Physicians and their families are barragedwith plenty of advice on how tolive the golden years. Times are changing,and without keeping a careful ear to theground you may find yourself at a seriousdisadvantage. The following are somecommon myths to be on the lookout for inyour quest for retirement solvency:
Myth 1: Getting married when you'reretired will cost you your Social Securityor pension benefits.
If you are age 60 or older andwere widowed, you can get remarried andstill collect on your deceased spouse'srecord. The survivor benefit is equal toyour deceased spouse's full benefit, whichmay be more than your own benefit or the50% you're entitled to from your newspouse's benefits. For more information,contact the Social Security Administration(800-772-1213; www.ssa.gov).
Myth 2: Thanks to the Pension BenefitsGuarantee Corporation (PBGC), your pensionbenefits will always be safe.
The PBGC doles out only a fractionof the actual benefits owed if a company'spension plan fails. You can expect to getonly one fifth of the monthly pension youwould have been due, for an annual pensionof $11,097 to $31,705. In addition, thePBGC doesn't cover any of the major bene-fits like severance, vacation, or sick pay. Allthose benefits will disappear if your pensioncollapses. Check the safety of youremployer's pension plan.
Myth 3: Your pension plan administratorwill ensure that you get all benefits.
Math or "actuarial" errors (eg,using an incorrect interest rate assumption)and administrative errors are all too commonwhen it comes to calculating yourpension benefitsâ€”and we're not talkingabout mistakes that cost you littleamounts. Thanks to these errors, you couldbe losing 20% to 50% of your lump sum ormonthly pension payment. One way toprotect yourself is to have your benefitsreviewed by an independent pension consultant.The best service we've found is theNational Center for Retirement Benefits(800-666-1100; www.ncrb.com). They review,analyze, andâ€”if need beâ€”audit yourpension plan participation to make sureyou're getting all your benefits. Their fee is20% of any additional money they findfor you, and if they don't find any moneyfor you, you pay nothing. Also, you canmake your own pension benefit calculationswith the pension calculator on theWeb site of the American Academy ofActuaries (www.actuary.org).
Myth 4: In retirement, avoid losses andpreserve principal at all costs.
While we do think older investorsshould be more cautious than 30-year-oldinvestors, we never want you to foregogrowth entirely as a guideline. Keep 60%to 80% of your money in fixed investmentsand invest the balance in conservativegrowth investments that pay good dividendsif you can afford to lose money. Yourexact investment strategy depends on yourparticular circumstances. More discretionaryassets will allow a higher percentage ofstocks and mutual funds.
Myth 5: Social Security is enough tomake up for the shortfall between yourpension and your living expenses.
This is one of those maybe/maybe not myths. The average annualSocial Security benefit is approximately$17,000 a year for couples and just under$10,000 a year for single recipientsâ€”along with your pension benefits, whichmay or may not be enough to pay yourliving expenses. How much can youexpect to get? Visit the Social SecurityAdministration's Web site (www.ssa.gov/online/ssa-7004.html) to download a Requestfor Earnings and Benefit EstimateStatement (Form SSA-7004). Odds areyou'll need to rely on your own investmentsto make up for the shortfallbetween your living expenses and yourpension and Social Security benefits.
Ken and Daria Dolan are thehosts of The Dolans, the nation's#1-rated personal finance show, which originatesfrom WOR-AM in New York.For 4 years, they served asmoney editors on CBS This Morning and CBSNews Saturday Morning. They also previouslyhosted their own popular personal financeshow on CNBC and have appeared on manyother television shows, including The TodayShow. This article was adapted from Don'tMess with My Money, by Ken and DariaDolan, copyright 2003. Reprinted with permissionfrom Currency/Doubleday Books.