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Friday, 27 April 2012

'Do I really need my savings to last until I'm 100?'

(MONEY Magazine) -- Why do I need my savings to last to age 100 if my average life span is much shorter? -- Mike Johnson, Fairfield, Ohio 

In "The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty," Stanford management-science professor Sam Savage illustrates the folly of planning using averages by recounting the tale of the statistician who drowns crossing a river with an average depth of three feet. The rub, of course, is that while the stream is shallow near the shore, it's 12 feet deep in the middle.

 The idea of using your average life span for estimating how long your savings will have to last in retirement is similarly all wet -- and could leave you in the unpleasant position of having no savings but a whole lotta living to go.

Life expectancy isn't an estimate of how long you are likely to stay alive. It represents the average number of years a person of a given age is expected to live. These days, the life expectancy of a healthy 65-year-old man is another 20 or so years, while for a woman of the same age, it's an additional 22 years.

Many people will live longer. As the above chart shows, a 65-year-old man has a 30% probability of living to 90; a 65-year-old woman has a 40% chance. And the chance that at least one member of a 65-year-old couple will be alive at 90 is higher -- 60%.

When you arrange your finances based on how long someone your age is projected to live, you may be giving yourself a false sense of security.


Let's say you're 65, have $500,000, and want to withdraw enough each year to live comfortably, but not so much that you'll spend your money too soon. If you assume your assets will have to support you for only 20 years, you could withdraw 5% of your savings initially and then increase it for inflation each year. With that regimen, you'd have about a 10% chance of depleting your money before age 85, according to T. Rowe Price's Retirement Income Calculator.

If you live longer the probability of your money running out rises. At the same withdrawal rate, it jumps to more than 30% if you live to 90, and almost 50% at age 95.

So if life expectancy isn't the right figure for retirement-planning, what is?

There's no single correct figure. In its Retirement Income Planner tool, Fidelity sets a default age of 92 for a 65-year-old man and 94 for a woman. T. Rowe Price's calculator uses 95 for all.

When Boston University economist Laurence Kotlikoff designed his ESPlanner retirement software, he set the target age at 100. "You have to plan for the possibility of reaching the maximum age because you might make it," he says. (All three calculators let you set a higher or lower age.)


In reality, the vast majority of us won't live to 100, or even our nineties. So how do you balance the risk of assuming too short a life span and spending down your assets too soon, vs. erring on the side of longevity and living more frugally than need be?

Deciding between those two possibilities is personal. My take is that the prospect of having to scrimp in your final years -- or, worse yet, depend on the kindness of others -- is more unsettling than the possibility of dying with unspent assets.

Unless you have serious health problems or a family history of dying young, plan on living into your early or mid-nineties. If your ancestors are long-lived, you may want to aim for 100. And couples may want to plan for a husband dying first since women have longer life spans on average.

Ultimately, you have no way of knowing when you'll depart this earth. Even online tools that fine-tune your life expectancy based on your health, behavior, and family history -- such as the one offered by Northwestern Mutual -- produce only an average.

Given that uncertainty, it pays to hedge your longevity bets another way once you retire: Devote a portion of your savings to an immediate annuity, which pays guaranteed income no matter how long you live.
What you don't want to do is plan as if your savings need to last only for an average life span. Do so, and you could find yourself in deep water later



7 ways to beat your worries

Can’t stop worrying? Try out our seven ways to beat the bother and boost your happiness. Whilst worrying is necessary for spurring us on to achieve our goals, chronic worrying can disrupt the balance in our nervous system and be detrimental to our health. Here are seven ways to wash away your worries:

How to stop worrying, tip 1: Forget the things you can’t change
If you’re worrying about something that’s happened in the past, you need to stop. The power of your mind isn’t strong enough to solve problems through panic, so it’s important to beat your worries by thinking logically and tackling them head-on. Bad memories from the past are toxic to our health and highly counterproductive so you must bury the burdens of your past and move on.

How to stop worrying, tip 2: Write a worry list
Write down everything you’re worried about; the bills, your job, the car MOT – everything. Then rate them on a scale of one to 10, with 10 being the things that are concerning you most. You can then turn your worry list into an action list. Take action on the worries that you rated the highest first, and then work through the rest of the list. You will feel a sense of relief each time you tick a worry off, and this is a sure-fire way to boost your happiness and relieve your worries.

How to stop worrying, tip 3: Discipline your thoughts
If you’re a chronic worrier, you need to learn to take control of your thoughts rather than letting them take control of you. To do this, every time you think a negative thought, you must turn it into a positive. Every time you worry, think “is this really helpful?” If the answer is no, turn the thought into a positive or forget it completely. Whilst this may seem difficult at first, it will eventually become second nature and you will find that turning a negative into a positive is a much more constructive way of dealing with your thoughts.

How to stop worrying, tip 4: Distract yourself through relaxation
When we’re worried – particularly about a number of things at once – our brains don’t tend to find a logical solution to our problems. In order to think logically, we must take the time to relax and unwind. Breathe in through your nose, and out through your mouth. After a couple of minutes of relaxation, the tension will leave your body and you will be in a better position to tackle the problem from a fresh perspective.Woman relaxing in bath with candles

How to stop worrying, tip 5: Talk to friends and family
A problem shared is a problem halved. Talk to your family, your friends, or a doctor if you have a good relationship with them. Sometimes saying your problems out loud can get your thoughts straight in your head and if you’re worrying about something useless, saying it out loud can make you realise that it’s just not worth the worry. With those close to you, you can laugh, cry, and moan as much as you like without being judged and this is a healthy way to relieve stress.

How to stop worrying, tip 6: Confront the problem head-on
Some worries can’t be tamed through talking to others or relaxation. A problem that won’t go away until you physically do something about it needs to be confronted head-on. Sometimes, we have so much on our mind that we don’t know what to deal with first. Make a decision on which problem you want to solve and how you will go about it, and then stick to it. You will probably find that once you resolve the problem, you’ll wish you’d done something about it sooner.

How to stop worrying tip 7: Put things into perspective
Don’t be overwhelmed by small things; try and see the bigger picture. Is your problem really as bad as you’re making it out to be? The chances are there will be many people worse off than you. Instead of zoning in on certain things and panicking about them, put everything into perspective. Does this problem affect your entire life? Will you still be panicking about this in a few weeks or months time? If the answer is no, then it’s really not worth the worry.

Thursday, 26 April 2012

New test to prove whether you are a 'workaholic'

LONDON - A new test devised by psychologists could now determine once and for all whether you are officially addicted to work.

In a world of long hours, instant access to emails and fierce competition in the office, there is a fine line between being a keen employee and a workaholic.

But research, by scientists at the Nottingham Trent University and the University of Bergen, has now tested 12,000 workers to find out the key elements of "workaholism".

The study, the first of its kind in the world, also found that work addiction was getting "worse" and blamed the blurring of boundaries between the home and office making it harder to "switch off".

The Daily Telegraph reported that the questions come in the form of statements which participants must answer on a sliding scale of 1, to represent "never", 2 meaning "rarely", 3 meaning "sometimes, 4 for "often" and 5, representing "always".

They include "You think of how you can free up more time to work"; "You spend much more time working than initially intended"; and "You work in order to reduce feelings of guilt, anxiety, helplessness and depression".

Other potentially revealing statements are: "You have been told by others to cut down on work without listening to them"; "You become stressed if you are prohibited from working"; "You deprioritise hobbies, leisure activities, and exercise because of your work"; and "You work so much that it has negatively influenced your health."

Those who score a 4 or 5 on four or more of the seven questions may be considered workaholics.

The results of the study, led by Dr Cecilie Schou Andreassen, have now been published in the Journal of Psychology.

It is yet to be determined whether those who truly are classed as "workaholics" will have the time to consider completing such surveys. AGENCIES

5 Strategies to Pay Down Credit Card Debt

LONDON - A new test devised by psychologists could now determine once and for all whether you are officially addicted to work.

In a world of long hours, instant access to emails and fierce competition in the office, there is a fine line between being a keen employee and a workaholic.

But research, by scientists at the Nottingham Trent University and the University of Bergen, has now tested 12,000 workers to find out the key elements of "workaholism".

The study, the first of its kind in the world, also found that work addiction was getting "worse" and blamed the blurring of boundaries between the home and office making it harder to "switch off".

The Daily Telegraph reported that the questions come in the form of statements which participants must answer on a sliding scale of 1, to represent "never", 2 meaning "rarely", 3 meaning "sometimes, 4 for "often" and 5, representing "always".

They include "You think of how you can free up more time to work"; "You spend much more time working than initially intended"; and "You work in order to reduce feelings of guilt, anxiety, helplessness and depression".

Other potentially revealing statements are: "You have been told by others to cut down on work without listening to them"; "You become stressed if you are prohibited from working"; "You deprioritise hobbies, leisure activities, and exercise because of your work"; and "You work so much that it has negatively influenced your health."

Those who score a 4 or 5 on four or more of the seven questions may be considered workaholics.

The results of the study, led by Dr Cecilie Schou Andreassen, have now been published in the Journal of Psychology.

It is yet to be determined whether those who truly are classed as "workaholics" will have the time to consider completing such surveys. AGENCIES

4 Changes in the Hiring Market

By Farnoosh Torabi

Slaving over your resume to land a new job? You may be focusing too much on the wrong thing. Recent trends are pointing to changes in the job market – and if you can meet some of these new hiring standards, experts say, you’ll be high in demand.

Niche Expertise
First, if you think it’s better to be good at 10 things instead of amazing at just one, think again. According to researchers at MBO Partners, employers will be more focused on hiring experts and highly skilled workers in 2012. In other words, niche will be necessary.

“I think it’s going to be a lot harder to get a great job if you’re too much of a generalist,” says certified career coach and job interview specialist, Pamela Skillings. “Employers are really looking for someone to be that go-to expert, that authority on the job.”

Mature Workers
According to a new CareerBuilder survey, 43 percent of employers say they plan to hire workers age 50 and above this year, up from 41 percent in 2011. What’s more, three out of four employers said they would consider an overqualified worker above age 50, with many saying it’s due to the fact that mature candidates “bring a wealth of knowledge to an organization and can mentor others.”

Skilling hopes this means that older workers will finally be getting the praise - and pay - they deserve. “Unfortunately older candidates have been discriminated against in the past but I think that’s shifting a little bit. I think companies have been burned hiring the cheaper young candidate and now they’re thinking they want that expert ... and an expert often comes with years of experience.”

Freelancing Flexibility
Researchers at MBO Partner also predict that by 2020 more than half of the private workforce will be "career independent," or self-employed, so expect to see more openings for contract work, as opposed to full-time staff positions.

“Both companies and candidates are looking for more flexibility and a contract workforce provides that,” Skillings says. Contingent workers also allow companies to stay lean and avoid hiring more permanent workers, which are more expensive because of benefits, such as health insurance, paid vacations and sick days, she adds.

More Than Just a Resume
Paper resumes are losing their luster. Employers are increasingly judging applicants based on their online profiles at sites like LinkedIn. They’re also searching for videos of job seekers online and evaluating how they respond to online quizzes.

“You still need that resume to back you up, but it’s no longer that all-important first impression,” says Skillings.

Monday, 9 April 2012

Living Like a Billionaire, if Only for a Day

By KEVIN ROOSE

I HAVE a major problem: I just glanced at my $45,000 Chopard watch, and it's telling me that my Rolls-Royce may not make it to the airport in time for my private jet flight.

Yes, I know my predicament doesn't register high on the urgency scale. It's not exactly up there with malaria outbreaks in the Congo or street riots in Athens. But it's a serious issue, because my assignment today revolves around that plane ride.

"Step on it, Mike," I instruct my chauffeur, who nods and guides the $350,000 car into the left lane of the West Side Highway.

Let me back up a bit. As a reporter who writes about Wall Street, I spend a fair amount of time around extreme wealth. But my face is often pressed up against the gilded window. I've never eaten at Per Se, or gone boating on the French Riviera. I live in a pint-size Brooklyn apartment, rarely take cabs and feel like sending Time Warner to The Hague every time my cable bill arrives.

But for the next 24 hours, my goal is to live like a billionaire. I want to experience a brief taste of luxury - the chauffeured cars, the private planes, the V.I.P. access and endless privilege - and then go back to my normal life.


The experiment illuminates a paradox. In the era of the Occupy Wall Street movement, when the global financial elite has been accused of immoral and injurious conduct, we are still obsessed with the lives of the ultrarich. We watch them on television shows, follow their exploits in magazines and parse their books and public addresses for advice. In addition to the long-running list by Forbes, Bloomberg now maintains a list of billionaires with rankings that update every day.

Really, I wondered, what's so great about billionaires? What privileges and perks do a billion dollars confer? And could I tap into the psyches of the ultrawealthy by walking a mile in their Ferragamo loafers?

At 6 a.m., Mike, a chauffeur with Flyte Tyme Worldwide, picked me up at my apartment. He opened the Rolls-Royce's doors to reveal a spotless white interior, with lamb's wool floor mats, seatback TVs and a football field's worth of legroom. The car, like the watch, was lent to me by the manufacturer for the day while The New York Times made payments toward the other services.

Mike took me to my first appointment, a power breakfast at the Core club in Midtown. "Core," as the cognoscenti call it, is a members-only enclave with hefty dues - $15,000 annually, plus a $50,000 initiation fee - and a membership roll that includes brand-name financiers like Stephen A. Schwarzman of the Blackstone Group and Daniel S. Loeb of Third Point.

Over a spinach omelet, Jennie Enterprise, the club's founder, told me about the virtues of having a cloistered place for "ultrahigh net worth individuals" to congregate away from the bustle of the boardroom.

"They want someplace that respects their privacy," she said. "They want a place that they can seamlessly transition from work to play, that optimizes their time."

After breakfast, I rush back to the car for a high-speed trip to Teterboro Airport in New Jersey, where I'm meeting a real-life billionaire for a trip on his private jet. The billionaire, a hedge fund manager, was scheduled to go down to Georgia and offered to let me interview him during the two-hour jaunt on the condition that I not reveal his identity.

I arrive several minutes after the billionaire, breaking the cardinal rule of private aviation: never be later than the owner of the plane.

Still, he lets me board. I walk to the tarmac and straight onto the Gulfstream IV, before settling into a supple leather armchair that swivels 360 degrees and reclines to flat at the push of a button. A flight attendant greets me by offering me coffee and a yogurt parfait.

I'm outfitted for the day in a navy pinstripe suit, picked out by Clifton C. Berry, who outfits Wall Street workers with his own line of bespoke menswear. It's probably the best I've looked all year. But I'm way overdressed for a meeting with the billionaire, who is wearing a sweater, jeans and sockless loafers.

During the trip, I ask the billionaire what it's like to be among the richest people in the world.

"Look," he says. "I think all it does is make things easier."

Like most of the wealthy people I've met while covering Wall Street, he plays down the effects of money. "I don't think it changes you that much," he said. "The happy guy who makes tons of money is still happy. If somebody's a jerk before, he's a jerk when he's got a billion dollars."

A raft of studies, including one in 2010 by Princeton researchers Daniel Kahneman and Angus Deaton, has underscored the fact that the rich are no happier than the merely comfortable, and are often burdened by the same problems: health and work issues, family concerns and worries about making ends meet.

I reached out to Dr. Jim Grubman, a clinical psychologist who specializes in wealth, to help me understand this idea that billionaires are, in essence, just like us.

"It goes against what we've been told our whole lives," he tells me. "But it's true."

Still, two hours later, when the billionaire and I touch down in Sea Island, Ga., it's hard to see the similarities. As we deplane, a classic Mercedes convertible is waiting. We jump in, and he ferries me around the resort, with its multimillion-dollar villas and perfectly manicured golf courses.

Everywhere he goes, he gets four-star service. Doors are opened, luggage is carried away wordlessly, and at one point, warm chocolate chip cookies magically appear. When his brakes sputter and his convertible starts spewing smoke, he picks up another Mercedes.

"Somebody's got to live this life," he says, gesturing to the pristine view from his penthouse villa. "God decided it should be me."

Three hours later, after my flight back to New York, I'm greeted by Steve Rubino, a former police detective from Florida who has been hired to be my "personal protection professional" (read: bodyguard). Mr. Rubino's company, Risk Control Strategies, is a major player in the world of high-end security, outfitting tycoons with fancy home security systems and protecting them while traveling.

"We have to train our clients sometimes," said Mr. Rubino, who charges $250 an hour for his services. "It can be uncomfortable if you're not used to having security. But people get used to it."

Mr. Rubino, tailing me through Times Square, accompanies me to my next appointment: a personal training session at Sitaras Fitness.

Waiting for me when I arrive is John Sitaras, a former bodybuilder who has trained the former General Electric chief John F. Welch Jr., the hedge fund macher George Soros and Paul A. Volcker, the former Federal Reserve chairman. The 140-odd members of his gym pay upward of $13,000 a year to train among fellow moguls in a sparse, spotless 12th-floor facility.

"Let's go, champ," Mr. Sitaras said, after I suit up leisurely in the locker room. "No wasted time in here."

One personal trainer might be good enough for a mere mortal, but Sitaris Fitness clients work with two-trainer teams. While Mr. Sitaris leads me in a set of upright rows, a second note-taker records my progress and fetches weights and artesian Voss water.

One thing I've noticed so far is that when you're a billionaire, you're never alone. All day, your life is supervised by a coterie of handlers and attendants catering to your whims. In the locker room alone after my workout, I feel unsettled. Where's my bodyguard? Where's my chauffeur? Why is nobody offering me an amuse-bouche while I shampoo my hair?

I asked Dr. Grubman, the psychologist to the wealthy, if a billionaire's lack of privacy eventually becomes second nature. "For these people, being able to be alone and relaxed with those people who are around you is rare," he said.

I feel bad admitting it, but my billionaire day has been stressful. Without an assistant, just keeping up with the hundreds of moving parts - the driver, the security detail, the minute-by-minute scheduling - has been a full-time job and then some.

When my night ends well after midnight, after a performance of Macbeth at the Metropolitan Opera and a raucous trip to a burlesque-themed nightclub called the Box, something funny happens. I realize that I'm experiencing the sensation that psychologists call "sudden wealth syndrome."

The feeling is one of cognitive dissonance, a quick oscillation between repulsion and attraction. I'm drawn on one level to the billionaire lifestyle and the privilege that comes with it. But the lifestyle is so cartoonish, so over-the-top flamboyant, that I'm not sure I could ever get used to it.

Dr. Grubman assured me that if I were an actual billionaire, I would resolve the dissonance in time. Luckily, I don't have to. When I wake up the next morning, my Timex watch, bought on sale a couple of years ago, goes back on my wrist. I put on my unshined shoes and slip on my blue jacket, the one with a hole in the pocket.

On my way to the subway, I stop in at my local coffee shop and order a cappuccino. It's slightly burnt, like always. But this morning, in the haze of my hangover, it tastes rich. Really, sublimely rich.

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