Hurricane Harvey? North Korean Missiles? Stocks Shrug

So, okay, Hurricane Harvey may be the worst storm to hit America in a while.  The damage is really bad, and getting worse.  Projections for recovery time are lengthening by the minute as rainfall totals rise.  The economic impact will clearly be big.  Energy extraction and refining are being hit.  The Gulf states have a number of petrochemical and plastics plants, but they aren't manufacturing much.  The Gulf ports are major transshipment points for a lot of stuff, but not much transshipment is taking place.  The cost of rebuilding may reach $100 billion or more.

Meanwhile, the fat kid in North Korea keeps firing off missiles, in one instance over northern Japan.  He may think he's being clever, pushing the world to see how far he can go.  But shooting missiles over another country is a way to start wars.  The Japanese held their fire.  But North Korea's missiles aren't the picture of reliability and sturdiness.  If one flies in an unintended trajectory, or falls apart at the wrong time, physical impact on Japan or maybe South Korea is quite possible.  Then what?  Kim Jong Un has been on a path of escalation in recent months.  He's announced that Guam--U.S. territory--is his next target.  Since he seems intent on escalating, he will approach a flashpoint. 

But do stocks care?  Not one bit.  Even though U.S. stock futures dropped sharply last night, all indexes closed up today.  Mega hurricane--meh.  Barrage of North Korean missiles--meh.  Discord rife between and among the President, Congress and both political parties--meh.  Merrily we roll along.  Plus ca change, plus c'est la meme chose. 

Why do we have such insouciant stocks?  The likely explanation is the Fed.  Market participants have gotten so used to Fed bailouts that no one believes stock indexes can fall more than about 3% at the most, and therefore don't panic sell portfolios.  In some respects, this market stability may seem desirable. 

But market stability based on government subsidies is ultimately chimerical.  The Fed produced that stability by screwing over large numbers of people.  By keeping interest rates extraordinarily low for almost a decade now, the Fed has decimated pension plans.  A lot of middle class people who depended on their pensions are now lower middle class, or even poor.  Retirees and others who relied in part on interest income from their savings have learned to like dog food in lieu of steak, or even hamburger.  Holders of long term care insurance policies have faced extortionate rate increases, or possibly the prospect of spending old age in homeless shelters until they qualify for nursing homes that take Medicaid (which sometimes aren't exactly top class institutions).  Those that still have some faith in the future and want to save for a rainy day need to tighten their belts and put aside more principal, rather than count on the compounding of interest income to make their golden years glow.  That means reducing current consumption, which is a drag on the economy and may partially explain why economic growth remains tepid.

As long as the Fed supplies financial opioids for stocks to mainline, the market will be copacetic.  But problems lurk.  Stock valuations may not truly reflect investment values.  Instead, they probably incorporate a large dose of government subsidy.  That would mean people are paying too much for stocks.  This story won't have a happy ending.  Market forces can't stay suppressed indefinitely and government subsidies can't last forever.  The failure of Communism in China and the Soviet Union prove that point.  Things generally feel good when you're on narcotics. But you don't get good quality sleep on opioids--and investors shouldn't be sleeping too soundly now.

Planning For Your Obsolescence

The ongoing debate over trade policy highlights a major career risk:  the possibility that you could become obsolescent because of cheaper labor elsewhere and/or automation.  For example, in the auto industry, many car parts and some cars are made in other countries and shipped to America because labor and other costs are cheaper elsewhere.  In America's auto assembly plants, robots have replaced large numbers of people because robots are more reliable and cheaper.  This trend will continue as many other tasks become mechanized and/or cost-effective in lower wage nations.  Computer programming, radiology, legal research and legal document review have joined data entry and call center jobs as routinized work that can be done by smart people living in many countries.  What can you do about your potential obsolescence?

Keep up your skills.  Maintain and upgrade your professional skills.  People capable of cutting edge work will often have an advantage over foreign competition and robots.

Be flexible.  Keep an open mind about working in new and different jobs.  Many people have succeeded in fields they didn't plan on entering.  But they were open minded about learning new things and taking on new challenges.  The economy will keep changing, and success can follow if you change with it.  If you're unemployed, be open to taking temporary and part-time work in order to prevent your personal finances from eroding faster than necessary.

Computers and computer science.  Much of the reason for personal obsolescence is computerization.  Computers and related technologies (most importantly, the Internet) make it possible for workers overseas and robots to compete against American workers.  Don't get angry about this because computerization will continue--and most likely at an accelerating pace.  If you can't beat them, join them.  Acquire and maintain computer skills.  Go into a computer-related field.  Become a programmer, technician, data management engineer or something else computer-related that fits your skills.  Computers won't become obsolete, and people who can work with them have a better chance of staying employable.

Build your benefits.  Work as long as possible to build Social Security credits.  If you have the potential to earn a pension, stay in that job long enough to qualify.  Having a stream of payments that doesn't depend on your employability is a major victory over obsolescence.

Save.  Here's an ugly truth:  just as the wages and salaries of the middle class have fallen due to globalization and other reasons, the returns on capital have improved.  People who hold capital are becoming comparatively better off, while people who work are on average becoming comparatively worse off.  Save. Acquire capital and improve your chances for a comfortable life.  Then save some more.  Whatever your views on social issues like the distribution of income and wealth, you are individually better off with a pool of savings to protect you from the riptides of a free enterprise economy.

Is the Federal Reserve Wrecking Retirement?

We're now in the 7th year of Federal Reserve induced ultra low interest rates.  The Fed has kept short term rates at zero (actually negative, once you take inflation into account) through monetary policy.  Long term rates fell as well, especially after the Fed devoted years to quantitative easing (i.e., purchasing bonds in the open market).  Those people old-fashioned enough to actually save money have been bedeviled by the near-absence of interest income.  While some have been desperate enough to gamble with risky investments like junk bonds in order to generate more income, many and perhaps most have simply tightened their belts and spent less.  After all, if you're not getting any interest income, the last thing you want to do is spend down your principal.  That's like eating the seed corn--there will be no more harvests once the seed corn is gone.

Insidiously, the years-long pandemic of low long term interest rates has undermined retirements.  Pension funds, insurance companies and other persons and entities trying to provide for America's retirees have historically depended on long term bonds to provide a stable source of predictable income.  Pensions funds, insurance companies offering annuities, and other providers of retirement income tend to have relatively predictable obligations (i.e., the payouts they must make to current and future retirees), and look for predictable sources of funding to ensure that they can meet their obligations.  U.S. Treasury securities, agency bonds and high quality corporates were the bread and butter of retirement funding.  But these same stable long term investments have since the 2008 financial crisis been paying lower and lower interest rates. It's getting harder and harder to finance defined benefits.  While pension funds, insurance companies, municipalities and the like have sometimes turned to stocks and alternative investments, the volatility of these alternatives makes them a poor substitute for the plain vanilla fixed-rate, meat-and-potatoes high quality bond.

Of course, pension providers could contribute more funding to pension plans to make up for the shortfall in interest income.  But how many corporations, states and municipalities do you see leading the charge to put extra profits or taxpayer dollars into pension plans?  Many seem to be looking for spots on the increasing crowded sides of the road to dump current and future pensioners.

Corporations have curtailed and terminated defined benefit pension plans.  States and municipalities are in the process of doing the same.  Multi-employer pension plans are going belly up like fish in a toxic waste spill.  Soon, almost all of America's workers will be left with largely self-funded defined-contribution retirement plans, like the 401(k), or with self-funded retirements using IRAs.  Experience teaches that self-funded retirements are usually not as stable or comfortable as retirements funded with defined benefit pensions.  And that's just for the 40% of Americans who have any retirement savings at all.  As for the 60% who have none (as in zero, zilch, nada), the opulence of life on Social Security beckons. 

To be sure, Fed policy isn't the only reason why interest rates are low.  Economic and political instability in many other parts of the world are driving capital into safe dollar-denominated investments.  Low inflation tends to keep interest rates low.  But the Fed, as the single most powerful force in the money markets, has played a crucial role in eradicating high long term rates.

While Wall Street, corporate America, the 1% and many of the unemployed have benefited to varying degrees from the Fed's suppression of positive interest rates, there is, as economics teaches, no free lunch. There are costs to persistently low interest rates, and much of the cost has fallen on those middle and modest income workers who have or hoped for a defined benefit retirement.  Okay, so we already know the wealthy enjoy a heads-we-win, tails-those-little-people-lose advantage.  But we shouldn't buy into the Fed's story that it's creating stability to prevent a Great Depression.  What the Fed has done is transfer losses and instability that could have manifested themselves in another Great Depression, to many of America's current and future retirees, whose golden years may now be more unpredictable and depressed than they had hoped. 

How To Reduce Volatility in Your Retirement Income

The S&P 500 has dropped three days in a row, and after all the market calm of recent months, many investors must be thinking that the apocalypse looms.  There are understandable explanations for the recent downdrafts.  Islamic radicals of the Sunni variety have rapidly seized several towns and cities in Iraq, along with American weapons and vehicles provided to the Iraqi government (and the administration worries about giving small arms to moderate Syrian rebels?).  Iranian paramilitary troops, who are Shiites, supposedly are fighting alongside Iraqi government troops to retake territory seized by the Sunni radicals. Is Iran now a more important ally of the Iraqi government than the U.S.?

Russian tanks have reportedly rolled into Ukraine, where the fighting is escalating.  Bashir Assad is winning in Syria, and the moderate rebels that the U.S. supports seem to be almost inconsequential.  Most of East Asia is squabbling over this island or that, with contending nations issuing many a proclamation declaiming a neighbor as a ratfink, a double ratfink or even a triple ratfink. 

Domestic politics also create uncertainty for the markets.  Eric Cantor, House Majority Leader, was just defenestrated in a primary election by a guy from far right field whose name, even if we mentioned it now, you probably wouldn't recognize.  (But we're going to, because it's Dave Brat, a marvelously fitting name for a guy who ousted the Majority Leader.)  Cantor, who outspent his opponent's six-figure campaign by $5 million, convincingly proved that money isn't everything.  Not even in politics.  The Koch brothers must be scratching their heads about what checks to write next.

The markets will always be plagued by volatility.  And it tends to pop up when you least expect it.  That might be inherent in the definition of volatility, but you know what we mean.  Yogurt happens, but you don't want your retirement finances smeared with yogurt.  While there are no complete protections against the ups and downs of life, here are a few ideas for calming the financial waves.

Build Up Social Security Benefits.  Disregard the hyperbole.  Social Security will be there when you retire.  Maybe not exactly as it is now, but nevertheless in a meaningful form.  Any politician who votes to eliminate or sharply reduce Social Security retirement benefits will end up doing an Eric Cantor faster than Eric Cantor as voters reject the idea that they should have to eat dog food in their old age.  Work as long as you can to build up your benefits.

Get a Pension.  If you're lucky enough to get a pension, stick out it long enough in that job to qualify.  Although classic defined benefits pensions are usually found these days only alongside the remains of diplodocus, lasso one if you can.  Other pension arrangements, like cash balance plans, are a lot better than no pension. 

Save More.  Saving more is a salve for portfolio instability and financial insecurity.  Those that have the saving jones won't have to get loans.

Use Retirement Accounts.  Retirement accounts like 401(k)s, IRAs and so on offer tax advantages that let you leverage your retirement savings, while limiting your ability to prematurely spend your savings.  A particular advantage to a 401(k) account comes if your employer provides a matching contribution, which is the freest money most people can get.  Use these accounts as much as you can.

Diversity Your Investments.  The values of all assets wax and wane.  But they usually don't wax and wane in unison.  More commonly, some assets get yeasty while others do the fallen souffle thing.  And vice versa.  So a diversified portfolio is usually kind to your antacid budget.  There are moments, like the 2008-09 financial crisis, when it seems like almost all assets belly flop.  But these cognitively dissonant interludes are the exception and not the rule. 

Consider an Annuity.  A fixed annuity (one that pays a specified dollar amount per month) or a fixed annuity adjusted for inflation can be a reasonable way to provide a steady income.  Annuities aren't cheap, and you should buy only from an insurance company with a strong credit rating. Don't put more than about one-third to one-half of your portfolio into an annuity because cash needs in old age can be unpredictable and it helps to have a nice pool of cash or cash equivalents.  Be very cautious about variable annuities--they often have high expenses, and the point here is to reduce volatility, not subject yourself to it in another form. 

Health Insurance and Long Term Care Insurance.  Financial volatility can sometimes come from sudden increases in expenses, and not just decreases in portfolio values.  Health care and long term care needs are the biggest landmines in the journey through retirement.  Most retirees are covered by Medicare, but if you're not, then buy something else.  The Affordable Care Act, despite all the teeth-gnashing on the right, is likely to be a good option if you don't have anything else.  If you have a significant net worth, consider buying long term care insurance, especially if you have a spouse who may depend on that net worth after you've gone to the great Dance Party in the sky.  It's expensive, but so is long term care.  If you want more than the quality of care given to Medicaid patients, long term care insurance may be a good choice.

Part-time Work.  Okay, you want to hear about retirement, not employment.  But part-time employment reduces the extent you need to draw down your savings, so you can keep more powder dry for later.  It also lessens your risk of dying from the boredom of day time TV.  It may boost your Social Security benefits (depending on your work history).  And the dignity of work is better than the indignity of looking for sales on dog food.

From the Fed: Short Term Gain, Long Term Pain

As the Fed's ultra low interest rate policies grind on for a fifth year, we can see ever more clearly that there is no such thing as a free lunch, even when it comes to central bank policies.  The benefits of the Fed's low interest rate policies were easy to see at first:  cheap credit, stimulus to housing, a boost to the economy.  The costs didn't seem so great. 

However, by persistently favoring borrowers and heaping mulch on income-seeking investors for five years, the long term costs of the Fed's policies are emerging--and painfully so.  Detroit is in bankruptcy, and other cities teeter on the brink. Corporate defined benefit pension plans are becoming less common than the ivory-billed woodpecker. It's no wonder why.  Pension funds rely on safe long term investments that provide solid returns.  U.S. Treasury notes and bonds used to be crucially important components of pension fund portfolios.  AAA-rated corporates, which would have to pay slightly better than Treasuries, also were favored investments.  But pension plan returns came under stress as the returns on these low-risk investments nosedived.  And pension fund deficiencies, calculated on the basis of long term returns, balloon when returns fall.  Plan sponsors have to increase contributions--sometimes enormously--to keep the plans solvent.  Corporate executives intent on making the big score with their stock options see little upside to signing off on these contributions.  Shrinking cities like Detroit have little ability to make them.  Something has to give, and pensioners seem to be doing a lot of giving these days.  Detroit's problems go well beyond low long term interest rates.  But the city really didn't need the Fed to push it closer to the abyss. 

Neither did a lot of corporate employees whose retirements are less secure after losing their defined benefit pensions or seeing the plans capped.  Most people aren't skilled at managing their finances.  When fewer have defined benefit pensions, more are likely to end up with just Social Security, even if they start retirement with good-sized 401(k) account balances.  When people have fewer or no private resources, cutting benefits from the government becomes political anathema. 

Low interest rates hurt older folks in other ways.  As income from their interest-bearing investments dries up, fear drives them to become serial economizers.  That's a hard habit to break even after rates rise again (assuming they do).  Consumption may be impaired for a long time.  In addition, long term care insurance is getting scarce and expensive.  While poorly conceived estimates by insurers of the cost of care have much to do with that, the inability of insurers to obtain decent, safe returns on investments has added to the problem.  Fewer people are able to afford such policies.  So we have a ticking demographic time bomb, with lots of uninsured elderly likely to need Medicaid in a decade or two or three instead of being able to rely on their own resources.  Low interest rates are beneficial to the federal government's borrowing costs right now, keeping the budget deficit lower.  But positioning a lot of people to need Medicaid in decades to come means we'll have pressure toward an increased deficit in the long term.

 The Fed is taking a page from corporate America:  focus on short term returns at the risk of increasing long term costs.  The great corporate success stories don't follow this plot line.  But there's not much chance the narrative will change.  The Fed's easy money merry-go-round keeps the stock market buoyant.  With mid-term Congressional elections coming up next year, the Obama administration needs to keep the market feeling chipper.  Ultimately, everything in Washington happens for political reasons.  And politics dictates that Janet Yellen, a monetary dove, will be Obama's nominee as the next Chairman of the Fed.

Costs of Quantitative Easing

The law of unintended consequences haunts economic policy.  The Federal Reserve's quantitative easing program, now in its third phase, is meant to provide economic stimulus.  However, it also drags on the economy.  Let us count the ways.

Reduced Interest Income.  Hundreds of billions of dollars of interest income have been lost because of the Fed's longstanding campaign to drive down borrowing costs.  Losses of this magnitude undoubtedly have dampened consumer demand.  Even though QE likely sprung loose some personal income by providing lower mortgage rates for homeowners to refinance, tight standards applied by banks making mortgage loans have limited the refi impact of lower rates.

Reduced Retirement Savings.  As bond yields shrivel up like corn in today's drought-ridden Midwest, many retirements look bleaker.  Even though the stock market has boomed, large numbers of shell-shocked savers abandoned stocks after the 2008-09 market crash and haven't participated in the gains.  Instead, they ducked into bonds.  Although the improbable bond rally of the past few years generated capital gains for many bond holders, the basic return sought by bond investors comes from interest paid.  That has been paltry.  As retirements look bleaker, many workers cut back on current consumption in order to save more.

Pension Pain.  Despite appearances from some recent press coverage, pension funds cannot take large risks, overall, with their portfolios.  However much publicity pensions' alternative investments may generate, a large part of pension assets must be invested in high quality bonds.  As returns on these puppies shrink, employers corporate and municipal confront the necessity for greater contributions.  Workers may be laid off, citizens may receive fewer public services, state and local taxes may be raised, shareholders may endure lower returns, and those workers still employed may have to make greater pension contributions.  All of which would further discourage current consumption.

Insurers Backpedal.  Insurance companies' returns on their investments are falling.  This means policies that depend on long term returns, such as annuities and long term care policies, become more expensive or even impossible to buy.  Or else, they offer fewer benefits.  Policy holders suffer.  Those people who want to provide for themselves, through long term care policies, annuities, whole life and similar products, have a harder time.  More people end up having to rely on government programs like Social Security, Medicaid and so on.  That's not good in an age of serious federal deficits.

Yield Curve Flattens Bank Incentive to Lend.  Back in the days when they made loans, banks would borrow short term (usually through demand deposits, interbank loans via the fed funds market, and savings accounts) and lend longer term.  The difference between short term interest rates (historically lower) and longer term interest rates (historically higher) provided profits for the banks.  But the yield curve (the graph of interest rates from short to long) has been flattened by the Fed's monetary policies.  There isn't that much difference any more between short and long term rates.  Potential profitability for banks has been squeezed.  Banks have less incentive to lend, and fewer loans means less potential for economic growth.

The Fed has sworn on a stack of printed money to keep short term rates darn near invisible until at least mid-2015.  It may achieve some of its objectives.  But it will also create unintended consequences.  The impact of these opposite reactions to the Fed's actions may be greater than the central bank foresees.  There are few real life experiments in economics.  But if we look at the most obvious example of the impact of a central bank squashing interest rates for years at a time, we can see that Japan has remained moribund for two decades since its financial and real estate crashes in the early 1990s.  The Bank of Japan has ruthlessly stamped out any positive upswings of interest rates in that nation.  But that hasn't produced the spark needed to revive Japan's economy.

It now looks like the Fed will keep rates unnaturally low for the better part of a decade.  Given Japan's experience, one wonders what is in the Fed's playbook.  If it's a sensible fiscal program from Congress and the White House, the next question would be what is the Fed smoking?  But if the Fed is acting on the reasonable assumption that we will have fiscal dysfunction for the foreseeable future, only the arrival of Godot, it would seem, would offer reason for optimism.

How Statistics Can Lower Your Standard of Living

What you don't know can hurt you.

Nothing glazes over as many eyes as economic statistics. And with good reason, since most of them, even if accurate (a big assumption) don't mean much of anything by themselves. At best, even the most important economic statistics are meaningful only when considered in light of numerous other statistics and the big picture revealed thereby.

But there are a few statistics that really matter: the ones used to figure out how much we are paid and taxed. The ongoing debate over Social Security and tax reform revolves around three of them. Pay attention, because money talks and these statistics are talking loudly.

Social Security benefits and federal pension payments are adjusted by an inflation index called the CPI-W, or the Consumer Price Index for Urban Wage Earners and Clerical Workers. Federal income tax brackets are adjusted by the the CPI-U, or the Consumer Price index for All Urban Consumers. The CPI-W and CPI-U are not identical. But they both gather information about the prices and amounts of goods and services people buy, put the information in a giant mixing bowl, swirl things around vigorously, dump the contents in a large blender, and churn out a value that reflects a composite price value, weighted by the relative amounts of goods and services people buy. Changes in prices over time increase or decrease (usually increase) the value of the composite. These changes are treated as the measured inflation rate. The CPI-W and CPI-U also take account of changing consumption patterns of consumers--i.e., as consumers buy less iceberg lettuce and more arugula (or vice versa, which may be the case in times of recession), the weights assigned to the prices of iceberg versus arugula are adjusted. These adjustments are made once every few years.

The debt ceiling/budget deficit debate has included a proposal to use the Personal Consumption Expenditures Index (or Chained CPI) in place of the CPI-W and CPI-U as the measure of inflation for adjusting Social Security, federal pensions and tax brackets. The Chained CPI takes account of substitution of goods as prices rise. For example, if the price of beef rises, consumers may eat less beef and more chicken, thus lowering their overall spending on meat. The Chained CPI doesn't increase as much as the CPI-W and CPI-U because overall meat expenditures don't rise as fast when chicken is substituted for beef. If consumers substitute beans for beef and chicken, then the Chained CPI would rise even less. The Chained CPI may, over time, rise about one-third more slowly than the CPI-W or the CPI-U. (Actually, the CPI-W and CPI-U also incorporate the substitution effect but reflect those changes only once every few years, while the Chained CPI accounts for the substitution effect much more quickly.)

Using the Chained CPI, instead of the CPI-W, to increase various federal payments will be less costly to the federal government. But that's only part of the story. The Chained CPI, as an index for increasing Social Security and pension payments, punishes people for economizing, because it treats substitution solely as a matter of price, without taking account of the loss of perceived quality. Given a more miserly inflation adjustment, people might economize some more, only to be further punished through next year's use of the Chained CPI to get a lower inflation adjustment. That in turn would continue the cycle of skimping, followed by punishment, followed by more skimping, resulting in more punishment, until people are eating sawdust instead of bread. At a time when we need to sustain and support consumer spending in order to have a foundation for economic recovery, using the Chained CPI lessens the potential for recovery.

The use of the CPI-W as an index for adjusting payments to retirees has been criticized for not fully reflecting the rising costs of health care, which are more burdensome for retirees than younger, healthier people. But the Chained CPI would only make things worse, and if people turn to alternative medicine because they can't afford mainstream care, their cost of living adjustments will be further limited by the Chained CPI. Witch doctors will rejoice.

As if retirees and other Americans receiving Social Security haven't been penalized enough, look at what happens when the Chained CPI is applied to the tax code. By law, the CPI-U is applied to increase the level at which higher tax rates are imposed. In other words, the more inflation there is, the lighter taxes become at a given income level because inflation has effectively lowered the value of that amount of income.

The inflation adjustment was enacted in the 1980s as a matter of fairness and to take away an incentive for the federal government to inflate the dollar, slyly obtaining tax increases without legislating them. If the Chained CPI is substituted for the CPI-U, the effect will be to weaken that policy by raising tax brackets less quickly when there's inflation. The Chained CPI would, in effect, to raise taxes from what current law provides. That, in turn, would squeeze consumers, forcing them to cut back on their standard of living.

The combined effect of substituting the Chained CPI for the CPI-W and CPI-U would be that retirees and others receiving federal payments would be hammered harder by inflation, and their taxes would increase in real terms to reward them for having to live with lower standards of living. As they tried to cope with their reduced circumstances, their inflation adjustments would be even less, while their taxes would effectively rise some more. Catch-22, only this isn't fiction. Even if you're not receiving Social Security yet, don't think this doesn't affect you. Your taxes will be higher than otherwise because the brackets will adjust slower.

The Chained CPI provides useful information to economists and others trying to understand consumer behavior. But if it becomes the legal basis for deciding how much the government pays to retirees and other people (recall that many receiving Social Security are disabled), and also for how much government will tax its citizens, then it may end up automatically lowering standards of living. Why this beggar the citizens policy in a time of economic stagnation is a good idea hasn't been explained. Yes, it would tend to reduce the federal deficit, but only by making the electorate poorer.

The times are beginning to hark back to the pinched, self-flagellating malaise of the late 1970s, when it seemed we could do little about OPEC oil price hikes except turn down the heat and wear sweaters. The Chained CPI proposal takes advantage of the unfamiliarity of most citizens with the complexities of economic statistics. It would lower standards of living for tens of millions of Americans while raising taxes on all, and encourages the federal government to foster inflation. Why is this a good thing? The federal deficit needs to be addressed. But surreptitiously eroding the prosperity of citizens, most of whom aren't prosperous anyway, is the wrong approach.

How to Avoid Running Out of Money in Retirement

The fear of running out of money may be the biggest financial dilemma for most retirees. There's no perfect solution to the problem. But plenty of people have long, enjoyable retirements and leave something behind for their heirs. So the problem isn't insurmountable. Here are some ideas.

Build up your Social Security and pension credits. Whatever Congress and the President do to reform Social Security, they won't abolish it. It will be there in one form or another when you retire. Working as long as possible to maximize your benefits ensures a lifelong stream of inflation-adjusted payments. While Social Security won't cover more than the basics, life is easier when you have the basics covered. If you're fortunate enough to have a pension, work as long as you can to boost your pension payments. Working longer, although not as much fun as shuffleboard, is one of the best ways to make sure you're as well prepared as possible for retirement.

Save. The more you save, in retirement accounts or otherwise, the better off you will be in retirement. Non-savers, by definition, have already run out of money, and poor savers will quickly fall into the abyss. It's important to have a pool of cash available for big expenses like assisted living and other medical bills. If all you have are comparatively small streams of payments like Social Security and perhaps a pension, and you need to go into assisted living, you'll have effectively run out of money even though you're still getting a monthly income.

Pay down debts. Ideally, you should have no mortgage and little or no other debt by the time you retire. Debt, and its accompanying interest expenses, are negative savings. Some financial advisers will conjure up scenarios where you supposedly might be better off with a mortgage or some other debt. But debt involves risk, and the recent financial crisis and Great Recession amply demonstrate that risk can easily lead to losses. Financial stability is very important for a comfortable retirement, and debt destabilizes.

Invest conservatively. The older you get, the less time you have to recover from investment losses. Keeping some money in assets with potential for appreciation, like stocks, is a good idea because of long term risks of inflation. But be cautious about investing in stocks and other volatile assets. Perhaps a third of your portfolio might prudently be kept in stocks. As you get older, that proportion should shrink so that you don't get walloped by the stock market when you're 83.

Consider an annuity. It's easier to establish a budget if you have a predictable monthly income. An immediate annuity can provide either a fixed monthly payment or one that rises with inflation. (The latter is costlier, but you get additional peace of mind.) Annuities are issued by insurance companies, and they can go bankrupt. If you want the benefits of an annuity, consider buying two, each for half the amount you want to invest, from different insurance companies. Both should have solid credit ratings. With two different insurers, you diversify your risks.

Be cautious with variable annuities. They tend to have high expenses and varying (as the name indicates) payments. That uncertainty of payments may, for some, defeat the purpose of an annuity.

Note that annuities lock up the capital you invest in them, meaning you can't get access to it. All you can get are the payments. You'll almost surely need some liquid assets during retirement, for medical expenses and large items like cars. Never spend more than half your savings on annuities. Indeed, given the limitations of annuities, spend only the minimum amount needed to give you the peace of mind you're trying to secure.

Think about long term care insurance. Although increasingly expensive, long term care insurance gives you hundreds of thousands of dollars of buying power if you have to go into assisted living or have other major similar needs. Long term care insurance helps to preserve your savings (which may be important if you have a spouse or partner whose financial security you wish to protect). In addition, if you want to avoid a nursing home that accepts Medicaid patients--some feel that such nursing homes provide lower quality services--long term care insurance could be essential to affording a more exclusive facility.

Work part-time. Okay, working isn't exactly what you had in mind for retirement. But it allows you to spend less of your savings while you're able to work. If and when you reach the point where you can't work, you'll be glad you worked as long as you did.

Hope For the Financially Lost

Financial plans can be blown up because of job loss, illness, elderly parents who need support, or bad investments. Some people simply can't save. Whatever the situation, there remains hope for the financially lost to have at least a decent retirement.

Boost your benefits. Work as long as possible to build up Social Security and, if available, pension benefits. This is especially important for those that can't save. Even if you aren't working, delay taking Social Security benefits as long as you can (unless you're 70 or older). Delaying Social Security increases benefits. For more, see http://blogger.uncleleosden.com/2007/05/mysteries-of-social-security-retirement_02.html.

Stay together. Couples generally are better off than singles, because they can pool their resources. Even if their only resources are Social Security benefits, a couple are usually better off together than individually. Of course, togetherness isn't always possible. When it is, there are financial, as well as other, benefits. For more, see http://blogger.uncleleosden.com/2007/05/mysteries-of-social-security-retirement_03.html.

Get a job with a pension. Government, law enforcement, military and educational jobs usually offer a pension or other retirement plan. Although pension benefits in many state and municipal jobs are being adjusted to meet fiscal realities, they will still be better than nothing. Not everyone is cut out for these lines of work. If you find a private sector job with a pension, then try to stay there long enough to accrue meaningful benefits. For those who can't save, a pension is golden. You just have to work long enough to vest; saving isn't necessary. If you need assistance figuring out if the amount of pension benefits your employer promises is correct, contact the American Academy of Actuaries at http://www.actuary.org/palprogram.asp. They'll give you up to four hours of free help. If you think your benefits are too low, contact a regional pension counseling project for free assistance. http://www.pensionrights.org/counseling-projects.

Buy a house and pay off the mortgage. Buy a house, pay off the mortgage, and don't borrow against the house until you retire. This strategy will build equity in a piece of real estate that you can add to your Social Security benefits (and pension benefits, if any). Even though strategic defaults have become fashionable, the unfashionable may have an advantage in the long run.

None of these strategies will finance a yacht. Remember that it's never too late to save, even if you're living on just Social Security. Cash is sublime when times are tough.

Year End Financial Checkup

Before you become too friendly with the nearest bowl of eggnog, give your finances a quick year end checkup. That way, you can roll into the new year hungover, perhaps, but with some idea of where you are financially and where you want to go. Admittedly, money issues bring less cheer than the bubbly stuff that makes the cork pop. Ignoring one's finances, though, won't lead to wealth.

A lot of year end financial advice focuses on tax planning or prognostications for next year. Like many things, though, a solid foundation in financial basics is more important than doing some transactions that invite an IRS audit or believing in the latest self-appointed soothsayer. Get the basics right and other things become easier.

Calculate your net worth. This is the where sound financial planning begins. If you don't know where you stand, you can't tell if you're making progress (or losing ground). If things are going well, you can give yourself a pat on the back. If not, save more and perhaps change what you're doing. Calculate your net worth every three months. For more, see http://blogger.uncleleosden.com/2007/04/secret-to-building-wealth.html.

Ensure adequate cash reserves. Make sure you have at least six months worth of living expenses set aside in an emergency cash fund that you never tap except during a crisis. Better yet, considering today's continuing albeit not-officially-recognized recession, have nine or twelve months of living expenses set aside. Unemployment remains a serious problem. Even though high ranking government officials are quick to tout even a tiny smidgen of improvement in employment levels, lots of people are still being laid off. Thrifty squirrels are the ones that survive winter.

Review portfolio diversification. Your portfolio's asset allocation may have changed as a result of market shifts. Most recently, bonds have been falling (contrary to every effort of the Federal Reserve to push them higher), while stocks have been rising. Consider whether you should adjust your allocations.

You may have different asset allocations for different pools of assets. The way you diversify a college fund for your kid(s) could be different from the ideal asset allocation for retirement savings. Keep these differences in mind.

Go over your benefits. Make sure you understand where you stand with Social Security and, if you have a pension, with your pension benefits. Maybe you don't believe either will be around by the time you retire. Well, people thought the same thing 30 and 40 years ago, and they're now retiring with Social Security and, sometimes, pension benefits. Figure out how to maximize your benefits. Then, maximize them as much as possible.

Review privacy. The Internet, by all indications, is becoming less private by the day. In an implicit but sharp rebuke to the private sector for its failure to display even a modicum of propriety, U.S. government regulators are now talking about setting federal standards for online privacy. Think about limiting your use of the Internet for financial matters (this includes banking, stock trading, online shopping and other online use of credit cards, debit cards, bank account numbers, and other financial transactions). The less often you do financial transactions on the Internet, the fewer opportunities you give bad guys to steal your money and/or identity. The Internet is unquestionably a convenience, but being robbed by cybercrooks can be highly inconvenient. If you must do transactions online, use the best security measures available.

A report in this weekend's Wall Street Journal (P. C1) indicates that smart phones (like the iPhone and Android) may be significantly less secure than computers. Apparently, some apps may sneak off with your name and other highly personal information without telling you or getting your permission. Avoid doing financial transactions on a smart phone, at least until security is greatly improved. If you must do financial transactions on your smart phone, check account balances and activity often. This means at least weekly and perhaps even daily for your bank accounts, credit card accounts and whatever accounts you use through your smart phone.

A cyberthief can make off with savings you took years to accumulate. Protect yourself.

Think about saving more. One of the best protections you have against an uncertain future is a nice, warm, fuzzy and large pool of savings. The more you save, the sooner you'll be able to retire and the nicer your retirement lifestyle will be. See http://blogger.uncleleosden.com/2009/07/simplest-financial-plan-of-all.html and http://blogger.uncleleosden.com/2009/11/techniques-for-retirement-saving.html.

The Cash Balance Pension: a Retirement Plan for the Future?

It's hardly a secret that retirement plans and retirement planning are a mess. Traditional defined benefit pensions can be costly to fund properly and all too often have proven to be underfunded. Employers battered by the recession sometimes abandon their plans, leaving beneficiaries with only the payments guaranteed by the federal Pension Benefit Guaranty Corp. These plans are going the way of the dinosaurs.

Newer defined contribution plans like 401(k)s are much less risky for employers. But the risks are dumped on beneficiaries, who are at the mercy of high expenses, Wall Street induced economic crises, flash crashes and other financial market volatility, and limited numbers of often unattractive investment options. It's almost impossible to predict the benefits one will receive from a defined contribution plan, and funding an account is more an act of faith than planning for retirement. The average defined contribution plan account is worth somewhere near $70,000. When you think about it, that's a lot of money to put in a black hole.

Both employers and employees want something better. Oddly, a runt of the retirement planning litter called the cash balance pension may provide an answer. It's an amalgam of not entirely attractive features. But it may prove workable in an uncertain world.

The cash balance plan annually credits a dollar value to each employee's account. The amount credited is usually a percentage of the employee's compensation. The accumulated balance in each employee's account is paid interest (at a fixed or variable rate, as specified by the plan), which is compounded annually. Employee accounts gain value over time from annual credits and the compounding of interest. Upon retirement, the employee generally has a choice between receiving the account value as a lump sum, or using it to buy an annuity (which would provide monthly payments). If an employee leaves the employer before retiring, he or she retains the accrued value of his or her cash balance account and can remove the money from account.

The cash balance plan is a compromise. The employer guarantees the growth of account balances up to the point of retirement or termination of employment. Then, the employee is responsible for deciding what to do with the account after retirement: either withdraw a lump sum and personally invest it at market risk, or take an annuity that provides monthly payments. The employer can fund the annuity through a contract with an insurance company, largely relieving the employer of the burdens of guaranteeing years and perhaps decades of retirement benefits. (However, the employer remains legally liable for the annuity payments and bears the risk of the creditworthiness of the insurance company.) Cash balance pensions are guaranteed by the Pension Benefit Guaranty Corp., so there is federal backing for employees' benefits.

The advantage to employees is that the employer takes on the costs and risks of funding the cash balance plan until the employee retires. The formulaic nature of the cash balance plan makes it easier for employees to predict how much they'll have upon reaching retirement age, and thereby facilitates financial planning. Employers benefit from the same predictability, making it easier to fund and manage the plan. Small businesses also get large tax deductions from cash balance plans.

Are cash balance plans a win-win? Not necessarily. They have a poor reputation stemming from litigation over early iterations of these plans, when employers converted from traditional defined benefit pensions to cash balance plans in ways that left longtime employees feeling shafted. Some cash balance plans have been attacked in court for alleged unlawful discrimination against older workers. Because cash balance plans can be structured to give older employees lower benefits than traditional defined benefit plans, they are disfavored by many workers.

But pension plans are voluntary, and an employer doesn't need to offer any kind of pension. Many don't, substituting 401(k) plans and all the risks they present to workers. Other employers offer nothing, leaving employees to limited self-help measures such as IRAs. A cash balance plan has the somewhat dissatisfying quality of a compromise. But it offers a degree of certainty and predictability to both employers and employees. Many employers want to offer pensions plans as a means of recruiting and retaining employees, yet don't want the burdens of traditional defined benefit pensions. The cash balance plan may be a way for employers to have such a recruiting tool, and for employees to predictably accumulate retirement benefits in amounts they'd never save on their own.

Techniques for Retirement Saving

Technique matters a lot in tennis, golf, basketball and a host of other sports and activities. It also matters to investors. If a middle income American approaches investing--especially long term retirement saving--the right way, he or she can be hundreds of thousands of dollars better off when receiving the retirement watch, than someone's whose technique is poor. Here are a few basic pointers that can take you a long way.

Calculate your net worth regularly. Keeping score is essential. You have to know if you're making progress. You'll need to know when you're not making progress or losing ground, so you can take action to turn the tide. Knowledge can be painful in times of market downturns, but avoiding reality won't improve your retirement finances. You may or may not have a fixed saving goal. Having a goal is good, but not essential. See http://blogger.uncleleosden.com/2007/04/goals-for-retirement-saving-and-why.html. But it's essential to know where you stand. That knowledge alone will keep you focused on building wealth for the future. Calculate your net worth at least every three months. See http://blogger.uncleleosden.com/2007/04/secret-to-building-wealth.html.

Automate the saving process and use retirement accounts. Participate in any 401(k) or equivalent retirement plan your employer may offer. Maximize the amount you contribute. Some people think you might want to contribute only enough to get an employer match and then contribute to a Roth IRA; this isn't a bad idea but you have to be conscientious about the Roth contributions because they aren't necessarily automatic (read on for the solution to this problem). If you don't have access to an employer sponsored plan, open an IRA--or a Roth IRA if you think your future tax rates will be higher than today's--and arrange with your bank to have funds transferred every month (or every two weeks if you are paid on a biweekly basis) to the IRA. It's a good idea to use retirement accounts like 401(k)s and IRAs because they are separate from your regular bank and securities accounts, and the money in them is harder to spend before retirement. For more information, see http://blogger.uncleleosden.com/2007/04/automate-to-accumulate.html.

Average returns take you to Lake Wobegon. Money managers (such as those at actively managed mutual funds) usually don't perform as well as market averages like the S&P 500. There are a number of reasons for this, including their higher trading costs and their compensation. But the bottom line is you are likely to end up with less. Focus on long term gains. Stick with index funds and other low cost investments. If you aim to get the market average for a return, you'll probably end up doing better than average. For more, see http://blogger.uncleleosden.com/2007/06/why-average-investor-does-well.html.

Keep it simple. Investing is, among other things, a sales transaction. A financial firm is the seller and you're the buyer. Complexity favors sellers and places you at a disadvantage. The seller will naturally know more about the product than you will. The law requires that sellers of financial products make a variety of disclosures to buyers. But even if those disclosures are made, the seller will probably still have a better understanding of the product than you will. So you may have trouble figuring out if the product is truly to your advantage. The complexity of some annuities and other insurance products, and some leveraged ETFs, is so great as to make them virtually opaque. Investing in opacity isn't a good idea. Complex products also tend to have higher costs, which negatively impact investor returns. Stick to index funds, and maybe some individual stocks and bonds. Plain old bank CDs aren't bad when the markets seem turbulent. If you don't understand a financial product, avoid it.

The easiest budget of all--save a good percentage of your income (especially if you're self-employed). Budgeting sucks and it seems like every month something comes up that you didn't anticipate. Then, there are the "discussions" with your significant other about how much should be allocated to what expenses, and also last week's rampage off the budget. If you want a simple way to budget, don't focus on how much you spend, but instead on how much you save. Target a good-sized percentage of your monthly income (10% is good, 15% is much better, and 20% is a home run), and make sure that come hell or high water you save at least that much. If replacing your car's exhaust system one month prevents you from hitting your goal, then add enough more the next month or two so that you backfill the deficit. The percentage-of-income-saved method allows you to avoid a lot of handwringing over lattes or not, and inter-spousal sniping, while meeting retirement goals. If you can consistently save 15% to 20% of your earnings over the course of a 30 to 40 year career, you could end up with enough to pretty much maintain your pre-retirement lifestyle during your golden years. If you're self-employed and have an uneven income, it's particularly important to save a good-sized percentage of your income because you can't easily automate the saving process. For more, see http://blogger.uncleleosden.com/2009/07/simplest-financial-plan-of-all.html.

Build your benefits. Even though private sector employers are abandoning pensions faster than New York high society abandoned Bernie and Ruth Madoff, just about everyone has the equivalent of a pension through the Social Security system. Although much maligned and stereotyped, Social Security is the port in the storm for tens of millions of Americans. The longer you work, the greater your benefits will be. Even though the level of Social Security benefits is subject to the whim and caprice of Congress, the tenure of members of Congress is subject to the whim and caprice of voters (including most of the tens of millions of Social Securities recipients). Whatever Congress may do in the future about Social Security benefits, it won't destroy the system and you'll be better off by working longer. If you're fortunate enough to have access to a pension, work as long as you can to boost your benefits. You'll sleep better, without having to buy a new mattress, if you can count on the automatic deposit of a monthly check. For more, see http://blogger.uncleleosden.com/2007/05/how-to-retire-without-saving.html.

Attitude. Perhaps the most important factor, but the hardest one to control, is how you view money and saving. If you look at them the right way, you'll do fine. Understand that you have a finite stream of income during your life. If you spend your money, you can't save it. It's gone forever, and you're left with the now diminished remainder of your finite stream of lifetime income. Saving is a choice, not a sacrifice. Money saved now builds security for the future. Because your lifetime income is finite, you can economize now or economize later. Consider that eating dog food in your old age probably won't be a high point of your life. Remember that savings generate returns that can be compounded, so they may increase your finite lifetime income. Save enough, and you'll hit a financial home run by compounding. (See http://blogger.uncleleosden.com/2009/09/if-you-love-compounding-compounding.html.) This isn't about being greedy in an unseemly way or living like a pauper during your working years. It's about common sense and living within your means. If you adopt the right attitude, you'll establish control over your finances, and that will give you a very good feeling.

Unclaimed Money

(As Updated Jan. 26, 2013)

There are billions of dollars worth of unclaimed assets in America. It's important to marshal your assets, particularly as you approach retirement. If you've been careful about your finances, chances are that you have everything that you're entitled to. But there are places you can check to make sure you haven't left any money on the table. Remember that you may have money coming to you directly, or perhaps from a deceased family member through inheritance. That means you should check under your name and the deceased person's name. And if your spouse is busy unloading the dishwasher, you may want to check for him or her as well.

Old bank accounts, shares of stock, insurance policy assets and payments, annuities, uncashed checks, unredeemed money orders or gift certificates, security deposits, contents of safe deposit boxes, customer overpayments, and other financial assets must be turned over to the state of the customer's last known address, if the customer has not made any contact or engaged in any activity for a period of time (such as a year or more). You can search at www.missingmoney.com. Also, you can go to www.unclaimed.org to get more search options (this site can link you to each state's treasurer, which allows you to search individual states). If you search individual states, make sure to check all states where you, your spouse, your kids, your late parent, or your deceased wealthy uncle, aunt, grandparent, cousin, sugar daddy, sugar mommy or other potential benefactor lived, as far back as you have information.

Remember that there is a chicken and egg problem with unclaimed property. You may have forgotten to cash a check. Maybe a small bank account slipped your mind when you moved some years ago. You may not know that you're a beneficiary of a will or insurance policy. Or you may not realize that your late parent, in the forgetfulness of old age, lost a number of checks without depositing them. You can't get what you've forgotten or never knew about in the first place. States, facing severe budgetary pressure, have become aggressive about getting these assets from insurance companies, corporations, banks, and so on. While the states are looking out for themselves, the consolidation of all this unclaimed property into the hands of state treasurers gives unknowing beneficiaries and claimants centralized places to look for assets to which they may be entitled. So don't be shy about poking around. You have nothing to lose.

You can check for an unclaimed federal income tax refund at www.irs.gov. Use the "Where's My Refund" feature on the front page. State tax agencies usually provide a way to check online for the status of a refund.

If you think you may have a claim to a matured U.S. Savings Bond, check at http://www.treasuryhunt.gov/.  You might locate bonds you bought yourself but forgot, and bonds that your parents, relatives or others bought for you.

If you worked 10 years or more for an employer with a pension plan, you may have earned the right to a pension, even if you no longer work there. You can check with the employer. If it has gone out of business, its pension may have been taken over by the Pension Benefit Guaranty Corp. This is a federal agency that guarantees pension benefits up to a limit (around $49,500 for pensions with a single beneficiary). You can check at http://search.pbgc.gov/mp/ to see if you might have a pension claim. Even if your name doesn't appear in this search, you may want to find out if the pension plan is now being administered by the Pension Benefit Guaranty Corp. Search at www.pbgc.gov/workers-retirees/find-your-pension-plan/content/page676.html. There's always a chance your name is spelled differently in the government's records, so you should find out who's taken over the plan and then figure out how to establish any claim you may have. Another resource for finding or dealing with a pension plan would be a regional pension counseling project. These projects are listed by the Pension Rights Center, a nonprofit organization, at http://www.pensionrights.org/counseling-projects. You can also try the federal Employee Benefits Security Administration at 1-866-444-3272 or http://www.dol.gov/ebsa/. You can get the address and phone number of a local EBSA office where you could seek assistance. If you need help figuring out whether the amount of pension benefits your employer promises is correct, you can get four hours of free assistance from the American Academy of Actuaries. See http://www.actuary.org/palprogram.asp.

What if an old employer had a 401(k) plan, and you want to check to see if you have an account? Contact your old employer. If your old employer has gone out of business, you can search a Department of Labor website for information: www.askebsa.dol.gov/AbandonedPlanSearch.

Of course, keep track of your Social Security benefits. The Social Security Administration, in a deplorable display of exceptional penny-wise pound-foolishness, announced in early 2011 that it would no longer send out annual benefit statements. You also can no longer request a copy at www.ssa.gov/mystatement. The Social Security Administration has said that it would allow citizens Internet access to electronic statements of their accounts, although that system isn't ready yet and may not be ready until the end of 2011 or early 2012. Until then, all you can do is wait and hope they get your record right. Whenever it is that you can again check on your benefits, remember that not only do you get benefits, but your spouse and perhaps even your dependent children may get benefits. This is something we discussed earlier at blogger.uncleleosden.com/2007/05/mysteries-of-social-security-retirement_03.html. Make sure everyone in your household gets the benefits to which they're entitled.

Veterans of limited financial means may be eligible for an income supplement called the Veterans Pension. This pension supplements other income you have to bring your total income up to levels prescribed by Congress. For those who served during the Vietnam War or earlier, benefits may be available if you had at least 90 days of active service, with at least 1 day during wartime. Veterans whose active duty service began on or after Sept. 7, 1980 need at least 24 months of active service (or the full time period for which they were called up for active duty). For more information, go to the Veterans Administration website at http://www.vba.va.gov/bln/21/pension/vetpen.htm. It's very important to note that veterans eligible for a basic veterans pension, who have serious health problems and need assistance from others for personal living tasks, or who have one or more disabilities, may also be eligible for Aid and Attendance or Housebound benefits, which are paid in addition to the basic veterans pension. For a vet facing nursing home expenses, or the costs of home health care, Aid and Attendance or Housebound benefits can make a difference.

For more information about Social Security, read our May 1, 2007 blog blogger.uncleleosden.com/2007/05/mysteries-of-social-security-retirement.html, and May 2, 2007 blog, blogger.uncleleosden.com/2007/05/mysteries-of-social-security-retirement_02.html.

To avoid having your money or property go unclaimed, see http://blogger.uncleleosden.com/2008/08/how-to-avoid-having-unclaimed-property.html.

Animal News: if you're stressed out by work and want an escape, here's a soothing animal story. www.wtop.com/?nid=456&sid=1143000.

How to Retire Without Saving

Many people can't save. Sometimes it's for good reasons--illness, an aged parent who needs support, a child with special needs, or too low an income. Other times, the reasons are not so good--serial spending, reckless investing or indifference to the future. Whatever the reasons, good or bad, these people need to retire, too. How can they do it? Here are some ideas.

1. Get a job with a pension. Government jobs, military service, law enforcement and educational jobs usually offer pensions. Some of these employers also offer retirement savings accounts similar to the 401(k) plan--the federal government's Thrift Savings Plan is an example. These jobs aren't for everyone. Governments are often bureaucratic, and action-oriented people may have a hard time fitting in. Teachers sometimes find that their jobs involve as much babysitting as teaching. Military and law enforcement personnel perform yeoman's duty for everyone else, but they have to be disciplined, motivated and able to deal with a highly structured and high-pressured environment. It often takes 20 or more years to qualify for a pension, so this isn't a cakewalk. But if you think you're cut out for one of these jobs, and your retirement savings hover around zero on a good day, give it a try.

Corporate pensions continue to exist, especially at the larger, old line companies. But most corporations are fleeing the traditional defined benefit pension (the good kind) faster than rich folks left New Orleans before Katrina. New hires often are unable to participate in the older pension plans. If you have the opportunity to participate in a corporate pension plan, consider yourself lucky. But don't rely entirely on the company pension. You may be disappointed.

2. Buy a house and pay off the mortgage and all home equity debt. Many people who can't put $20 into a savings account always manage to pay the mortgage one way or another. The house can be used as a vehicle for forced savings. Just don't mess things up by taking out a home equity loan or home equity line of credit. You'll get only a finite amount of home equity in your life. If you take out home equity debt, you use up some of your finite lifetime home equity. Yes, you can repay the home equity loan, but you have to use cash that could otherwise have been devoted to retirement savings. If you enter retirement with a home that's free and clear of all liens, you'll have a valuable asset that could add much to your golden years.

3. Work longer. The longer you work, the more your Social Security payments will be. We explained how this works in our earlier blog, Mysteries of Social Security Retirement Benefits, Part 1 (blogger.uncleleosden.com/2007/05/mysteries-of-social-security-retirement.html). An added benefit of working longer is that it gives you more time to save, and, if you are lucky enough to have a pension, it may help you earn a larger pension. While working longer isn't the fastest way to the cabana on the beach, you may end up with a nicer cabana.

4. Stay together. This is something we discussed in our blog "Love in a Time of Financial Planning--Part Deux" (blogger.uncleleosden.com/2007/04/love-in-time-of-financial-planning-part_20.html). Two people together can often do better than if they were alone. Consider the following example. Each member of a couple gets $15,000 in Social Security benefits, and has $250,000 in savings, enough to allow withdrawal of $10,000 a year in retirement beginning at age 65. Individually, they'd each have $25,000 a year, enough to be okay, but not more than that. Together, they'd have $50,000 a year, enough to be solidly middle class. The idea of staying together for financial reasons conjures up images of bedraggled housewives stuck in loveless marriages with unshaven, potbellied louts who drink too much and smoke cheap cigars. That's not what we mean. Sometimes, no relationship is better than a bad one. But you have many reasons to make your relationship work and your financial well-being may be one of them.

None of these strategies will get you luxuries. You need savings for that. But if you feel like you're financially lost, don't give up. There's still hope for you.

Strange News: Trying to make fast food faster--www.nbc4.com/news/13326368/detail.html?dl=headlineclick.