Right now, the Powerball jackpot stands at $425 million, but whoever wins it will probably be broke within a few years. That's what happens to 70% of winners, according to the National Endowment for Financial Education.
That made us think about retirement. (We know, we know... what doesn't?)
Lottery winners can choose to take annual payments, pay lower taxes on their newfound windfalls, and have 30 years before worrying about running out of money. But research shows that the vast majority of winners choose to take a windfall lump sum instead.
But those who take the lump sum apparently don't "invest" it so wisely.
So if you're the lucky Powerball winner, unless you plan to keep your job, think twice about how to fund your retirement, and whether to take your winnings all at once. Remember, that gigantic pot of money has to last your whole life, not just a few years.
And even if you don't win the lottery, beware of a lump sum of whatever size. It may look good now, but you take on the risk that you'll outlive it. Most folks do better with guaranteed income.
With recent news of the Detroit bankruptcy, more people are asking about PBGC's role in public pensions. However, by law, PBGC doesn't insure state, county, or city plans.
While we insure most private-sector (non-governmental) pension plans, Congress has also defined exceptions that PBGC does not insure. But for more information about public pensions, please contact the National Conference on Public Employee Retirement Systems.
A new study answers whether the retirement crisis is worse than we thought. The research report concludes that when all working-age families are counted, the typical family has only a few thousand dollars saved for retirement.
The study reveals:
- The typical working-age household has only $3,000 in retirement account assets; the typical near-retirement household has only $12,000.
- Four out of five working families have retirement savings less than one times their annual income.
- The U.S. retirement savings deficit is between $6.8 and $14.0 trillion, depending on the household assets counted.
These findings are contained in a new research report, The Retirement Savings Crisis: Is it Worse Than We Think?, issued by the National Institute on Retirement Security (NIRS).
Read the full study on the NIRS website.
Today, June 18, is National Splurge Day.
There are certain days and times of year that most people look forward to. Perhaps National Splurge Day is one of those days marked on your calendar. However, in calendars that haven't been printed yet, you may look forward to marking the day you can retire.
According to Holiday Insights, here's how to properly join in the National Splurge Day festivities:
Treat yourself excessively, to anything you want. And, to excess if you desire. Isn't that a great thing? Maybe, you're on a diet, and that special dessert is too many calories. Maybe, you want to buy a steak, and the budget is a little tight. Toss out the reservations, and go for it today.
A steak or a dessert is one thing, but don't go crazy. There's one kind of splurge you may really regret — the multi-thousand-dollar retirement binge. Too many people retire and "treat themselves" to a fancy new car or an extravagant vacation that they don't really need, and in the long run can't afford. And even while they're still working, too many people downgrade their future retirement income through "leakage" from their 401(k) plans — loans and cash-outs between jobs.
So, on National Splurge Day, go ahead, treat yourself. But definitely don't cheat yourself or your retirement.
In the article, "10 Ways to Pay for Retirement," U.S. News & World Report lists the most common ways to pay for retirement.
- Social Security.
- A pension.
- Retirement accounts.
- Home equity.
- Stock market investments.
- Savings accounts.
- Annuities or insurance plans.
- Part-time work.
- An inheritance.
- Rent and royalties.
Pensions are a big part of how people prepare for retirement, along with working longer, saving more, and — as a last resort — tapping home equity. Read the full article.