We mentioned the "free lunch" seminars last week.   Often these luncheons are hosted by insurance companies that are promoting index annuities.   This type of annuity has come under a lot of scrutiny by securities regulators.

BusinessWeek provides some basics on these annuities.  Retirement Made Complicated- Index Annuites.

Here's how the indexed annuity works. An investor buys a policy with a one-time purchase—typically a minimum of $5,000 or $10,000. The term may run from 4 to 12 years, and the payoff is linked to the stock market. The big selling point—one that gives it a lot of appeal to risk-averse sorts—is that the annuity's value doesn't decline if the market does. In fact, the annuity builds in a guaranteed minimum return, usually between 1% and 3%.

If this no-loss policy sounds too good to be true, it is. The annuity owner doesn't get all of the stock market's gains, and forget about the dividends. That's the giveback—in effect the insurance premium—that pays for the downside protection and the minimum guarantee.

RetirementThink resource for income annuity and variable annuity basics.

Okay, I'll admit it- I'm in my 50's (a classic baby boomer) and getting closer to retirement.   I've paid a lot more attention to the stock market this summer than normal.  We all watched the market hit new highs in mid-July and continue on a roller coaster the last couple of months.   This week, gold and oil are hitting record highs. 

Here's a Friday update on the markets.

Life expectancy rates in the United States are at an all-time high, with people born in 2005 projected to live for nearly 78 years, a new federal study finds.

The finding reflects a continuing trend of increasing life expectancy that began in 1955, when the average American lived to be 69.6 years old. By 1995, life expectancy was 75.8 years, and by 2005, it had risen to 77.9 years, according to the report, released Wednesday.

Each year the Vanguard fund family provides a detailed report on all of the 401k and employer plans they manage.  This report provides a lot of insight into plan participation, investment activity. loans and average account balances of over 3 million participants.

Vanguard How America Saves 2007

I mentioned I stayed home several weeks ago and watched CNBC throughout the day-not enjoyable.   Today was another wild ride on Wall Street.  

Federal regulators and authorities in seven states are set to release the results of an investigation of firms that run "free lunch" investment seminars, which draw large numbers of retirees. The results, said Securities and Exchange Commission Chairman Christopher Cox said are "deeply disturbing" and have produced multiple law enforcement referrals.

I have a feeling these are popular,  the WashingtonPost.com looks at Investment Pitches Prey On Elderly

By keeping your car for 15 years, or 225,000 miles of driving, you could save nearly $31,000, according to Consumer Reports magazine. That's compared to the cost of buying an identical model every five years, which is roughly the rate at which most car owners trade in their vehicles.

CNNMoney provide a list of "good bets" for making 200,000 miles.

Most of the financial planning magazines we glance at each month have started to focus on retirement income strategies.  Makes sense as 77 million baby boomers have been busy accumulating assets and at some point will start to withdraw from their nest eggs.   With the uncertainity of Social Security and lack of pensions for many of these boomers-lets just hope it's a big nest egg. 

Many planners believe we have a retirement income crisis.  Our traditional sources of retirement income-Social Security and defined benefit pension plans (remember the three-legged stool?) -will replace a smaller portion of necessary income in retirement.  A recent Fidelity Reseach Institute study pointed out the huge "gap" we may face.  It will be a challenge.  Their recent paper pointed out some "building blocks" we need to understand in order to generate income.

The building blocks for retirement income include:

• Systematic Withdrawal Plans (SWP) Probably the most familiar strategy of taking periodic withdrawals from your 401k plan or IRA account.
• Income Annuities  Starting to be offered as a 401k option.  Creating you own pension.
• Variable Annuities with "living "benefits".  Annuities that allow you to withdraw 5-7% of your inital contribution each year to create a pension.

Fidelity Research Institute Structuring Income For Life

USAToday profiles several of the "new retiree's",   people who have started second careers.  Make sure to see to see my new hero, Grant Holdaway harvesting tomatoes on his farm and working in his garden center.

Hope you have a great Labor Day weekend!

When Social Security was founded in 1935, establishing 65 as the age for full retirement benefits, the average life expectancy in the USA was just 61.7 years. Today, the average 65-year-old man will live 19.2 more years, and the average 65-year-old woman will live 21.8 more years, according to the American Academy of Actuaries. In addition, a 65-year-old woman has a 19% chance of living to 95, and a 65-year-old man has an 11% chance of living that long.

As a result, "retirement isn't what it used to be," says Matthew Tuttle, a financial planner in Stamford, Conn. "You used to retire at 65, move to Florida, have early bird dinners, play golf, and you're dead by 70. Now people realize, 'I could live to 95; I've got to do something.' "

Thanks for the laugh www.cagle.com

Most 403b plans offer several "vendors" or plan providers for investments. 

Participants in a 403b plan have been able to choose between different insurance companies or mutual fund providers. Under existing rules participants in the 403b tax shelter arrangements could transfer their  accounts to other 403b providers tax free.  This is known as a "90-24" transfer and often made sense to get better returns or lower expense investments.  New 403b regulation will limit these transfers after September 24, 2007.

There has been a lot of discussion about the new 403b regulations and changes to 90-24 transfers.

Several recent articles at 403bwise.com will provide info on 90-24 transfers.

Many investors change jobs or retire and roll their 401k plans into IRA accounts.   What if you own company stock?   You'll have to make a decision.  Most plans will cash the stock out and allow you to roll the proceeds or you may be allowed to roll the company stock into a brokerage IRA.   If you have a sizeable amount with low cost basis you could roll these shares into a taxable brokerage account and take advantage of net unrealized appreciation (NUA).  NUA allows you to pay taxes at a lower rate.  It's a complex topic, be sure to speak with your tax advisor.

The Wall Street Journal explains the basics of NUA distributions.

First, to review: A little-known tax break known as net unrealized appreciation, or NUA, lets you withdraw your company stock from your 401(k) plan and move it into a taxable brokerage account. The same calendar year, you withdraw the rest of your assets from the company plan -- most likely moving that balance into an individual retirement account to continue deferring taxes. To be able to do this, you must have a triggering event, typically reaching age 59½ or leaving your job. (For more information, go to www.irs.gov and look up the instructions for Form 4972 and Publication 575.)