Kiplinger's Personal Finance 2020

Among Americans saving for retirement—and that includes most of us—the pandemic-sparked bear market and recession have shaken our confidence that we will have enough income to live comfortably throughout retirement. According to a recent Kiplinger poll of savers who are 55 to 70, half of respondents say they are less confident about living comfortably in retirement than they were before the pandemic. Women, people in their fifties and, not surprisingly, those with lower household net worth are the most pessimistic. (The poll was conducted in partnership with the Alliance for Lifetime Income, which educates consumers about protecting retirement assets via annuities.) As we were sending this publication to press, the short 2020 bear market officially ended. The S&P 500 index, which measures the performance of the largest U.S. stocks, regained…

RETIREE TAX MAP Updated every year with the latest tax changes, our state-by-state guide helps you choose the right home for you and your assets in retirement. See how states tax various forms of retirement income, offer property tax breaks for retirees, and tax your estate. ■ kiplinger.com/links/retireetaxmap PODCAST Listen to our Your Money’s Worth podcast every week for insights on saving for retirement, investing for income, cutting your tax bill, and much more. ■ kiplinger.com/links/podcasts RESOURCES Free College for Seniors Visit our state-by-state roundup of no-cost and discounted tuition programs for older residents. ■ kiplinger.com/links/freecollege Social Security Retirement Age Determine when you’re eligible to collect full Social Security benefits. ■ kiplinger.com/links/age RMD Calculator Compute your required minimum distributions from a traditional IRA. ■ kiplinger.com/links/rmd Free Retirement E-Newsletter Get Kiplinger’s…

As you approach retirement, it’s easy to become fixated on the magic number—a pot of money large enough to allow you to retire comfortably without outliving your savings. But figuring out whether you can afford to retire requires math, not magic, along with a thoughtful analysis of how you plan to spend your time and money. On the following pages, we’ll help you come up with a realistic estimate of how much money you’ll need to retire in style. Plenty of online calculators will help you figure out whether you can afford to retire based on how much you’ll need to replace a specific percentage your current income. A popular rule of thumb, for example, suggests that you should plan on replacing 70% of what you currently make, or 80%…

Long-term-care insurance offers a way to avoid catastrophic expenses later in life. But if you’re already in your sixties, you may have a hard time finding a policy that’s affordable. One alternative that could provide income for late-life care is a deferred annuity, which provides guaranteed payments when you reach a certain age. Because of the risk that you’ll die before you start collecting payouts, these annuities cost much less than immediate annuities. For example, a 65-year-old man who invests $100,000 in an immediate annuity would receive $525 a month, according to Immediateannuities.com. But if he invested $100,000 in a deferred annuity that starts payments when he turns 80, he would receive about $1,750 a month. Deferred annuity payouts, like immediate annuity payouts, are tied to interest rates, so if…

No matter how many years away from retirement you are, you should have at least some idea of how much income you’ll need in order to maintain your standard of living once you’re out of the workforce. Not surprisingly, researchers, financial institutions and financial planners offer to help you figure the amount you need in savings, from multiples of final salary to percentages pegged to your preretirement income. But no one formula fits every person or life stage. The worksheet on page 25 lets you personalize the numbers. 1 How much income will you need in retirement? Start with your current income (and your spouse’s, if you’re married), and apply a growth factor from Table 1. Assume, for example, that inflation will average 3% a year between now and the…

The money-growth and inflation factors in Table 1 will help you complete steps 1, 2, 4 and 5. Use Table 2 to calculate how much you need to save to generate retirement income over various periods (Step 3). Table 3 estimates the growth potential of your savings given different annual rates of return and years until retirement. Use it to complete Step 6.…