You're Fifty -- Now What?: Investing for the Second Half of Your Life

by Charles Schwab

Overview

Every eight seconds someone in this country turns 50, an age at which even baby boomers can no longer put off becoming fiscally responsible and planning for the future. For everyone who finds that thought daunting (and that's an awful lot of us), Charles R. Schwab, America's most trusted figure in financial services, is here to outline the simple steps we should take to evaluate what we have, determine what we'll need, and put our money to work to make our future one of reward instead of worry.

In the same upbeat, user-friendly style that made Charles Schwab's Guide to Financial Independence a bestseller, You're Fifty- Now What? offers a mix of clear and workable advice, simple worksheets, and a healthy dose of encouragement. In addition to learning how to accumulate and grow their money, readers will even find help with estate planning and charitable giving.

His message is that the goal is not just financial security, but financial peace of mind. The way to get there is not by being a spectator, but a participant. It doesn't take special talent or advanced degrees; it just takes attention and a little time. With baby-boomers living longer and spending more time in retirement, the need is clear. Charles Schwab's You're Fifty- Now What? is the perfect place to get started.

Product Details

ISBN-13:	9780609504222
Publisher:	Crown Publishing Group
Publication date:	03/01/2001
Sold by:	Random House
Format:	eBook
Pages:	336
File size:	2 MB

About the Author

Charles R. Schwab is the founder, chairman, and CEO of the international full-service brokerage firm that bears his name.  He lives near San Francisco.

Read an Excerpt

I have a question for you, and it's simply this: How much is enough?

It's a tough question, and it's essentially the topic of just about every retirement book, article, or seminar. Everyone's trying to figure out how much they'll need, and all the experts are trying to tell you how to do it. So how much will you need? How much does it take? Will you have enough? How much is enough?

Chances are it's more than you think, thanks in part to some good news. We're living longer, for one thing. Today's 50-year-olds are a lot younger than the 50-year-olds of two generations ago. A lot of us will live to be 100. As a result, what we used to call retirement can last 30 or even 40 years. Not only that: we're healthier and therefore more active, so what we used to call our retirement years are a little more costly. And we have less help from the government -- Social Security isn't what it used to be. So while a lot of people think that if they have $300,000 or $400,000 set aside for retirement, they're set for life, they're probably wrong. True, that's a lot of money; chances are that it's a lot more than your parents had. But in reality, it may not be enough. So how much will it take to sustain the lifestyle you're picturing? There are some dangerous estimates out there. One number that's tossed around is 70%, meaning that in retirement you'll need 70% of your current income to live comfortably. That argument seems logical enough: a lot of costs will, after all, go down. If you're not working, you won't commute, you won't have to buy work clothes, and all those other work-related expenses will diminish.

But do the costs go down enough to justify a 30% reduction in income? I don't think so. A recent national news story mentioned a 58-year old computer programmer who, when he retired, had heard that 70% estimate, but just had a feeling that it wasn't reliable. Instead he decided that he would need 100% of his pre-retirement income. Yes, he realized, there were costs that would go down -- 401(k) contributions, Medicare and Social Security taxes, commuting and other work-related expenses, for example -- but he suspected that those savings would be more than offset by a whole laundry list of other expenses: medical care, travel and entertainment, eating out.

Many people have the same concerns. There are plenty of medical expenses for even healthy retirees, things that aren't covered by Medicare: prescription drugs, dental care, hearing aids, eye care. The house and car will still need maintenance, and it's common for retirees to find they can't or don't want to do as much of the work themselves, which means the added cost of hiring someone else to do work you used to do yourself. And a lot of retiring baby boomers are finding themselves part of the "sandwich generation." Retirement isn't their only financial concern; aging parents and the kids' college tuition? -- hings that used to be almost mutually exclusive -- are concerns as well.

To say that things have changed is putting it mildly, and retirement is at the top of that list. When all is said and done, a lot of people are finding that once they've looked carefully at the costs of retirement, the expenses are significant enough to warrant revising their master plan. They're thinking about working longer, or investing a little more each month. In short, if retirement has changed, then planning for retirement has to change as well. It's time to revise our assumptions and our plans. It's time for something new.

Table of Contents

I: Planning For The Financial Second Half Of Your Life

1: Investing Strategies for the Second Half ..... 7

2: Adding Up What You Have ..... 28

3: Estimating How Much You'll Need for the Second Half ..... 46

4: Choosing Investments for the Second Half ..... 84

5: Cash Flow in the Second Half Creating a Paycheck for Yourself ..... 127

6: Monitoring and Rebalancing Your Portfolio ..... 155

II: Putting Your Hourse In Order In The Second Half

7: Getting Help If and When You Need It ..... 187

8: The Assurance Called Insurance ..... 208

9: The Fine Art of Estate Planning ..... 226

10: Giving Something Back: Some Thoughts on Charitable Giving ..... 249

Epilogue ..... 265

Appendix ..... 267

Introduction

I have a question for you, and it's simply this: How much is enough? It's a tough question, and it's essentially the topic of just about every retirement book, article, or seminar. Everyone's trying to figure out how much they'll need, and all the experts are trying to tell you how to do it. So how much will you need? How much does it take? Will you have enough? How much is enough? Chances are it's more than you think, thanks in part to some good news. We're living longer, for one thing. Today's 50-year-olds are a lot younger than the 50-year-olds of two generations ago. A lot of us will live to be 100. As a result, what we used to call retirement can last 30 or even 40 years. Not only that: we're healthier and therefore more active, so what we used to call our retirement years are a little more costly. And we have less help from the government -- Social Security isn't what it used to be. So while a lot of people think that if they have $300,000 or $400,000 set aside for retirement, they're set for life, they're probably wrong. True, that's a lot of money; chances are that it's a lot more than your parents had. But in reality, it may not be enough. So how much will it take to sustain the lifestyle you're picturing? There are some dangerous estimates out there. One number that's tossed around is 70%, meaning that in retirement you'll need 70% of your current income to live comfortably. That argument seems logical enough: a lot of costs will, after all, go down. If you're not working, you won't commute, you won't have to buy work clothes, and all those other work-related expenses will diminish. But do the costs go down enough to justify a 30% reduction in income? I don't think so. A recent national news story mentioned a 58-year old computer programmer who, when he retired, had heard that 70% estimate, but just had a feeling that it wasn't reliable. Instead he decided that he would need 100% of his pre-retirement income. Yes, he realized, there were costs that would go down -- 401(k) contributions, Medicare and Social Security taxes, commuting and other work-related expenses, for example -- but he suspected that those savings would be more than offset by a whole laundry list of other expenses: medical care, travel and entertainment, eating out. Many people have the same concerns. There are plenty of medical expenses for even healthy retirees, things that aren't covered by Medicare: prescription drugs, dental care, hearing aids, eye care. The house and car will still need maintenance, and it's common for retirees to find they can't or don't want to do as much of the work themselves, which means the added cost of hiring someone else to do work you used to do yourself. And a lot of retiring baby boomers are finding themselves part of the "sandwich generation." Retirement isn't their only financial concern; aging parents and the kids' college tuition? -- hings that used to be almost mutually exclusive -- are concerns as well. To say that things have changed is putting it mildly, and retirement is at the top of that list. When all is said and done, a lot of people are finding that once they've looked carefully at the costs of retirement, the expenses are significant enough to warrant revising their master plan. They're thinking about working longer, or investing a little more each month. In short, if retirement has changed, then planning for retirement has to change as well. It's time to revise our assumptions and our plans. It's time for something new.

Editorial Reviews

In Your Fifty--Now What? author Charles Schwab focuses on real tasks that people nearing or already in retirement must tackle, such as creating a paycheck from savings. His rule of thumb: Start by taking no more than 4% to 5% of your savings each year. With helpful worksheets, glossary, and appendix, the book is digestible without being pabulum. Most of his advices is sound.
— BusinessWeek

Robert Barker

Founder and chairman of a famous international brokerage, Schwab offers sound advice on basic personal finance topics faced by boomers and retirees, including estate planning, retirement cash flow and pension plans. The investing sections target inexperienced investors, with definitions of stocks and zero coupons, and worksheets for retirement budgets and portfolio benchmarks. A useful appendix includes advice on reading mutual fund prospectuses and selecting insurance. Schwab's breezy, non-threatening style and advertising backed by his company should ensure high visibility and bestseller list appearances. (Jan.) Copyright 2000 Cahners Business Information.

Publishers Weekly - Publisher's Weekly

Finances, investments, and estate planning for aging baby boomers. Copyright 2000 Cahners Business Information.\

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