Retirement Advice: Your Hottest Questions Answered

Last Updated Apr 22, 2011 4:29 PM EDT

Earlier this week I appeared on the Ask the Experts program with CBS MoneyWatch Editor-in-Chief Eric Schurenberg and Editor-at-Large Jill Schlesinger. We had a lively show covering some of the hottest questions that readers have on retirement.

Here's a short summary of some of the Q&As:

  • Question: If I don't get a match on contributions to my 401k plan, should I contribute to that plan or a Roth IRA instead? Answer: Only if you can get a better deal shopping for investments on your own -- that isn't always the case. And Roths are great if you think your tax bracket will be higher in retriement than it is now.
  • Question: Talk to me about annuities. Answer: You need to distinguish between deferred annuities, which are an accumulation vehicle, and immediate annuties, which generate immediate lifetime income. Many annuities of either flavor have high costs and mediocre performance, which give annuities a bad name. But look beyond the reputation: Low cost, fixed immediate annuities have a place in a retiree's income portfolio to protect against "longevity risk."
  • Question: Should I be concerned about the strength of an insurance company? Answer: Yes! But don't let that deter you from considering an immediate annuity. Shop among the highest rated companies, and consider spreading your annuity among a few different companies. Consider it as another form of diversification.
  • Question: I'm 24 years old and saving the maximum allowed under my 401(k) plan. Will that enable me to retire at age 55? Answer: Congrats on saving so much -- you're well on your way to finanancial independence. But retirement at age 55 is tough -- you might live to age 100, and be retired far longer than you were working. With that level of contributions, most likely you'll be able to retire in your mid-sixties. And, you'll have the financial resources to enable to you to find the work that you like.
  • Question: Should I consider a reverse mortgage? Answer: Only if you're truly desperate for income. Right now, costs and interest rates are high, but I hope that these will come down as more institutions enter the picture and increase the competition. I'd hold your home equity in reserve for an emergency, such as the need for long-term care.
  • Question: How can you recessession-proof your retirement? Answer: Good question, since there's a good chance that you'll see two, three or four more market meltdowns in your life. Set up your income and expenses such that they're relatively immune to the economic craziness that can happen. Details are in my book Recession-Proof Your Retirement Years.
You can get the full answers to these questions and other questions by watching the video clip.
Be on the lookout for future installments of Ask the Actuary!
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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.