Without the proper precautions in place, you may unknowingly be putting your financial well-being at risk. Learn what you can do to help safeguard your hard-earned money.
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Make Your Money Last

In an age of diminished expectations for investment returns, these tips will help you stretch retirement funds.

Stingy stock returns are threatening to upend the standard rule of thumb for making your money last: Withdraw 4% of your assets the first year you retire, adjust annually for inflation, and you'll have nearly a 90% chance of your money lasting 30 years. But that calculation assumes 8% returns for stocks, 5% for bonds. Given today's low interest rates and choppy stock market performance, some advisers suggest starting at 2% or 3%. Too little to live on? Learn to balance conservatism and cash flow.

Lock in a Minimum
Even without a pension, you can collect a guaranteed check every month for life by buying an immediate annuity. The strategy: Put enough in an annuity so that the income it produces, combined with Social Security, covers your basic living expenses. Let the rest of your portfolio keep growing. (Even the federal government is getting behind this strategy: In February the Treasury Department proposed making it easier for workers to buy annuities in 401(k) plans.)

Annuity payouts depend on your age and current interest rates, so today the checks are smaller than they were five years ago, says New York City financial planner and C.P.A. Michael Goodman. His advice: Buy three annuities over a decade so that you don't invest all your money when rates are low.

Stay Nimble
Instead of relying on one withdrawal rate, says Vanguard's Maria Bruno, "be flexible and make adjustments along the way." When markets do well, you could take out 5% or 6%. In down times for stocks, dial back. Once a year, sit down with a calculator and come up with a safe withdrawal amount based on your expenses and your portfolio's performance.

Minimize Taxes
Once you start cashing out traditional IRAs and 401(k)s, the government takes a bite (withdrawals are taxed as ordinary income). The conventional wisdom is to draw from taxable investments first and let retirement-plan money grow tax-deferred. Save Roth IRAs for last, since you never have to take withdrawals.

That's a guideline, not a hard-and-fast rule. Sometimes it pays to play with the order, says Bill Meyer of advisory firm Retiree Inc. If, say, 401(k) withdrawals push you into a higher tax bracket, take out just enough to stay in a lower bracket and pull the rest from your Roth.

Stay on Target by Focusing on These Milestones

Age 60
By this point you should have set aside 8.1 times your pay for retirement.

Age 62
Wait to collect Social Security. Until age 70, your benefit grows by 8% each year you delay. Test out scenarios at

Age 63
Downsize to cut housing expenses like taxes, utilities, insurance and upkeep. The average tab for a $350,000 home is $10,500 a year. For a $200,000 home it's $6,250 annually.

Age 65
Consider working for two more years or taking on a part-time job. Working until 67 bumps the probability of never running out of money from 70% to 85%.

Age 66
Get physical. Active seniors have lower risk of cognitive decline and depression, as well as better health. Exercising once a week cuts hospitalizations by 8% and health care costs by $1,057 a year.

Age 67
Hey, you can squeeze in one more year at work. Plus, seniors who do paid work report better physical and emotional health. The odds of your money lasting will be 90%.

Age 70
Register for a home swap at to save on travel.

Note: Savings ratio assumes retiring at 65 on 70% of preretirement pay.

Sources: Charles Farrell, Your Money Ratios; Employee Benefit Research Institute; Centers for Disease Control and Prevention; Social Security Administration; Tax Foundation; Freddie Mac; T. Rowe Price; Center for Retirement Research;

Mercer HR Services, LLC and Mercer Trust Company do not provide investment, legal or other advice and are not responsible for the opinions contained in this article. This article represents the opinions of the author and not those of Mercer HR Services, LLC or Mercer Trust Company.

Adapted from the April 2012 issue of Money. © 2015 Time Inc. All rights reserved.

Protect Your Legacy

Worried that your heirs will squander the fruits of your labor? You can keep funds out of their reach until they’re ready.

You’ve saved enough to leave a parting gift for the kids, but will they use their inheritance wisely? You’re not alone if you’re concerned: 35% of people are crafting their estate plans to avoid mismanagement of money by their heirs, a recent survey from WealthCounsel found. Luckily, there’s a lot you can do now to make sure your children won’t have you rolling in your grave.

Prep Them for What's Coming
Don’t let your will reading be the first time an heir hears about his inheritance. Meet with adult beneficiaries to lay out your desires for your legacy. "Children who talk with their parents about this are much more responsible in planning for their future with the money," says Waltham, Massachusetts. financial planner Lea Ann Knight. She suggests giving kids the option to see a financial advisor or take a finance course if they’ll inherit more than 50% of their income. That way, you can rest assured that they will avoid missteps because of financial ignorance.

Give Them Practice
Consider passing down some cash during your lifetime so that you can guide your heirs while you’re still around, suggests Ann Arbor financial planner David Shotwell. You and your spouse can each give up to $14,000 per person in 2015 and 2016 without having to report the gifts to the IRS or having them count against your estate tax exemption. "Kids will make mistakes," adds Knight. "This way they can make them without blowing the whole inheritance."

Trust a Trustee
A trust helps guarantee that your legacy is used as you intended. This document, which can be drafted by an estate attorney for $1,600 to $3,000, places the management of funds in the hands of someone you appoint, be it a friend, family member or third party such as a bank. You can leave instructions on when the money will be doled out. A third party will follow these to the letter, while a person who knows you can exercise judgment on what you’d want for your child, says Jonathan Blattmachr of the American College of Trust and Estate Counsel.

Attach Some Strings
You can include additional hoops within a trust. Incentive trusts force an heir to meet requirements to receive funds, such as earning a degree or passing a drug test; staggered trusts pay out incrementally, giving heirs a chance to mature as money is disbursed. Such arrangements can cause resentment, so explain yourself and treat each beneficiary independently. Also, beware of making guidelines too strict. "The more structured the trust," says Austin, Texas financial planner Natalie Pine, "the more likely it’ll do something you didn’t intend."

Mercer HR Services, LLC and Mercer Trust Company do not provide investment, legal or other advice and are not responsible for the opinions contained in this article. This article represents the opinions of the author and not those of Mercer HR Services, LLC or Mercer Trust Company.

© 2015 Time Inc. All rights reserved.

The Trouble With Working Longer

Earning money after you start collecting Social Security can be a tax headache.

The question of when and how to file for Social Security is a tough one for many retirees — I've been regularly fielding questions on the topic on Recently a reader wrote to say he'd like to draw Social Security benefits at age 66 yet keep working until 75. What are the tax implications?

When you continue to work and draw Social Security, your benefits are reduced temporarily if you're 65 or younger and your outside income exceeds certain levels. After 65, these reductions do not apply. You may, however, owe taxes on your Social Security income.

How Earnings can Hurt
Not all of your Social Security income is taxable. Social Security uses a measure it calls "combined income" to determine how much of your benefit is taxable, and it can be tricky to understand.

To determine your combined income, take your adjusted gross income (check last year's tax return), then add any nontaxable interest income and half of your Social Security benefit. (If you haven't started claiming, you can get a projection online by setting up an account at If the total is less than $25,000 ($32,000 on joint tax returns), you owe no income taxes on your Social Security benefits. If the total is between $25,000 and $34,000 ($32,000 and $44,000 on joint returns), you may have to pay taxes on half of your Social Security that's over that threshold. Above that, 85% of your benefits may be taxable — the top rate.

Here's how that could play out. Take a retiree in the 15% federal tax bracket who is taxed on 50% of his Social Security. When he earns another $1,000, his so-called combined income rises by that much too, subjecting another $500 of Social Security income to taxes. So the tax bill on that $1,000 won't be $150 (15% of $1,000) but $225 (15% of $1,500), for an effective rate of 22.5%.

Your Workarounds
Beefing up your tax-free holdings, especially Roth IRAs, can mean money coming in that won't trigger more taxable Social Security income. (Working less lowers your tax bill too, but you're usually better off earning the money.)

If you can live on just your salary, deferring Social Security until age 70 also helps. Your taxes should be lower while you wait. And delaying benefits will increase your monthly Social Security payments by 8% a year (plus annual inflation adjustments).

Hedging Your Bets
Single retirees should think about one other option: filing for and suspending Social Security benefits at age 66. By doing so you will be able to request a lump-sum payment for all the suspended benefits anytime until age 70.

Even the best of plans can change, so that payment could come in handy if you face an emergency cash crunch. But there's a downside: Once you request a lump sum, your payout will be valued as if you took benefits at 66, as will your regular monthly benefit going forward.

Mercer HR Services, LLC and Mercer Trust Company do not provide investment, legal or other advice and are not responsible for the opinions contained in this article. This article represents the opinions of the author and not those of Mercer HR Services, LLC or Mercer Trust Company.

Adapted from the March 2015 issue of Money. © 2016 Time Inc. All rights reserved.

Saving for Health Care in Retirement

If you think health care is expensive now, have you considered what it might cost you in retirement?

The truth is, it’s likely to be one of your biggest expenses. According to a recent Mercer survey, only 22 percent of U.S. employees believe they will have enough money to pay for their health care in retirement.1 If this describes you, it’s time to boost your confidence by making a plan.

Crunch the Numbers
The total amount you’ll need to cover health care expenses in retirement depends on many factors, including your life expectancy, your retirement age and the rate at which health care costs increase. For example, the Employee Benefit Research Institute estimates that in 2014, a woman would need $131,000 saved and a man would need $116,000 saved in order to be confident of covering their health care costs in retirement. If your retirement is still years away, it’s safe to assume your number will be higher.

However, these estimates do not include the costs of long-term care. The U.S. Department of Health and Human Services estimates that about 70 percent of people over age 65 will require some type of long-term care services during their lifetime — and that comes with a steep price tag. For example, according to a 2015 Genworth study, the median annual rate for nursing home care in the U.S. is $80,300.2 Some quick math, and we can see that five years in a nursing home could cost more than $400,000.

As you’re considering what your future health care expenses might look like, it’s also important to know how government programs, like Medicare, may play a role. For example, Medicare will generally help cover a range of services and supplies deemed medically necessary, like hospital visits, preventive care and medical equipment. But it won’t cover long-term care in a nursing home for people who need help with basic daily activities, like bathing and dressing. Visit to see more information about what’s covered and what’s not.

To get a clearer picture of your future health care costs:

Budget for it
No one can know for sure how healthy they will be in the future or exactly what their health care might cost. That’s why it’s so important to plan ahead as best you can — and that means factoring in health care as a big part of your total retirement expenses. Also consider:

By preparing now, you can feel more confident that you’re ready for both the fun and the necessities that retirement will bring.

Need Some Help?
When in doubt, turn to a financial adviser who can help you prepare for future health care costs. If you’re searching for a financial adviser, visit reputable websites such as the Financial Planning Association or the National Association of Personal Financial Advisors.

1 Mercer’s 2015 Inside Employees’ Minds survey.
2 Genworth 2015 Cost of Care Survey; cost is for a semiprivate room.
3 Employee Benefit Research Institute, October 2014 report. Estimates do not include the costs of long-term care.

Copyright 2016 Mercer LLC. All Rights Reserved.