will be dedicating several columns in the next month to retirement investing strategies.  Jim Juback's Retirement Crisis: From Bad To Worse

But there are things we can do as individual investors to increase our chances of escaping the worst consequences of this crisis. Save more, of course, if we can. Keep on investing. And invest smarter.

In coming columns over the next month or so, I'll look at several strategies for investing smarter for retirement:

• How to put more of your portfolio in strong-currency assets.

• Where to find the stability premium that used to work in favor of U.S. assets.

• A new strategy that I'm calling "unfixed income" for finding better yields in a low-interest-rate environment.

• And, in my next column, set for March 11 (no column on Friday, March 7), I'll describe why, in a falling-dollar world, commodities are about as close to a sure thing as you'll ever find.

The IRS web site has  helpful tips for seniors and individuals on disability.

Standard Deduction for Seniors - If you do not itemize your deductions, you can get a higher standard deduction amount if you and/or your spouse are 65 years old or older. You can get an even higher standard deduction amount if either you or your spouse is blind. (See Form 1040 and Form 1040A instructions.)

Taxable Amount of Social Security Benefits -When preparing your return, be especially careful when you calculate the taxable amount of your Social Security. Use the Social Security benefits worksheet found in the instructions for IRS Form 1040 and Form 1040A, and then double-check it before you fill out your tax return. See Publication 915, Social Security and Equivalent Railroad Retirement Benefits.

Credit for the Elderly or Disabled - You must file using Form 1040 or Form 1040A to receive the Credit for the Elderly or Disabled. You cannot get the Credit for the Elderly or Disabled if you file using Form 1040EZ.

I tend to look at my 401k and IRA accounts each month. And, you can see the major index's are struggling this year, especially the Nasdaq.  Oil and gold are up dramatically  too.  Not a lot of good news.  Oh what the heck go enjoy the weekend!  Spend some time with friends and family- we'll look at retirement planning next week.

 

People are constantly looking for a new job or career.  And, we have a ton of resources to help us with job searches or resume help.  Sure, the key is to look at our strengths and interests- however maybe we should focus on the kind of retirement plan they offer.   Do they offer 401k, profit sharing or a traditional pension plan?  Most job recruiters I've ever spoken with are happy to discuss these topics.  One of my relatives was looking at several jobs recently..hey no brainer- go with the company that lets you start contributing to their plan immediately and offers a match.  I know money and benefits aren't everything but  consider the retirement accounts they offer! 

FoxBusiness looks at which job sectors offer the best retirement plans.  Looks like the federal government gets the nod.   After all, the TSP is a great plan and they still offer pension benefits.  Tough to beat.

Public sector retirement benefits take the cake.

Federal government positions typically offer the very best retirement plans, including important cost-of-living adjustments. If someone retires at 65, a pension plan with cost of living adjustments is worth 50% more than a regular pension, said Henry Hebeler, author of Getting Started in a Financially Secure Retirement.

Here's something that will impact your retirement portfolio......oil, gold and othe commodities.  Remember the the old Jackie Gleason line "I'm gonna send you to the moon,"   "To the moon, Alice."  This might be a good time to talk to your financial planner and figure out how to take advantage of risng prices. 

 

New Yorkers my be looking at higher hot dog prices.  Everything else is going up..why not hot dogs?  New Yorks famous Gray's Papaya said their "Recession Special," (2 Hot Dogs & a Drink)  for $3.50 may be going up this week.  Thanks CNBC for the chuckle this morning.

IRA accounts generally can hold just about any investment; stocks, mutual funds. CD's, ETF's and government and corporate bonds.  They are extremely flexible especially if you use a brokerage IRA.  They can even hold fixed annuities and variable annuities.  However, financial planners debate if these are appropriate investments and it looks like a variable annuity with guaranteed minimum withdrawal benefits (GMWB) is becoming more popular with retiree's. 

The idea behind putting the variable annuity inside an IRA often is to obtain insurance guarantees.

Those guarantees include:

* Guaranteed death benefit. When you die, your beneficiaries are guaranteed to receive the principal or market value of the annuity, whichever is higher.

* Guaranteed minimum withdrawal benefits. With these guarantees, you're promised a return of at least all your contributions — regardless of how the underlying investments perform. The guarantee can come in the form of regular withdrawals paid over a specific period. One popular type of guaranteed minimum withdrawal benefit, for example, promises a 5 percent withdrawal rate annually for life starting at age 65 — regardless of how the market performs or how long you live.

* Guaranteed minimum income benefit. With this, you can receive a guaranteed dollar amount in monthly income — regardless of how the contract's investments perform.

PalmBeachDailyNews.com asks if a variable annuity should be inside an IRA?