Most Workers Have Savings Under $25K

About 60% of U.S. workers said they have less than $25,000 in savings and investments, according to a new Employee Benefit Research Institute survey.

Workers' confidence in their ability to retire remains historically low, with about 14% saying they were very certain they'd have enough to live on comfortably, according to the report released Monday by EBRI, a Washington-based nonprofit that studies employee benefits. That compares with a high of 27% in 2007.

"People get the fact they shouldn't be optimistic, but instead of saying 'I'm going to save more today,' they just say 'I'm going to defer my retirement age once I get to 65,'" said Jack VanDerhei, EBRI's research director and a co-author of the study.

The savings figure doesn't include the value of a person's home and any traditional pension plan, if they have one, VanDerhei said in an interview before the study was released. The median existing single-family home price was $154,400 in January, down 2.6% from January 2011, according to the National Association of Realtors.

About half of all U.S. workers (.pdf file) don't have access to a retirement savings plan through their employer, and many younger people haven't been saving long enough to build a large balance, VanDerhei said.

"If you're working for an employer who doesn't sponsor one for the majority of your working career, employees just don't save on their own," he said. "So much of our retirement hopes for people depends on what they do in their defined contribution plans now."

Retirement security

Regulators and legislators have been looking at Americans' retirement security because life expectancies are increasing and savings have shifted from traditional pension plans, where employers generally provided retired employees with lifetime payments, to 401k accounts that individuals largely are responsible for funding.

EBRI worked on the study with research firm Mathew Greenwald & Associates Inc. About 1,000 workers and 259 retirees age 25 and older were interviewed by telephone in January for the survey, which EBRI has conducted for 22 years.

The low levels of confidence are a good thing because it will hopefully lead people to take action, said VanDerhei. Yet betting on working longer than age 65 rather than saving more is very risky. Half of the retirees surveyed said they were forced to retire earlier than they planned, he said.

Many workers have more immediate worries than saving for retirement, such as keeping their current job, the study said. Less than a third, or 28%, said they were very confident of having paid employment for as long as they need it, and 16% showed the same assurance that their investments would increase in value.

Sooner than later

Individuals should assess their current situation and make adjustments to their savings and spending sooner rather than later to prepare for retirement, Greg Burrows, senior vice president for Des Moines, Iowa-based Principal Financial Group, one of the report's underwriters, said. People should target saving 11% to 15% of their wages annually including any employer contribution, Burrows said.

A separate study released last week by T. Rowe Price Group Inc., a mutual fund firm in Baltimore, and research firm Harris Interactive found that about 60% of investors between age 21 and age 50 aren't confident they'll have enough money for retirement. The T. Rowe survey was conducted online in December and questioned 860 adults with at least one investment account. Investors said they expected to retire on average at age 62 and live an average of 22 years in retirement, the study found.

Funding annuities

The government has focused on the risks of people outliving their savings in hearings and studies of its own as Americans live longer and are more responsible for managing their retirement money. The U.S. Treasury Department proposed two regulations last month to make it easier for workers to fund an annuity through their company-sponsored pensions or 401k accounts. Annuities are insurance contracts that guarantee a lifetime stream of income in exchange for up-front payments.

About 12% of the retirees surveyed by EBRI said they or their spouse had bought a financial product that pays them guaranteed income each month for the rest of their life.

Source: http://money.msn.com/retirement/article.aspx?post=c9c263c3-fbdf-4cb5-9e18-23a11bdeace0

Student Loan Debt and Bankruptcies

A 12 On Your Side Alert for anyone who thinks bankruptcy is the answer to mounting student debt. A typical student owes about $25,000 when they finish school. But that debt stays with you -- always.

Graduating college is the exciting part, repaying student loan debt, not so fun. Counselors at Clear Point Credit Counseling solutions say the ability to repay is not getting easier.

"Aside from the increased school cost that seems to go up each year, there is also the unemployment rate, about 7 to 8 percent of college graduates will continue to be unemployed," said Clear Point Credit Counselor, Patrick Owens.

The news doesn't get better. Student loan debt is keeping Bankruptcy Attorneys busy. A new report by the National Association of Consumer Bankruptcy Attorneys says there's a major increase in people with student loans looking for help; many of them are turning to bankruptcy.

"If they go through bankruptcy, they may find out those loans can't be discharged through the bankruptcy. And while their credit cards and medical bills and everything else can, student loans are going to be placed on hold and they will have to pick up with those payments right after they bankruptcy process," Owens said.

Owens says you may be able to get a deferment but no matter what happens in bankruptcy court, you eventually will have to pay up. Many times parents will step in to help. Credit counselors say this is not always the best thing to do. Remember, if your child doesn't pay, you are stuck with the debt.

"I have seen a lot of parents have to take out of their 401k savings or use reserves to pay down or pay off student loans just to help stop a default,"Owens added.

There are some options to avoid racking up student loan debt. Experts recommend looking into community colleges and two year institutions to decrease the amount you will have to borrow. Another tip, consider your career path.

"When you are choosing your major, make sure you know what the salary ranges will look like when you graduate. Considering how tough it is to be hired now, you don't want to be saddled with a lot of debt but end up with a job that has lower pay," Owens said.

And for all you college students that have extra money left over each semester after paying for classes, don't just blow it. Use the money to start paying off the loan. If you spend it, you'll have to pay it back in the end.

Source: http://www.nbc12.com/story/17210416/student-loan-debt-increasing-bankruptcies

The Costs of Living Longer: Retiring Frugally vs. Finding Love

Planning for a comfortable retirement takes foresight, a lifetime of saving money and little familial luck. But planning for love? That might cost you.

As a widow, Goldie Linder, 92, lives in her own studio apartment, a choice that honors her desire for independence and is affordable with subsidized rent. She admits she feels lonely sometimes, but love stories from the library keep her company.

Leon Zerolnick, 93, moved into a well-appointed senior home in Wayne, N.J., last summer. Within weeks he found a real life love story with Ellie Green, 86. The two have been inseparable ever since.

Whether or not you age actively and happily often comes down to where you live, and that's based on a matrix of financial, physical and emotional decisions. And while you can't control whether or not you find love, spending more -- sometimes a lot more -- to move into a socially stimulating senior-living environment could be the difference between aging gracefully alone or finding a new partner for the final years of life.

The financial issues are significant: The median national cost for assisted living is almost $40,000 a year, while home care -- a far smaller financial drain -- costs an average of $18 an hour in addition to one's regular housing costs, according to a 2011 survey by Genworth Financial (GWF). Single-occupancy rooms at a nursing home cost more than $77,000 a year. Other cost comparisons found at Caregiverslist.com price assisted living at $4,000 a month to start, with home care options ranging from $15 to $25 per hour.


But even tougher are the emotional issues that no one wants to talk about, like serious illness, dying and death. Elder-care experts agree that too often, care decisions are typically left until there is an emergency, such as debilitating fall or other medical emergency.

"The majority of American families will face [the need for long-term services], but no one wants to talk about it," says Larry Minnix, president of nonprofit advocacy group LeadingAge.

The age wave that began this year -- 8,000 people a day are turning 65 in the United States, according to Census Bureau data -- means that more seniors and their families are starting that conversation. By looking at the generation ahead of them -- the Leons and the Goldies -- they get a glimpse of the costs and benefits of different senior lifestyle decisions.

In Leon's case, he and his family had to make a snap decision after a terrible fire last July destroyed the condominium where the widower had lived independently. It was necessary to clear both the emotional and financial hurdles before Leon's move to the Emeritus senior living home, his daughter Elaine Schlossberg says. But for him, finding companionship has made the change worth it.

If the stigma of a group senior home is that care is too institutionalized and expensive, the knock on living independently is that it's too isolating. Goldie's family helped her to find a subsidized apartment that satisfied her need for independence while offering enough social outlets, like a nearby senior center, to keep her occupied. Her home caregiver, Ida, 83 herself, comes five times a week to help with chores.

Relying on Family, Managing Care Givers

Yet for many families, it is ultimately the physical condition of a senior that makes either assisted living or independent living impractical. And the alternative -- a nursing home -- often doesn't have the right feel or price tag, leaving much of the caregiving to family members and hired aides. The AARP estimates that in 2009, 42.1 million family caregivers provided elder care every day. The value of their unpaid work: $450 billion.

Ellen Loewy, 55, and her husband are taking care of her 84-year-old father in their home in Hicksville, N.Y. Her father's fading memory -- and her close relationship with him -- made home care the only option she'd consider, says Ellen, although she admits a break would be nice.

Respite comes from a local caregiver franchise. Ellen says the costs for hiring a home caregiver are around $2,500 to $3,000 a month for her father. Currently, she's trying to match her schedule with his caregivers so she and her husband can take a week long vacation in December.

Managing schedules and caregivers -- and paying the associated bills -- is like managing a small corporation, says Terri Corcoran, 60, who lives with her aging, bed-bound husband, in Falls Church, Va.

She says last year she spent $78,000 on home care alone, and finding the right aides has been an ordeal. No-shows, bad personal hygiene, and poor personality fits with caregivers been a challenge for Terri, and she says it has taken several years to find any consistency. But despite it all, Terry says she would never send him to a nursing home.

"We have a nursing home in our backyard and it's more expensive," she says, "He can't speak for himself at all and he wouldn't get the attention [he needs]. A lot of people I know hire [additional home care] aides to go to the nursing home."

Planning Ahead, Finding a New Life

Lee Refzam, 79, has been on both sides of the debate: Until this year, she lived independently in an apartment in Raleigh, N.C. After she took a tumble that compromised her mobility, she had to face up to the reality that she needed help. Her daughter, Jayne, lobbied for Lee to move to Seattle, where she lived, and into a senior living home.

Lee recalls being hesitant to lose her independence, move to a new a city and leave her old life behind. But five days after arriving she met Doug, 74, and within a few months, they got married. And they are not the only ones. Lee's voice lights up when she talks about all the new couples that have formed at the senior living home.

"We have become a close knit family, and some of them have gotten married," she says. "None of them will ever have a baby!"

SOURCE:http://www.foxbusiness.com/personal-finance/2011/10/27/costs-living-longer-retiring-frugally-vs-finding-love/

Careful Planning to Stay Ahead of Rising Inflation

As we head into the home stretch of 2011, consumers are continuing to see inflation take more money out of their pockets. The latest Consumer Price Index numbers for September released by the U.S. Bureau of Labor Statistics show an increase of 0.3 percent, bumping the annual all items index, or rate of inflation, up to 3.9 percent from the previous 12 months. That annual CPI increase is the largest we've seen in three years.

Inflation impacts what consumers pay for, things like food and energy. The food index increased 0.4 percent in September and is 4.7 percent higher than this time last year. Energy prices also rose 2.0 percent in September, with gasoline up 2.9 percent from the month before and 33.3 percent over the past year. The things we need are costing more and more to afford, yet most people's incomes are not keeping the same pace. Inflation can be especially devastating for retirees.

If upon entering retirement you did not plan ahead for inflation, then through the years, your purchasing power will begin to diminish. Think about it. In 2003, a gallon of milk cost approximately $2.76, and today, it's priced around $3.50. That's a 74-cent increase in just eight years. Imagine what a gallon of milk will cost in 20 or even 30 years into retirement.

Rather than face the possibility of downgrading your lifestyle in retirement, consider the following four tips to help you protect your future purchasing power from the potentially devastating effects of inflation.

Analyze your income to make the most of your money. One of the first things you can do in an effort to maximize your savings in retirement is to perform an income analysis that can determine if you are using your current income sources properly and in the most tax-efficient manner.

With the ever-increasing cost of inflation, it is very important to find out if you have adequate savings and income to meet your future needs as well. Your actual inflation rate may be different than the published inflation rate by the government, as your rate is based specifically on where you spend your money. The CPI is an index of several different economic sectors, such as food, gasoline, shelter and more. So, for instance, let's say you're only purchasing gasoline, your actual inflation rate would be around 33 percent, not 3.9, during the past year. The various goods you purchase determine your actual inflation rate.

Keep your buying power up by paying your debt down. If you have substantial loans or debt with variable rates, it is important to consider paying them off or consolidating them and locking in a lower rate, especially during times of rising inflation. Not only will you be paying even more for those things you purchased in the past due to the decrease in value of the dollar, but interest rates may begin to increase with inflation as well.

Stay ahead of the rate of inflation. If you want to invest conservatively, you may need to think twice about the "safety" in bank-issued Certificate of Deposits or other vehicles with set return rates of interest. If you're earning anything less than 3.9 percent annually, the account may be costing you purchasing power. You may want to consider exploring other safer options that can at least keep up with the CPI, such as bonds or insurance products with an inflation rider.

Fix your fixed income. If you're in retirement and are living on a fixed income, inflation can be especially difficult. Following the most recent rise in inflation, it was announced that the Cost of Living Adjustment will return in January of 2012 with a 3.6 percent increase in Social Security benefits. While that is good news for retirees who have not seen an increase the previous two years, the COLA rate is less than the actual rate of inflation. Other alternatives to consider include dividend income and fixed annuity laddering.

Be sure to consult a qualified professional to help ensure that your money stays ahead of inflation and continues to work for you well throughout the retirement years.

SOURCE: http://www.hendersonpress.com/business/item/736-careful-planning-required-to-stay-ahead-of-rising-inflation

California Has Most Millionaires

California is a piker when it comes to millionaires, according to a new report.

The state boasts 750,686 households with $1 million or more in investable assets -- so-called liquid wealth, says the report from Phoenix Marketing International of Rhinebeck, N.Y.

It excludes primary residence and real estate, business partnerships, employer-sponsored retirement plans (401k, 403b), restricted stocks, and the like.

While California has more millionaires, it ranks just ninth in the nation with 6.01 percent of all households crossing that million dollar mark this year, says the report.

Tops for percentage of millionaires is Maryland, edging out Hawaii.

The top ten follow. Listed first is the number of households with more than $1 million in liquid assets followed by the percentage of households.

1. Maryland: 157,779; 7.22 percent

2. Hawaii: 33,461; 7.21 percent

3. New Jersey: 231,456; 7.19 percent

4. Connecticut: 98,392; 7.13 percent

5. Massachusetts: 162,619; 6.41 percent

6. Alaska: 16,239; 6.39 percent

7. Virginia: 195,006; 6.26 percent

8. New Hampshire: 31,159; 6.06 percent

9. California: 750,686; 6.01 percent

10. District of Columbia: 15,603; 5.88 percent:

The states with the lowest percentage of millionaire households are Arkansas and Mississippi at 3.43 percent each, although Arkansas has more of them at 39,749 compared to the 38,574 who call Mississippi home, the report says.

Wyoming has the fewest millionaire households at just 11,271.

"A few things are noteworthy from this year's millionaire rankings," says David Thompson, managing director of the Phoenix Global Wealth Monitor. "First, this is the closest it's ever been between the top two states. Second, all of the top ten states increased their millionaire ratios during the past year, which underscores that the richest states keep getting richer."

Phoenix computes its data on the size of affluent and high net worth U.S. households on a mid-year to mid-year basis. As of the end of June, 2011, Phoenix estimates that the number of millionaires in the U.S. grew by 6.9 percent from the previous year, numbering some 5.9 million households.

SOURCE: http://www.centralvalleybusinesstimes.com/stories/001/?ID=19664

How Much Should Have I Saved By 40

If you haven't started retirement planning by the time you are in your 40's, you have some real catching-up to do.  That being said, retirement planning in your 40s is perhaps the single most important step you can take to prepare yourself for those retirement years.

Retirement Planning Opportunities
Working in your 40s is like halftime in a football game. Your career is about half over, and it's time to stop the game, assess where you are, and rethink your opportunities and plans.


You have twenty years of work behind you, and roughly twenty years of work ahead. If you haven't been saving for retirement, it's time to get started. If you've been socking money away for years, then it's a good time to reassess where you are, and what you need to do over the next twenty years.

Time and Retirement Planning

Since you're at the half way point, we're going to make a couple of comparisons using our retirement savings calculator, so that you can see some of the different scenarios you might be faced with in the future and right now.

For example, we are going to illustrate what the retirement plans might look like for a 45 year old that had been saving through the years, versus one that is just starting to save for retirement. We're also going to demonstrate what happens if you decide to wait another ten years before setting money aside for those retirement days.

Retirement Savings Examples

Current Age	45	45	55
Desired Retirement Age	65	65	65
Annual Household Income	$80,000	$80,000	$90,000
Anticipated Income Growth Rate	3.0%	3.0%	3.0%
Desired Income Replacement Rate	70%	70%	70%
Current Retirement Assets	$75,000	$4,000	$4,000
Expected Return on Investments	6.0%	6.0%	6.0%
Expected Pension at Retirement	$33,000	$33,000	$33,000
Social Security at Retirement	$30,000	$30,000	$30,000
Ongoing Annual Savings Required	$5,354	$11,544	$18,310

In this example, a 45 year-old that has already saved $75,000 needs to save about $5,300 annually to meet their desired income replacement rate of 70% when retired. But a 45 year-old that has a minimal amount of retirement savings needs to save at more than double that rate, nearly $12,000 per year.

More importantly, if that same 45 year-old waits until age 55 to start saving for retirement, then they need to set aside over $18,000 a year! Saving that much money each year will truly present that individual with a lifestyle challenge. That's roughly 20% of their pre-tax income that needs to be set aside each year until the day they retire.

SOURCE: http://www.money-zine.com/Financial-Planning/Retirement/Retirement-Planning-in-Your-40s/

Retirement Planning Mistakes

How much do you need for retirement? Some people can manage on 50 percent and others can't make it on 100 percent of their current income. Let's look at some mistakes to avoid while planning for your retirement.

Underestimating health care costs: The September SmartMoney article said the typical male age 65 will need $378,000 to cover Medicare supplement insurance, out-of-pocket expenses and drugs for the rest of his life. This seems like a bit much, but half of this amount still is a lot at $200,000. This information came from the Employee Benefit Research Institute. Health care is expensive, so make sure you plan for the costs as you age.

Giving too much money to adult children: The Journal of Marriage and Family states four out of five parents gave money to their adult children about once per month. Where are those parents when I need them? CreditCards.com states 40 percent had paid off a debt for an adult child. I see this happen a lot. The retirement planning is not complete, but they are paying home and car payments for working adult children. There is a line between enabling and helping. Where do you draw the line?

Investing too conservatively: On SmartMoney. com, Catey says stocks have outperformed bonds since 1926. Stocks have an average return of 9.8 percent, while bonds were at 5.45 percent. It is hard to get your money to work for you if you invest in an asset class with low risk. I just had a 47-year-old who has had his money in a money market inside his 401(k) for the past 20 years. Even with the corrections in the past 10 years, he probably would have had a lot more money saved using equities. There is no guarantee for future returns. One rule I have heard is to have your age in bonds, plus or minus 10 percent.

Bored with all that free time: What if sitting on the porch reading your book gets old? It costs money to do things. Traveling and hobbies can be expensive. Make sure you plan an "activity" budget to do things with. Living expenses, debts, food and insurance are things to plan for. Start planning a fun account to enjoy life when you retire.

Not understanding your life insurance policy: I see many seniors buying multiple whole-life insurance policies because they want their funeral paid for. The time to buy these policies is not when you are retired and possibly in bad health. It is not a good financial decision to pay $100 to $200 per month on life insurance when you are retired on $1,000 per month, in most cases. Is your policy going to end? Are your premiums going to go up? Can you spend your dividends without affecting your guaranteed death benefit? These are all questions you need to know at retirement.

These are just a few issues that could affect your retirement plan. There are many other issues that could affect your retirement income. Consult with a professional to make sure you are on track for the best retirement you can have.

SOURCE

Biggest Loser of Debt Award for 2010

Carole and Don Carroll - Debt Free after 30 Years

Meet the Carrolls, 2010 Award-Winning Debt fighters! Carole and Don Carroll of New York won an award for determinedly paying down $88,000 in credit card and car debt by devoting 30 percent of their take-home pay for three and a half years.Until four years ago, Carole and Don Carroll considered it normal to live in a constant state of stress. Every day, the New York City couple engaged in a complicated dance with more than a dozen credit cards and a car loan. When they met in 1990, each partner already carried a credit card balance, and by the time they got serious about paying it down in 2006, they owed $88,000. They lived frugally, skimping to stay on top of the minimum payments they often made with credit card cash advances.

Today, just three and a half years after signing up with a credit counseling service, the couple is debt-free. Their mighty pay-down efforts were rewarded Oct. 5 with the Professional Achievement and Counseling Excellence (PACE) 2010 Graduate Client of the Year Award. The National Foundation for Credit Counseling gives out this award to those who commit to repaying their debt and manage their money.

Debt Due to Daily Charging Over Decades

The Carroll's near-six-figure credit card and car loan debt was the slow and steady accumulation of nearly 30 years of everyday living. Carole, an Ohio native who works in finance, moved to New York City in 1984 as a young woman and the debt slowly crept up. "I never knew how much debt I had. I didn't want to know -- it was a nauseating topic," says Carole. Expenses for modest items went on plastic, as did sporadic events like moving apartments. "I'm not a shopaholic," Carole says. "We bought crappy cars, and we didn't spend on expensive shoes or fur coats or go to Broadway shows. We didn't make bad decisions, but it was too much. We needed assistance."

Debt has always been a part of the Carrolls' relationship. Don, now 56, carried debt from helping to support two children, now in their late 20s, from a previous marriage. "When we got together, it was pretty scary to say, 'I have some debt,' and for him to say, 'Well, I have some, too.'" Their attitude was, "OK, it's only money, and we're going to pay it off," Carole says. "We worked at it every day, and we never felt like we had any money because we were always paying the man."

Collectively, their debt grew, even though both were making what Carole describes as middle-class incomes (Don has had a career in financial publishing). "When the kids came to visit and needed socks and underwear, you go out to buy stuff for your kids," Carole says. "But we went to Kmart."

Medical Issues, Late Payments Add Up

Over the years, both partners experienced several layoffs. Both had health problems -- Carole has had two hips replaced, and both underwent gastric bypass surgery to address severe obesity. Each event triggered an uptick in credit card balances.

After a while the cards maxed out, yet their debt continued to grow. Late fees, over-limit fees and annual percentage rates hitting 30 percent meant that their balances swelled monthly, even though they no longer charged on plastic. "It was fees after fees after fees," Carole says. "To this day, it is a blur how that even worked." The Carrolls stopped dining out with friends because they couldn't afford it. "We became really good cooks," she says.

Don suggested that the couple seek credit counseling, and friends urged them to file for bankruptcy. Carole resisted. "I thought we could pay off all these bills ourselves," she says. "Bankruptcy seemed like walking away from your responsibility. We created these bills, and I wanted to pay for these bills."

She reached a breaking point several years ago when Don suffered heart problems, and creditors started calling relentlessly. "I was very concerned about Don, and with the bills, it became overwhelming," Carole says. The stress kept her up at night. "That got to me after a while," she says.

Creating and Sticking to a Plan

Finally, in the fall of 2006, the couple enrolled with GreenPath Debt Solutions. After nailing down the details about the couple's debt, living expenses and spending habits, the agency set up a five-year payment plan. The Carrolls continued to pay down the car loan and took a personal loan from a friend for some of the balance. They cut up their 13 credit cards and were relegated to one bank card.

Payments totaled about 30 percent of the couple's take-home pay, but they stuck with it relentlessly. Not surprisingly, there wasn't much spending they could cut back on, though they did downgrade their premium cable plan. Carole and Don paid double the minimum on each card, and each time one balance was paid off, they applied any newly freed money to the next card, which meant each card was paid off quicker than the previous one. This system continued even after Don lost his job in January.

Over the next few years, any extra cash from holiday bonuses or tax refunds was applied to the debt, and just three and a half years later in April, the Carrolls were debt-free. "This is really a feeling of freedom," Carole says. "I never realized you could sleep this well."

What is the couple doing with their newly freed-up funds? They're socking it away in a car fund for the day their Hyundai Elantra needs to be replaced, and building up the recommended six-month emergency fund. Don has landed contract work, but the couple realizes the job market is tenuous.

Carole recently splurged on a new pair of shoes for the National Foundation for Credit Counseling awards ceremony. "It's very nice to know that even though I spend a nice sum of money on shoes, I can afford to pay for it all at the end of the month."

Looking back, Carole realizes that the anxiety produced by the debt became an uneasy normal. "If you don't see your way out, you live with it," she says, adding: "Pride is a terrible, terrible master."

In sharing her story with friends and acquaintances, Carole's fear of being stigmatized has been relieved as others share their own stories of debt. Their advice for others: Seek the help you need. "You can pay off your debt, even in this economy," Carole says.

SOURCE

Retirement Planning - Mistakes to Avoid

Having a financially secure retirement is a top priority for everyone. If you can avoid the simple mistakes that millions of people make in their financial planning, it'll take you a long way toward realizing your dreams of a happier retirement.

A dire picture
Unfortunately, for those who are already approaching retirement, a lot of damage has already been done. According to a study from the Employee Benefit Research Institute, even covering basic retirement expenses and uninsured medical costs will prove beyond the ability of nearly half of those currently within 10 years of retirement. As many as two-thirds of low-income workers will likely run out of money in the first decade after they retire.

Even if you've gotten a late start with your retirement planning, it's never too late to take action that will make a big difference in your standard of living after you retire. If you're making mistakes like the following, fixing your finances can produce significant results much more quickly than you might think.
1. Not investing enough, especially in tax-favored retirement accounts
In planning for retirement, the amount you save now is the only thing you have 100% control over. But many retirement savers don't realize just how much they can set aside.

Tax-favored accounts like 401(k) plans and IRAs are often your best choice for retirement savings. With limits of $16,500 for 401(k)s and $5,000 for IRAs this year, you have a lot of freedom to enjoy tax-deferred growth. And for those age 50 or over, catch-up provisions give you even higher limits: $22,000 for 401(k)s and $6,000 for IRAs.

That may sound like a lot, but the last years of your career may be the most productive from an income standpoint, while expenses may actually decrease as children grow up and leave home. If you commit to saving a bundle in the years immediately before you retire, you can make up for a lifetime of missed opportunities.

2. Panic-selling solid stocks
It's always scary when a stock you own drops a lot. But selling after such drops often proves to be a terrible mistake when the stocks inevitably recover.

You can find plenty of examples of this from past experience. In 2008, Starbucks (Nasdaq: SBUX) dropped more than 50% as competition from fast-food maven McDonald's threatened its long history as the prime innovator in coffee. Frightened investors bailed out as the weak economy made $4 lattes look ridiculously out of touch with the times, and home-brew machines from Green Mountain Coffee Roasters (Nasdaq: GMCR) sold like hotcakes as cost-cutting consumers tried to bring the gourmet coffee experience home. But since then, Starbucks shares have more than doubled as the company has stayed on track and fought back with new initiatives of its own.

Similar situations appear every day. Yesterday, Adobe Systems (Nasdaq: ADBE) saw shares drop almost 20% as it released a disappointing forecast for the coming quarter. Yet for long-term investors, the real question is whether the company's Creative Solutions division and its Photoshop, Flash, and Illustrator products will eventually restore Adobe's growth momentum, not just next quarter but in the years to come. For smart investors, today's drop may prove to be a gift, not a calamity -- but only if you don't panic-sell.

3. Putting all your eggs in one basket
The biggest asset most people have is their earning potential. Since you rely on your employer for your income, it's a mistake to double your exposure by owning employer stock in your 401(k).

Unfortunately, lots of people do exactly that. According to figures from BrightScope, 65% of ExxonMobil's (NYSE: XOM) Savings Plan was invested in Exxon shares, while the figures for Procter & Gamble's (NYSE: PG) plan was 43%.

When problems come up, they can be disastrous. For Valero Energy (NYSE: VLO) employees, who hold 63% of their assets in employer stock, losing three-quarters of their money over the past three years has to hurt. And even though employees at Ford Motor (NYSE: F) and dozens of other companies have sued plan sponsors to try to get lost money back, the odds are most likely against them.

Stay smart
These mistakes are common, but they're also easy to avoid. If you take care not to make them, it will help you protect your retirement from the threats that so many won't see until it's too late.

SOURCE

Retirement Planning for Your Mid 50s and Beyond

Main goal: Decide what type of retirement you want.

Savings: 6 times your annual salary by age 55.

• Prune my stock portfolio. Going into the 2008 crash, nearly four out of every 10 401(k) investors in their mid-fifties to mid-sixties had 80% or more of their accounts in stocks. To avoid damage from market meltdowns near the end of your career, scale back your stock stake to 60% or less by your early sixties. And once you're close to retiring, keep two years' worth of expenses in cash.
• Map out a blueprint for my retirement. When you quit working, how will you fill the hours of each day? How much traveling will you do? And will you stay put or relocate? Fill in the blanks and create a real budget.
• Run (and rerun) my income plan. A financial planner or the Retirement Income Calculator tool at troweprice.com can help determine if your savings plus Social Security and any pensions will generate enough income -- safely -- to meet your needs.
• Look into when to take Social Security. Should you collect Social Security benefits at 62, or wait longer to boost your checks by as much as 77%? The Social Security Adminstration's Retirement Estimator tool will help you map out your options.
• Work on my Plan B. Things don't always go as planned. So keep your income options open. In case you need part-time employment, maintain ties to colleagues at work even after you retire. And look into ways you can tap home equity, for instance through a reverse mortgage.

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Retirement Planning for Your Mid 40s to Early 50s

Main goal: Focus on how you invest your money.

Savings: 3 times annual salary by age 45

• Rebalance my portfolio. Periodically reset your holdings in stocks and bonds back to your desired mix to smooth out the market's bumpy ride. Keep it simple by rebalancing annually on your birthday or after you get your year-end statements.

• Go over my investment strategy. You still need to invest for growth, but now's the time to start gradually dialing back your stock exposure to guard against another downturn. So if you started your late thirties with an 80% or higher stake in stocks, trim that to 70% or so by your early fifties.
• Make my catch-up contributions. The extra $5,500 you can throw into your 401(k) starting at 50 will not only grow into a surprisingly big stash down the road (see the chart), but will also reduce your taxable income now. You can also stuff a bonus $1,000 a year into an IRA starting at 50.
  
• Give myself a reality check. Assess whether you're on course for a secure retirement. Several online retirement calculators will tell you the odds of meeting your goals -- based on your current balances, savings rate, and investment strategy. It will also let you know how to catch up if you're off track.
• Consolidate my far-flung retirement accounts. After career changes and job switches, you may very well have left a trail of 401(k) accounts scattered among former employers. Rolling these funds over into an IRA or your current 401(k) will make it easier to manage your entire nest egg.

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Retirement Planning for Your 30s to Early 40s

Goal: Develop the habit of saving.

Savings: 1.5 times your annual salary by age 35.

• Take full advantage of my 401(k) match. Your employer-sponsored retirement plan is the easiest way to put your savings on autopilot. And if you take full advantage of your company match, you could earn 50% to 100% on your money before taking on any market risk.

• Boost my 401(k) contribution. As your paycheck grows, your savings rate should too. Sign up for "auto escalation" to boost your contributions by a percentage point or so a year. If your 401(k) doesn't offer this feature, sock away half or more of each raise.

• Find other tax-advantaged ways to save. Already maxing out on your 401(k)? If you make less than $120,000 -- or $177,000 for married couples filing jointly -- check out a Roth IRA. Already hitting the $5,000 annual IRA limit? Move on to investment options such as index funds that don't expose you to stiff tax bills.

• Cover six months of expenses. Make sure you've got an emergency stash, so if you get laid off you won't be forced to dip into your 401(k) and IRAs. Put this money in a safe place like an FDIC-insured bank account or CD, or a high-quality money-market fund.

Invest for growth. You may feel skittish about stocks, given the recent market turmoil. But with retirement still two to three decades away, your best shot at building an adequate portfolio is to put most of your retirement savings -- 80% or so in your thirties -- in stocks and ride out turbulence along the way.

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Retirement Tips

Four things you can learn from people who have retired successfully:

The quality of your life is shaped by the quality of the people in your life.
First on his list is the importance of people’s social network. In his experience, the happiest retirees are active and have many positive people in their lives, some older, some younger and some the same age.

Wealth comes from choices, not chances
Having said that money is not the be-all and end-all in determining retirement happiness, people still need enough money to enjoy retirement. Depending on the kind of retirement lifestyle one aspires to, that amount can be relatively modest or quite substantial, especially if they plan to travel, spend winters down south and eat out often.

Smart people don’t wait for luck to make them wealthy. Successful investing means being thoughtful about making good choices, one choice at a time. Live below your means if you want to be wealthy. Watch out for a lifestyle that saddles you with expenses. Stay broadly diversified. And when you save and invest, make your money work hard for you.

People who are serious write down their retirement goals. Putting plans in writing lets you identify where you are, where you want to go and what you must do to get there.

Control your emotions
What really works in the long term is often in direct contradiction to people’s immediate emotional impulses. When it comes to sex, food and money, emotions are our biggest enemy. We start off with good intentions and then get lured away by quick fixes and easy solutions.

A classic example of the quick fix mindset is the surprising number of Canadians who in response to surveys list winning a lottery as part of their retirement planning strategy.

Don’t wait to start
A final message relates to starting to save early. Smart people learn early in life to defer gratification and make saving a priority. If you’re in your 20s, retirement seems pretty remote, but time gives you an opportunity to get a lot for a little.

Example: A one-time investment of $5,000 when you’re 25 will grow (at 10 per cent annually) to more than $140,000 at age 60. If you wait until you’re 45, you need to invest more than $30,000 to get the same result.

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6 Reasons Roth 401(k)s Are Catching On

The attraction of a Roth 401(k) is simple. You contribute after-tax dollars to the account, which will accrue tax-free earnings and allow for tax-free withdrawals in retirement after age 59½ . Here’s a look at why Roth 401(k)s are catching on, especially among young retirement savers.

More companies offering a Roth option. Roth 401(k) accounts first became available in 2006. But most employers did not immediately introduce this retirement savings option and many existing workers didn’t enroll right away. Employee usage of the Roth option tends to grow rapidly during the first two years it is offered and then stabilize after three years, according to a new Hewitt Associates analysis of 20 401(k) plans with 504,000 participants. While just 7 percent of retirement savers chose the Roth 401(k) account the first year it was offered, 15 percent of 401(k) participants started using it within 3 years of implementation. Approximately 29 percent of employers currently offer a Roth 401(k) and another 25 percent of companies say they are likely to add the feature this year, according to recent Hewitt survey of employers.

Same 401(k) match. Nearly all the companies in the Hewitt study provided the same 401(k) match for Roth 401(k) contributions as for the traditional 401(k). Loans and early withdrawals were also generally allowed from both types of accounts for the same reasons. However, employer matches to Roth 401(k) contributions must be made into a pre-tax account. Withdrawals from this traditional 401(k) account will be taxed as income in retirement.

Fewer restrictions than a Roth IRA. Retirement savers can only contribute up to $5,000 to a Roth IRA, or $6,000 if they are age 50 or older, in 2010. Investors must also earn below certain income limits to be eligible to contribute to a Roth IRA. Roth 401(k)s have the same higher contribution limits as traditional 401(k)s and no income restrictions. Employees can save up to $16,500 in a traditional 401(k), Roth 401(k), or combination of the two accounts in 2010. Those age 50 and older can contribute up to $22,000.

Tax diversification. Many retirement savers contribute to pre-tax and after-tax accounts simultaneously. Over half (54 percent) of Roth account holders also save in a traditional 401(k). Roth 401(k) users saved an average of 7 percent of pay in the Roth account and 11 percent of pay overall. Investing in both types of 401(k)s may allow you to hedge your bets against future tax increases.

Tax-free withdrawals in retirement. Your entire traditional 401(k) balance isn’t available for spending in retirement. You must pay income tax on withdrawals each year. With a Roth 401(k), you pay the tax up front and generally won’t have to pay any additional taxes when you take distributions from an account at least 5 years old after age 59 1/2. To decide which type of 401(k) is better for you, compare your current tax rate to what you estimate your tax rate will be in retirement. If your tax rate is higher now than you think it will be in retirement, consider deferring taxes until retirement using a traditional 401(k). But if you expect to be in a higher tax bracket in retirement, you can save by paying the tax now and investing in a Roth 401(k).

Benefits for young savers. Younger workers are the most likely to use a Roth option. Nearly 17 percent of retirement savers in their 20s have elected to pay taxes on their retirement savings up front, compared to only 4 percent of those in their 50s. New employees with low starting salaries have a lot to gain by choosing the Roth option because they may now be in a lower tax bracket than they will be later in their career and in retirement.

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Retirement Planning for Women

After a long career managing large accounts for an insurance company, Lynn Brooks is hardly a financial novice. But when she sought help from a financial adviser after her husband died, they might as well have been speaking different languages.

Ms. Brooks, who's now 60, knew she had reached the age when her savings should be managed conservatively. Her adviser, however, had something more testosterone-fueled in mind, urging her to buy riskier assets like small-cap stocks. And when she phoned him, she says, he was often in a hurry: "It was as if he was saying, 'Leave me alone. I'll take care of this.'"

Ms. Brooks says she eventually took her business elsewhere -- but only after her nest egg had shrunk 30% over the course of a decade before the crash.

Advisers Can Be Obstacles

This is how the battle of the sexes plays out in the complex world of retirement planning -- and all too often, women come out on the losing end. A recent survey by financial-services company MassMutual found that women's retirement accounts were, on average, just two-thirds the size of men's. The disparity is made worse by demographics: Because they live longer, women need more money than men for a comfortable retirement, according to the Employee Benefit
Research Institute.

"Millions of women are going to lose their standard of living unless they take hold of the situation," says Cindy Hounsell, president of the Women's Institute for a Secure Retirement.

But as women step up to do that, many find that the financial-services industry is an obstacle, not an ally. In a recent Boston Consulting Group survey of women investors, respondents said they routinely feel underserved by the financial-services industry, with more than 70% expressing dissatisfaction with the service they're getting. Among the complaints: disrespectful advisers, narrower investment choices based on the assumption that women can't handle risks and patronizing pitches like one from a bank's website that urged women to give their finances a "makeover."

The disenchantment is especially acute among women who find themselves managing money on their own after their marriages end.

One factor stands out as the bull elephant in the room: Between 70% and 80% of advisers are men, and many veterans have built careers serving a mostly male clientele.

While some companies are addressing the issue, a male-centric mentality still pervades the business. Many planners fail to take into account the fact that women typically earn less than men and are more likely to take time out of the work force while raising their families. And couples find that too often their adviser focuses his (or even her) attention predominantly on the man.

Conflicting styles of communication may have a lot to do with why women feel ill-served. Experts generally agree that women prefer advisers who address their needs holistically, educating them about their choices and explaining how they can reach long-term goals. For brokers accustomed to a hard sell and a fast pace, that's not an easy adjustment. Still, the industry is doing more to take gender differences into account.

Product Pitfalls

Analysts say the industry sometimes shoehorns women into retirement-savings formulas meant for men. But two important variables, income and life expectancy, are very different for women -- generally, they earn less and live longer. Many advisers specializing in women's finances say that means women should invest more aggressively in their younger years. In practice, women tend to be more conservative, keeping a higher percentage of their money in low-risk investments such as cash than men do, according to Cogent Research.

As women get older, conservative investments make sense. But advisers often fail to offer them two products that could be useful: annuities, which convert a lump sum into income, and long-term-care insurance.

Thinking for Two

Financial planners say it's common for married women to assume that their spouse's savings will do the heavy lifting. But in practice, women are more likely than men to spend part of their retirement alone, making it even more important for them to have their own plan.

More pros say they're teaching women a cardinal rule of personal finance: "Pay yourself first."

Greg Ward, of financial-education firm Financial Finesse, recommends investors make automatic deposits into their own retirement plans or brokerage accounts, not just into joint plans they share with spouses.

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Retirement Planning for your 20s, 30s, 40s, & 50s

If You're in Your 60s:

• Build a cash cushion to cover at least two years of expenses. If the stock market or the bond market tumbles, you do not want to be forced to sell off your investments at a low price just to cover your everyday bills. And you will be less stressed over market fluctuations.

• Control spending. Start now. One guideline is that you want to spend 4% or less each year from your retirement savings, or $4,000 if you have $100,000 saved.

• You can start collecting Social Security at age 62, but you must apply for benefits four months before you want to start receiving them. If you consider yourself likely to live well into your 80s or 90s, you can consider delaying collecting Social Security until you reach full retirement age. Go to www.ssa.gov. Your monthly check goes up with each year you wait to collect, but consider life expectancy and your likely financial needs.

If You're in Your 50s:
• Adapt to new technologies, new duties on the job, new challenges. Don't quit for a reactionary reason, such as a shift change, or in a moment of weariness or frustration.

• Cut your debt. Save more money. If you are 50 or older, you can contribute up to $6,000 to an IRA or Roth IRA. (Under 50, the max is $5,000.) For 401(k) plans, the maximum pretax contribution limit is $16,500 for 2010 and could be higher in 2011, depending on inflation.

• Pay attention to pensions. You may have one coming from a previous employer. Look through your paperwork. Contact plan administrators. Or go to www.pensionaction.org or www.pensionhelp.org.

If You're in Your 40s:

• Invest money for retirement: If you're saving 4%-5% of your pay each year in a retirement account, bump that to 10%-15%. Opt for a diverse mix. At age 45, you might want 55% or so of your long-term IRA or 401(k) in mutual funds that invest in stocks and the rest of it in bonds.

• Try to build savings outside of a retirement plan, too, to cover emergencies and other expenses.

If You're in Your 30s:

• It's not easy in your 30s to think about retirement, but force yourself. Get a target savings amount. Go to www.choosetosave.org and click on the link for the "Ballpark Estimate" retirement calculator.

• When you change jobs, make sure you keep money invested in a retirement account -- don't cash it out.

• If available, sign up for a 401(k) when you change jobs.

• Try to cut your debt so you can save more.

If You're in Your 20s:

• It's never too early to cultivate good habits that will build the financial foundation you need for retirement, such as paying off your credit card each month and paying your bills on time.

• Pay off your student loans.

• Do not put off saving for retirement. If money is tight, sign up to have at least a tiny amount, even if it's just 1%-2%, taken out of your paycheck toward a 401(k).

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5 Tips for Becoming an Entrepreneur in Retirement

The extensive knowledge and experience that baby boomers have accumulated throughout their working lives could make them the ideal entrepreneurs. Increasingly, older workers who are unable to find new jobs or are looking for increased workplace flexibility go to work for themselves. Almost a quarter of workers who change jobs after age 51 become self-employed, according to an AARP and Urban Institute analysis. Here are some tips for becoming an entrepreneur in retirement:

Emphasize your experience. Decades of work experience can be a huge advantage in coming up with ideas for a start-up and making a business work. "You want to start with something you already know how to do—a skill that you know you are already good at," says Jeff Williams, chief executive of Bizstarters.com. "The key to having a successful business is to find a problem that you can solve better than other people."

After retiring for two years, Lex Alexander, 57, launched 3 CUPS in 2008, named after the three fermented drinks it sells: wine, coffee, and tea. Alexander already had extensive experience in the retail food business: He started Wellspring Grocery in 1981, which merged with Whole Foods in 1991, and he remained with the company for 10 years. "Going back to work, you have to have this calling to somehow do something that contributes in a positive way," says Alexander. "For me, it is about preserving the places where these agricultural products come from and being a selling agent for these really great farmers and wine makers." The shop sells a vetted collection of high-end products, and each bottle of wine comes with a write-up explaining where the wine came from, how it was made, and why it was selected for the store. When he's not managing the Chapel Hill, N.C., store's 12 employees, Alexander also works part-time as a consultant for Whole Foods.

Find funding. You may have savings you can tap to launch a start-up, but it's risky to invest a large portion of your life savings so close to retirement. "You want to be very careful about using your retirement funds, because if your entrepreneurial venture doesn't work out, then you won't have many years to recover," cautions Dan Olszewski, director of the Weinert Center for Entrepreneurship at the Wisconsin School of Business. "You need to be able to feel confident that the worst-case scenario is something that you can live with." The majority of small business owners (70 percent) use their own savings as the main source of funding for their first business, according to a 2009 Kauffman Foundation survey 549 company founders in high-growth industries including computing, electronics, and health care. Less common sources of funding for first startups include bank loans (16 percent), friends and family (13 percent), venture capital (11 percent), and angel financing (9 percent).

Tap your network. Most people approaching retirement age have a large network of friends, associates, and colleagues, which can help you find suppliers, customers, and other support for your business. "A very large amount of people age 50 and older are very networked and you can save money and get sales leads through your network," says Williams. Reach out to your social network when you need ideas and assistance.

Prepare for more responsibility and flexibility. As a business owner, you'll have the flexibility to set your own hours and work at your own pace. But you are also ultimately responsible for hiring, firing, and meeting your budget. "The decisions you make you are very accountable for," says Bob Vomaske, 58, who left Hewlett-Packard and bought into IT engineering firm Vista Solutions Corporation in Fort Collins, Colo., in 2003. When business dropped off in 2009, Vomaske had to put some of his retirement savings into the business and reduce his staff from 20 to 13 people. "We've been profitable since April due to a combination of the business coming back and cutting ourselves to success," says Vomaske. "My object when I got into this was to make jobs for people. I want to get those people back."

Use your creativity. During her hour-long commute to work at Bank of America, Dorothy Atkins, 69, would make sketches with crayons and dream of doing more creative work. When she was offered a buyout in 2002, she welcomed the chance to try something new. Atkins launched a greeting card company, From Where I Sit, named for the brainstorming she did during her train rides to San Francisco. She now creates each card herself from old photographs, her own artwork, and sayings passed down in her family, and sells them at upscale boutiques and bookstores. "It supplements my retirement income and keeps me connected," Atkins says. "It motivates me every day to get up because I want to work on it."

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5 Key Elements to Retirement Planning

Most Americans have noticed that there is often more month than paycheck. Increasingly, people worry that they might have more retirement years than retirement funding. With limited resources, is it smarter to save money for your future retirement, or to use funds to pay off debt?

The short answer is that for most people, it's smart to pay off credit card and consumer debt before investing for retirement. Do it as quickly as possible, however, and then make saving a priority. Here are the facts about choosing to pay debt vs. retirement. Educate yourself, and make the right decision for your future.

1) Today, debt costs more than investments earn.
If you owe money, the interest you pay costs much more than you earn on investments. Here is an example: Credit cards currently have an average interest rate of 16.79 percent. The S&P 500 (one major marker of performance for the stock market, where many retirement funds are held) has provided a negative return over the past 10 years. That means if you had invested $10,000 in the stock market 10 years ago, you would have lost money on your investment. If, however, you had used that $10,000 in cash 10 years ago to pay off credit card debt, instead of making monthly minimum payments (that amount to 2 percent per month on the debt), you would have saved $11,000 in interest payments over that time period

2) Do pay into an employer-sponsored plan if possible.
If your employer offers a 401(k) or similar retirement savings plan, choose the automatic contribution option. As these contributions come from pre-tax income, they reduce your taxable income and thus let you invest and pay less in taxes. Plus, many employers match 401(k) contributions you make. Not participating means you might be walking away from adding 2 percent or more to your paycheck. It is, in effect, a paycheck for your future.

3) You do need to save for retirement when you can.
The average Social Security benefit for retirees is less than $1,200 per month. The number will increase with inflation, but that income is hard to live on without additional savings. Once you have paid off high-cost credit card debt, transfer some or all of those payments to retirement savings. It is still important to pay off other debt such as car loans and student loans, but try to save for retirement alongside those payments.

4) Make a plan, choose a number.
Retirees commonly will want to have about 80 percent of their pre-retirement income. These funds will come from Social Security and retirement savings (interest and principle). To reach that goal, many retirement planners estimate that people should save 10 percent to 15 percent of their gross income (wages before taxes and deductions) each year. Do your research to find a ballpark prediction for yourself. One example: A 35-year-old worker with $20,000 in a 401(k) should save about 7.5 percent of her annual income to have enough in retirement. Check the number again every few years. You can save via your employer plan or by opening an individual retirement account (IRA).

5) Get help now if you need it.
If you have so much debt that you cannot make even minimum payments, or are going deeper into a hole, seek help. A reputable debt settlement company provides one option; other options exist, too. It is better to handle debt during your working years than to carry it with you into retirement.

The sooner you learn to manage your money and eliminate debt, the sooner you will be able to plan for your future peace of mind. Make a promise to yourself that you will value your future enough to get rid of debt and save for your old age. You will feel good about treating yourself -- and your finances -- right.

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Economic Confidence Improves in America

Americans' confidence in the economy improved slightly in August, but the mood is still gloomy amid job worries, according to a monthly survey.

The Conference Board said Tuesday that its Consumer Confidence Index now stands at 53.5, up from a revised 51.0 in July. Economists surveyed by Thomson Reuters had expected 50.5. The increase comes after two straight months of declines.

It takes a reading of 90 or more to indicate a healthy economy — a level not reached since the recession began in December 2007. The index — which measures how Americans feel about business conditions, the job market and the next six months — had been recovering fitfully since hitting an all-time low of 25.3 in February 2009. But August's reading suggests that American confidence hasn't improved from a year ago, a bad sign for the economy and for retailers, which have been grappling with a weak start to the back-to-school season.

Economists watch confidence closely because consumer spending accounts for about 70 percent of U.S. economic activity and is critical to a strong rebound. But worries are rising the economy is growing too slowly to support sustained job growth, and some are concerned it could fall back into a recession.

"The comfort in (August's confidence figures) is that confidence did not fall further," Paul Dales, U.S. Economist at Capital Economics, said in a statement. "But there are few signs that households will ramp up their spending. High unemployment, widespread negative housing equity and low share prices are keeping households on the sidelines."

Still, investors, bombarded by piles of bad news about the economy, seized on the bigger than-expected increase in August's confidence figure. The Dow Jones industrial average is up 22, or 0.2 percent, at 10,032 Tuesday morning. The S&P 500 is up 1, or 0.1 percent, at 1,050. Stocks have been pummeled throughout the month because of uncertainty over signs of slowing growth.

Meanwhile, a widely watched home price index reported that home prices rose in June for a third straight month as now-expired tax credits inspired a burst of home buying. But prices are expected to fall through the rest of the year now that demand has faded.

The slight improvement in August's Consumer Confidence Index was boosted by shoppers' improved outlook over the next six months. That gauge rose to 72.5 from 67.5. The other, which measures how consumers feel now about the economy, decreased to 24.9 from 26.4.

"Expectations about future business and labor market conditions have brightened somewhat, but overall, consumers remain apprehensive about the future," said Lynn Franco, director of The Conference Board Consumer Research Center in a statement.

New figures issued Friday show the economy is weaker than expected, and the outlook for the rest of the year is looking bleaker. The Commerce Department reported that gross domestic product grew at a 1.6 percent rate for April through June. The initial estimate was 2.4 percent. Home sales are plunging, and consumers are saving more and spending less as the unemployment rate remains stuck at almost 10 percent.

The Standard & Poor's/Case-Shiller 20-city home price index released Tuesday posted a 1 percent increase in June from May and was up 4.2 percent from a year ago. Home prices nationally were up 4.4 percent in the second quarter compared with the first quarter. That was largely because buyers could take advantage of government tax credits of up to $8,000.

Home sales have dropped sharply since those incentives expired. Lending standards remain tight, and unemployment is stuck near 10 percent. Last week, the National Association of Realtors said sales of previously occupied homes in the U.S. fell 27 percent in July, the weakest showing in 15 years. It marked the largest monthly drop in the four decades that records have been kept. Meanwhile, the Commerce Department reported that sales of new homes fell 12.4 percent in July from a month earlier. July's pace was the slowest in at least 47 years.

Economists will closely watch Friday's reading on job figures for August, but they're bracing for more bad news. Economists surveyed by Thomson Reuters expect overall nonfarm payrolls to drop 100,000 jobs in August, dragged down by government cutbacks on the state and local level. Private employers were expected to add 54,000 jobs, which would mark the fourth straight month of tepid gains. Given the scenario, the unemployment rate is slated to tick up to 9.6 percent from 9.5 percent.

Against this background, consumers are waiting for the best deals and buying fashions that they can wear right away for the fall season. And stores don't expect shoppers to start spending anytime soon.

The Conference Board survey, based on a random survey mailed to 5,000 households from Aug. 1 to Aug. 24, showed shoppers remain worried about jobs. Those saying jobs are "hard to get" increased to 45.7 percent from 45.1 percent, while those claiming jobs are "plentiful" declined to 3.8 percent from 4.4 percent. Those expecting more jobs in the months ahead increased to 14.6 percent from 14.2 percent, while those anticipating fewer jobs decreased to 19.4 percent from 20.9 percent.

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Graduate College Debt Free

So, how do you graduate college debt free?

By taking a hard squint at your family's budget and picking a school with a tuition that won't burst the purse strings. Intuitive, rewarding in the long run, and impossible to fathom in an age when parents buy Mozart records in hopes of raising the new Harvard baby...

So what should you do if you'd like to erase student loans from your credit history?

1. Parents should refrain from cashing out their home equity lines and 401K accounts. Unless, of course, you'd like the 'rents to rely on social security and skimp on those winter getaways to Palm Beach.
2. Downsize, downsize, downsize. Quit smoking, drive your car for an extra year, and easy on those latte purchases. Also, GET A JOB AND QUIT MOOCHING.
3. FAFSA Form Woes: Understand that college financial aid accountants don't take into account how much your parents have saved for retirement, or how much of the housing mortgage they've paid down.
4. Choose the state school if you can't pay. Consider this your personal austerity program for a debt-free education.

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