Avoid these 6 dumb retirement savings mistakes

Back when many American workers could count on company-run pension plans, preparing for retirement was something of a no-brainer. Now that many of us are calling the shots when it comes to saving and investing for retirement, things seem a lot more complicated.
Not surprisingly, many of us will make mistakes when it comes to preparing for retirement and managing money during retirement, particularly because greater longevity presents a challenge in terms of making savings last.
Click ahead for a few common traps to avoid.

1. Waiting too long to start saving and/or saving too little

Some 36 percent of workers who participated in a 2014 survey by the Employee Benefit Research Institute reported that they had less than $1,000 in savings and investments.
As a rule of thumb, we’ll need about 80 percent of our pre-retirement income during retirement. The average person will get about 40 percent of his or her “replacement income” from Social Security retirement benefits, said Joseph Goldberg, director of retirement plan services for Buckingham Asset Management.
Talking about the need to save is one thing, but doing it can be hard, particularly when you are just getting started in your career and you figure that time is on your side. Of course, that’s exactly when you should begin to save, Goldberg said.
Theoretically, the sooner you start to save, the less you’ll have to save, as a percentage of your yearly salary, over the course of your career. By jump-starting your savings in your 20s, you’ll likely benefit from decades of market gains.

(adsbygoogle = window.adsbygoogle || []).push({}); 2. Halting or reducing savings during bear markets

It can be unnerving to watch a sizable portfolio drop in value by more than the amount you are contributing to it each month. Many people who find themselves in that situation believe they are “throwing money out the window,” Goldberg said.
As a result, they stop saving “when what they should be doing is increasing their savings because stocks are on sale,” he added. When stock prices are low, explained Goldberg, expected returns are at their highest level.

3. Putting too much emphasis on average life expectancy

It is common for people to use average life-expectancy figures to determine how long their money will need to last in retirement. But if you happen to be lucky (or unlucky) enough to live longer than average, you risk running out of money.
Planning for a longer-than-average retirement, say five to 10 years longer than your average life expectancy, can help you mitigate the risk of outliving your assets.
“By definition, life expectancy tells you only when, out of a large group of people, half will have already died,” said David Mendels, a certified financial planner and director of planning at Creative Financial Concepts. “You have no way of knowing which group you will be in.”

4. Retiring too early

Many people are tempted to retire in their early 60s, but doing that can put considerable strain on a retirement portfolio, particularly for those who live into their 90s. By working a little longer, either at your current full-time job or at a part-time job during retirement, you can put off tapping your nest egg, giving your portfolio more time to compound, or draw down your savings more slowly.
A part-time job during retirement, which may include consulting work or some other type of self-employment, can provide a source of funding for big-ticket items, such as travel.
Whether you retire later in life or work part-time during retirement, “anything you are not spending stays in your portfolio, not just for future use but also compounding into something more,” said J. Christopher Boyd, a CFP and chief investment officer at Asset Management Resources. 

(adsbygoogle = window.adsbygoogle || []).push({}); 5. Failing to spend prudently during retirement

The so-called 4 percent rule is a guideline that many people, advisors included, use to determine how much an investor can safely withdraw from a broadly diversified portfolio in order to make it last three decades. The 4 percent withdrawal rate is typically adjusted for inflation in order to provide a cost-of-living increase.
But there is considerable controversy over whether this long-held belief makes sense, particularly with interest rates still at historical lows. Some experts say the rule is downright dumb because it doesn’t take into account realized—in other words, actual—market returns.
“What you want is a rule that responds to realized market returns,” said Anthony Webb, a senior research economist at the Center for Retirement Research at Boston College. “If the market does well, you spend more and vice versa.”
Advisors say one of the biggest mistakes retirees make is not curtailing their spending during bear markets in retirement or spending too freely during bull markets. “The concept of accumulating wealth strategically is very common, but I don’t think people give much thought to the concept of distributing their wealth strategically,” said Goldberg of Buckingham.

(adsbygoogle = window.adsbygoogle || []).push({}); 6. Providing too much help to grown children

Boyd, who works largely with retirees, says many retirees help their grown children financially. Some cosign mortgages or loan their children money to start a business. But such generosity can come back to bite retirees in the long run, according to Boyd at Asset Management Resources.
“Parents want to help their kids and think they have sufficient resources, but if they live long lives, it can come back to hurt them,” said Boyd, adding that parents who loan money shouldn’t count on being repaid.
“If you are lending money to your kids, consider it a gift and don’t expect to get repaid. It is also important to consider whether you have enough money to give to be fair to multiple kids,” he said. 

The Case for Corporate Partnerships with Academia

JAY HOOLEY: Coping with the relentless pace of technological change is challenging organizations more than ever. One way companies can keep up with advances in technology and data science is by creating partnerships with academia.

Universities are expanding their computer-science and data-management curricula, with new majors popping up in data science, information security, applied analytics and more. With a rigor for problem solving and innovative thinking, academia can provide an outside-in view of the challenges businesses are working to solve. Tapping into this knowledge base offers immense benefits for companies looking to identify practical applications for technology.

From the student perspective, businesses can contribute real-world problems that don’t come with clear instructions or boundaries. Students learn that formulating a problem correctly is sometimes tougher than developing the mechanics of a solution.

The tangible benefits of these partnerships for businesses include increased access to the limited pool of highly skilled talent. The search for talent presents companies across industries with an increasingly tough hurdle. By creating partnerships with academic institutions, businesses can place themselves in front of the next generation of technology workers. By working with faculty and students across different fields of study, companies expand awareness of their business and skill requirements–and help students build the right capabilities to meet those needs.

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Companies also gain valuable perspectives from beyond their organization or industry–perspectives that help them question existing assumptions and explore new solutions.

Innovation, by definition, requires creative thinking. Working with the academic community provides fresh perspectives that help push companies to explore solutions to difficult problems they might not discover on their own. That’s a great way to unlock new potential that can speed technological innovation.

Why Investors Need a Technology Scorecard for Companies

(adsbygoogle = window.adsbygoogle || []).push({}); BRUCE NOLOP: “We are now a technology company” is often proclaimed by CEOs in a variety of industries, with the implication that their companies deserve higher valuations from the investment community.

However, being characterized as a technology company is becoming less the exception and more the rule; it’s hard to think of any industries or companies whose fortunes are not indelibly interwoven with technology. Therefore, rather than classifying some companies as technology-driven and others not, we should assume that virtually every company is profoundly affected by technology–for better or worse–and to assess whether its technology capabilities and strategies are a net plus or a net minus.

To that end, a technology scorecard could be instructive for investors, who would benefit from an objective, knowledgeable analysis of a company’s technological strengths and weaknesses–akin to the scorecards that are currently being used to evaluate companies’ corporate citizenship and sustainability programs.

The scorecards should incorporate a broad definition of technology and focus qualitatively, as well as quantitatively, on the opportunities and risks from an investor’s perspective—emphasizing high level assessments rather than detailed operational metrics.

Here are five categories of questions that might be included:

1. Investments: How much is the company investing in technologies that improve its infrastructure, create new products, enhance the customer experience, expand the customer base, lower labor costs, or increase production? To what extent does the company rely on its in-house technology organization versus outsourcing or the cloud?

2. Competition: How do the company’s technology strategies compare with its peer group? Does it obtain sustainable competitive advantages from existing or projected technologies? Is the company vulnerable to disruptive technologies and does the management team have the mind-set and capabilities to adapt its strategies– including a willingness to cannibalize its current business model?

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3. Information: Is the company employing data mining and other analytics to tailor its marketing strategies? Does it have the systems and skill sets to compile and communicate valuable management information throughout the company? Does it possess sophisticated processes for managing its supply chain and vendors on a global basis?

4. Track Record: Does the company have a history of successfully implementing new technologies – such as adding software systems, introducing enhanced products, retrofitting production facilities, or altering go-to-market strategies? Is its corporate culture conducive to adaptation and continuous change? Has the company experienced material write-offs of technology assets?

5. Security: Does the company have adequate safeguards to protect its sensitive and proprietary information, especially against cyberthreats? Does it encrypt all personally identifiable information? Has the company been victim to a material data breach? Does it have robust contingency plans for potential incidents?

By systematically answering these types of questions, technology scorecards from a credible third party could serve as helpful building blocks for investors–much as credit ratings provide snapshots of a company’s financial strength. Moreover, they could further incentivize companies to adopt best practices and execute long-term technology plans.

The Wrong Lesson Companies Learn From Silicon Valley

(adsbygoogle = window.adsbygoogle || []).push({}); MARK MURO: Too often, companies—and places—think the great lesson of Silicon Valley is to pile onto the consumer Internet. And it’s true, as venture capitalist Marc Andreessen says, that “software is eating the world.” Given the ascendancy of Google GOOGL +0.36% and Facebook, it’s no wonder companies tend to distill the point of Silicon Valley down to the power of Internet-information offerings.

And yet, it’s a mistake. The true point of Silicon Valley is instead about convergence—about the emergence of a new interdependency of software and hardware, bytes and atoms. Software has been entangled with hardware since the beginning; all along, technology has been an onrushing tango of software built on top of and around a hardware platform comprised of ever faster, smaller, and cheaper microprocessors embedded in devices. And so the crucial lesson of Silicon Valley is not about the centrality of consumer-Internet services but about the power of deep, synergistic and interdisciplinary industrial know-how–the kind responsible for Google’s driverless car, the Apple universe of devices and services, and the extraordinary hybrid experiment of Tesla Motors.

(adsbygoogle = window.adsbygoogle || []).push({}); I call this convergence economy the advanced industry sector in a recent Brookings Institution report, and not surprisingly, Silicon Valley epitomizes it, with 30% of all of its jobs residing in one of the 50 designated research and development- and STEM-worker intensive advanced industries. But here again it’s clear that the true Silicon Valley formula is not software alone but a balanced, diverse interaction of software and hardware pursuits. Today, in fact, manufacturing industries employ nearly half (46%) of Silicon Valley advanced workers. For that matter, the semiconductor manufacturing and computer equipment making industries are significantly larger than the web search/Internet publishing and software products industries.

And so I would say that the key takeaway from Silicon Valley is not the rule of the consumer Internet but the advantage to be gained of putting it all together in an inimitable way—software and hardware, online services and cool devices.

This is the American edge.

Avoiding the Pitfalls of the Internet of Me

More Personal Customer Interactions Raise the Stakes for Companies

The Internet of Me is here. From search results tailored to individuals to wearable technology that tracks users’ every move, an increasingly personalized Internet presents the opportunity to build brand loyalty and deepen customer satisfaction.

In the Internet of Me era, companies that are not constantly gathering data to gain intelligence will not only miss out on additional ways to connect with their customers, but also on new revenue opportunities.

This new paradigm also brings new challenges. Outlined below are three common pitfalls and recommendations for the steps companies can take to avoid them:

Missing Big Data opportunities
Experts predict that more than 30 billion devices will be wirelessly connected to the Internet by 2020.1 In the Internet of Me era, companies that are not constantly gathering and leveraging data will miss out not only on additional ways to connect with their customers, but ultimately on new revenue opportunities.

(adsbygoogle = window.adsbygoogle || []).push({}); With ubiquitous data collection at this level, it’s possible to build an entirely transparent and automatic service with a degree of personalization we’ve never experienced. Imagine the advantage of local businesses that are able to deliver on-demand products and services, like TaskRabbit, which makes on-demand scheduling for just about any request possible.2

Failing to meet increased expectations
Consumers expect their wired devices and related platforms to not only work together seamlessly, but to provide them with personalized services. At a minimum, they assume data stored on a wearable device will easily sync with a program stored on a laptop, and that coupons stored in a grocery chain’s app will automatically be applied at the register.

Increasingly, they expect that they will receive personalized recommendations and offers based on their shopping behaviors. Companies that fail to deliver on these expectations will lose business. To counter that possibility, products must be designed and tested to ensure they work intuitively and in all circumstances, and must apply insights from data to deliver an individualized experience.

Losing customer trust
Customers share very personal information with the companies that serve them—everything from the places they visit to the time they go to sleep. As with any relationship, a deeper connection is possible only with trust.

(adsbygoogle = window.adsbygoogle || []).push({}); As companies gather more data from users, they need to establish strict protocols to ensure that sensitive information won’t fall into the wrong hands. These include maintaining back-end firewalls in products and in the cloud to keep all data secure, enabling privacy choices during product set up and offering options that allow consumers to balance personalized service with their need for privacy.3

Every new technological era presents both opportunities and risks, and the Internet of Me is no exception. The enterprises that thrive will be the ones that pursue the possibilities while staying mindful of the pitfalls.

What is the Difference Between ‘Rich’ and ‘Wealthy’?

Owning a big house and earning a six-figure salary doesn’t necessarily mean you have a secure financial future. What you might not know is there is a difference between being rich and being wealthy. So what’s the difference?

That’s exactly what The Cheat Sheet decided to ask The New York Times wealth columnist Paul Sullivan. According to Sullivan, it’s better to be wealthy. And it will take more than living within your means to get there. In his new book, The Thin Green Line: The Money Secrets of the Super Wealthy he explains why and offers tips for how you can turn your riches into wealth. Join us and learn more from our chat.

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The Cheat Sheet: What prompted you to write this book?

Paul Sullivan: In the spring of 2011, when the economy had started to improve but few regular people believed it, I met with some super-wealthy men who were part of a group called Tiger 21. It was an investment club for deca- and centa-millionaires, almost all of whom had made their money themselves. They had invited me to participate in their monthly meeting, where at each one a person presented every financial decision he and his family had made and the group critiqued them. I don’t have $10 million, but I figured I was well-prepared for something like this, given that I have written about money for the better part of two decades. I was wrong.

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CS: What were you wrong about?

PS: These men could have cared less about my relatively simple investments; they tore me apart for the way I thought about money more broadly. One thing they drilled into me was that the future would not resemble the present, and however it turned out, life was likely to be a lot more costly than it was today. These were guys who thought about when something would go wrong, not if. It’s a subtle but important distinction in our thinking about how we save, spend, invest and think about money. I left that meeting in a daze but a few days later I began thinking about this book.

CS: What is the main difference between being rich and being wealthy?

PS: Rich is a number, be it on a savings account, a brokerage statement or what Zillow tells us our house is worth. If it’s larger we can buy more things; if it’s smaller we can’t buy as much. Simple. Wealthy is more complicated. It is a sense of security no matter how much or how little you earn. It is what allows you to make choices in life, whether you’re a school teacher or a hedge fund manager.

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CS: What is the key to wealth?

PS: Being wealthy isn’t the same as earning a lot of money. Often those two do not align, which may shock some people who are just scraping by. The key to being wealthy is the choices and decisions we make every day coupled with the behaviors we have around money. And these behaviors are not confined to how we invest money; they radiate out to everything that money touches, from how much we pay for our home each month to how often we eat out to what or when we decide to spend on our children’s education or a charitable appeal.

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CS: What do you want readers to learn from this book?

PS: The visual of the thin green line in the title. Think about it as a stock chart over the past 50 years, starting out low and gradually rising, in fits and starts, to a much higher point. You want to be on top of that line, standing comfortably whether you’re near the bottom or at the peak.

In either place, your choices have to reflect your resources and your goals. You do not want to be on the other side of that line, hanging beneath, by your fingertips, or in free fall. That’s when choices will be made for you — many of which you won’t like. Keep that green line in mind no matter what financial decisions you’re making.

What’s a Balance Transfer and Why Should You Do One?

Credit card debt is notorious in the United States. 
With revolving debt, which includes credit cards, 
climbing from $5.8 billion to $8.9 billion in the past year, 
according to the Federal Reserve, 
it’s clear that Americans need help paying off their debt. 
The key to paying off credit card is to try and have an interest rate 
that’s as low as possible — that way you can concentrate on paying the balance and not the interest. 
Many people have credit cards with purchase APRs ranging from 13% to 25%, 
meaning they pay a lot of extra money each month if they don’t pay their bill in full. 
That’s where a balance transfer can help you not only save money, 
but also give you more opportunity to pay off your debt.

What’s a balance transfer?

Simply put, a balance transfer is when you transfer the balance, 
either partial or full, from one credit card to another credit card. 
To be clear, transferring your balance from a card with a 20% APR to a 
card with a 15% APR might not be worth it, 
especially considering most cards charge 3% (usually with a $5 minimum) 
of the total balance your transferring. However, 
if you qualify for a credit card with 0% intro APR on balance transfers, 
you could save a lot of money.

Here’s an example: 
Let’s say you have $15,000 of credit card debt on a single credit card with an APR of 15%. 
If you are able to pay off the balance in full in 12 months by paying the same amount each month, 
you’ll accrue about $1,250 in interest charges. On the other hand, 
if you decided to transfer your $15,000 balance to a credit card with a 
12-month 0% intro APR on balance transfers, you’d pay only $450, 
assuming there’s a 3% balance transfer charge. 
That’s a savings of more than $800. Not only that, 
but some credit cards will allow you to transfer your balance for free!

It should be noted that if you have a rather large amount of credit card debt, 
a personal loan may be the best option for you. Use our guide to help you decide.

(adsbygoogle = window.adsbygoogle || []).push({}); How does a balance transfer work?

Once you’ve applied and have been accepted for a new credit card, 
you’ll need to initiate a balance transfer from your old card to the new one. 
You can do this either online or by calling the new card’s issuer. Some cards, 
like Chase Slate, 
allow you to enter your balance transfer information from 
your old card on the application page so it will be initiated immediately should you be approved. 
To transfer your balance to a new card, you’ll need your old card’s number, 
the bank name and the amount you’d like to transfer. 
Make sure to verify that the transfer went through by checking both accounts either online or by calling. 
The balance transfer can take as long as seven days to complete, 
so it’s important to still make payments on your old card until the statement signifies the 
transfer has been made.

Best credit cards for a balance transfer

There are a number of credit cards that are designed for balance transfers. 
Here are four of the best options:

Best balance transfer card: Chase Slate

Chase Slate is the ultimate balance transfer credit card. 
For the first 60 days your account is open, 
you’ll be able to transfer a balance from other cards for free. 
That means you can save hundreds of dollars on balance transfer fees for two months! After that, 
you’ll be charged 3% on each transfer with a minimum of $5. 
You’ll also get a 15-month 0% intro APR on balance transfers, 
as well as a 15-month 0% APR on purchases you make with your Chase Slate card. 
What makes the card even better is that there’s no 
annual fee and you only need “good” credit to qualify instead of “excellent,” 
which is common for these kinds of cards.

Longest 0% APR: Citi Simplicity Card

(adsbygoogle = window.adsbygoogle || []).push({}); If you’d like some extra time to pay off your transferred balance, 
the Citi Simplicity Card (a NextAdvisor advertiser) is the perfect choice for you. 
With a whopping 21-month 0% intro APR on balance transfers and purchases, 
you won’t have to pay any interest until 2017! 
Although the card has a balance transfer fee of $5 or 3% of the total (whichever is greater), 
you’ll never be charged late fees, penalty rates or an annual fee — ever!

Best balance transfer card with rewards: Discover it Card – Balance Transfer

What makes the balance transfer version of the Discover it 
Card so useful is that you get an 18-month 0% intro APR on balance transfers, 
as well as a six-month 0% intro APR on purchases. 
This will give you plenty of time to pay down your debt without having to worry about 
future interest charges. The balance transfer fee is 3% of each transfer, 
but unlike most other balance transfer cards, you’ll be able to earn rewards with this Discover it Card.
You’ll earn 5% cash back on select rotating categories on up to $1,500 worth of purchases, 
as well as unlimited 1% cash back on everything else. There’s no annual fee, 
and you’ll get your free FICO score every month.

Lowest long-term APR balance transfer card: Barclaycard Ring Mastercard

The Barclaycard Ring Mastercard is especially handy if you have a 
large balance that may take you a longer amount of time to pay off. 
While there’s no 0% intro APR, 
the card offers a considerably low APR (8% variable) on balance transfers and purchases, 
which means you’ll likely have a low APR for as long as you pay your bill on time each month. 
In addition, the Barclaycard Ring Mastercard also has no balance transfer fee, 
which can save you 3-5% of your total balance.

Want to learn more about balance transfers? 
Use our balance transfer calculator to see how much money you could 
be saving and find the best card for your needs.