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Thursday, 28 June 2012

Want to Live to 100? Sleep

Your chances of reaching age 100 could be better than you think – especially if you get some additional sleep and improve your diet.

New research from UnitedHealthcare looks at centenarians and baby boomers, asking the former about the “secrets of aging success” and evaluating whether the latter are taking the necessary steps to celebrate a 100th birthday.

The primary findings: Many boomers are embracing lifestyles that could lead to a long and rewarding life – with two exceptions. More than seven in 10 centenarians – 71% – say they get eight hours or more of sleep each night. By contrast, only 38% of boomers say they get the same amount of rest. And when it comes to eating right, more than eight in 10 centenarians say they regularly consume a balanced meal, compared with just over two-thirds (68%) of baby boomers.

The report – “100@100 Survey” – begins with some startling numbers. As of late 2010, the U.S. had an estimated 72,000 centenarians, according to the Census Bureau. By the year 2050, that number – with the aging of the baby-boom generation – is expected to reach more than 600,000. Meanwhile, an estimated 10,000 boomers each and every day – for the next decade – will turn 65.

How to reach 100? Centenarians point to social connections, exercise and spiritual activity as some of the keys to successful aging. Among surveyed centenarians, almost nine in 10 – fully 89% – say they communicate with a family member or friend every day; about two thirds (67%) pray, meditate or engage in some form of spiritual activity; and just over half (51%) say they exercise almost daily.

In each of these areas, baby boomers, as it turns out, match up fairly well. The same percentage of boomers as centenarians – 89% – say they’re in touch with friends or family members on a regular basis. Sixty percent of surveyed baby-boomers say spiritual activity is an important part of their lives, and almost six in 10 boomers (59%) exercise regularly.

Again, sleep and diet are the two areas where baby boomers come up short. Not surprisingly, the one area where boomers are more active is the workplace. Three-quarters (76%) of surveyed baby boomers say they work at a job or hobby almost every day; that compares with 16% of centenarians.

Finally, researchers turned to cultural affairs and asked centenarians and boomers to identify – from a list of 14 notable people (including President Obama, singer Paul McCartney and actors Tom Hanks and Julia Roberts) – their preferred dinner guest. The top choice among centenarians and boomers alike: the comedian Betty White.

Basic Rules for Getting Rich

1) Focus on what's most important

In achieving wealth, how you invest isn't nearly as important as how much you save.

Say you're 40, have $200,000 saved, with 60% in stocks, and are putting away 10% of a $100,000 salary (including company match). You have a 52% chance of retiring with 70% of your pre-retirement income, according to T. Rowe Price.

Boost your stock stake to 80%, and your chances improve modestly, to 57%. But if you boost your savings to 15% instead, you get to 69%.

Message: Stretch to save the most you can.

2) Make a family decision

62% of couples don't agree on their expected retirement age.

The age at which each of you will retire determines how much money you'll need. If you're among the multitude of couples that the Fidelity survey (cited above) found were not on the same page, make some time to talk with your partner about when you'll quit and what you'd like your life to be like.

3) 3 ways to get out of debt


Credit cards are almost never "good" debt, yet professional and managerial workers -- who theoretically should know better -- still carry a median balance on plastic of $3,300, according to the Federal Reserve's most recent Survey of Consumer Finances. Even such a small amount can be deleterious, since you're paying around 15% in interest.

Three ways to get out of the red:

Just pay it off. Behavioral research finds, oddly, that people often save in cash while carrying credit debt. That's a -15% rate on credit vs. 0.13% on savings. See the problem? If you've got enough cash to cover the balance, use it.

Get a 0% card. Interest-free balance-transfer offers are back in a big way. If you think you'd be able to pay off your total debt within 15 months, get one of these cards, and bank what you would have paid in interest.

Break out the tools. Can't pay your debt in 15 months? Use the tools at creditcards.com/calculators to come up with an aggressive schedule to erase the debt. The sooner your IOU is wiped away, the sooner you're back on the wealth-building track.

4) Fill up your 401(k)

Only 12% of 401(k) investors stash away the maximum amount allowed -- $17,000 in 2012 for those under 50 -- reports Vanguard. In fact, the average investor puts in 7.1% of pay, basically just enough to get the employer match.

Need motivation to pump up your percentage?

The value of your retirement plan at 65, starting at 40 with $0 and saving 7.1% of $100,000 salary: $614,000. If you saved the max, the value of your plan at 65 and starting at 40 with $0, would be $1,300,000.

Notes: Assumes 3% annual raises, 7% annualized return, and the 2012 maximum of $17,000.

But also save outside it. Those earning higher wages may need to save more than a 401(k) allows. Next best vehicle: a Roth IRA. The money is saved after tax, so withdrawals in retirement are tax-free. Couples with adjusted gross income up to $173,000 can add $5,000 in 2012 (partial contributions allowed up to an AGI of $183,000). Save the max for 30 years, and you'll net $505,400, assuming 7% annualized returns.

Don't forget to play catch-up. Who says there are no benefits of aging? Folks 50 and up can stash an extra $5,500 in a 401(k) and $1,000 in an IRA per year. But only 32% of those eligible take advantage, according to a TD Ameritrade poll. Too bad, since if you play catch-up on both a 401(k) and IRA each year for a decade, you'll end up with about $96,000 more in your account at 60.

5) Get the mix right

Yes, in 2008-09, investments plunged en masse. But over time assets tend to perform differently. So a diversified mix -- like the to the left, from Rick Ferri of Portfolio Solutions -- reduces risk to keep you on track.

6) Get a pro to help with the plans

Participants in 401(k) plans who receive some form of guidance earn annual returns an average three percentage points higher than those who don't, according to Aon Hewitt and Financial Engines. You may be able to get financial advice for free; an increasing number of companies offer it as a benefit. Ask HR

7) Know your number

People who have calculated the total amount they'll need to retire have more saved than those who haven't, the Employee Benefit Research Institute recently found.

[Related: 10 Countries Where Retirees Live Large]

Not among the 42% of workers who've run this math? It's easy enough to do: Plug your info into the "How much will you need for retirement" calculator.

Strategize, don't improvise. Go a step beyond simply knowing the target -- know how to hit it.

A study last year conducted at the University of California at Irvine found that people who had a specific plan for their savings amassed between 28% and 85% more than those who didn't. "A formal plan makes you a more disciplined saver," says Chicago financial planner Cicily Maton. The "What you need to save" tool can help you determine how much to put away.

8) Money magazine readers speak up

Get progress reports

"We keep track of our net worth using an Excel spreadsheet, and we put all our monthly updates in a binder so we can look back on how far we've come. This motivates us to keep saving and investing and to keep our expenses to a minimum." -- Lori Watts, Allen, Texas

Make your savings untouchable

"I keep a separate savings account that I'm not able to view with my ATM card. I can only see it online. Doing this ensures that I do not take money out of the account -- it's out of sight, out of mind." -- Jay Albino, Stony Point, N.Y.

9) Set goals, but not too many

People who set fewer, more integrated financial goals saved nearly five times as much as those who set many unrelated ones, a recent study from the University of Toronto found.

Reason: With too many things to save for, you spend more time weighing priorities and less time taking action.

Limit yourself to three main goals -- say, retirement, Junior's college, the emergency fund -- then articulate a theme that describes them, like "improving my family's financial security."  

Monday, 25 June 2012

Be afraid: Some in U.S. see shades of 2008 in euro crisis

By Jennifer Ablan and David Gaffen

REUTERS - Grim. Serious. Terrifying. Nerve-rattling.

These are the words some prominent American investors and strategists are using to describe the worsening debt crisis in the euro zone and its impact on the global economy.

While growth has been slowing in China and the United States and companies warn about the effect on earnings, there is a mounting sense among the financial community that politicians and markets are operating on two completely different timelines.

They see a fractured Europe fiddling in the near term, attempting to seal one fissure as another larger one appears while they talk about a five-to-10-year timeframe for real solutions, such as a more fiscally integrated euro zone. They see investors who want solutions in the next few weeks and months or else nations like Spain and Italy could find they cannot borrow at all on capital markets, starting an economic firestorm that would make today's problems seem mild.

Some even suggest markets are taking on shades of the 2008 global crisis, with the potential for a collapse in investor confidence, bank runs in Europe and a seizure for the global financial system.
"History may not repeat but it often rhymes. The fear is that it could be a replay of 2008. The reality is that the potential for a replay of 2008 on steroids is not exactly zero," said Bonnie Baha, portfolio manager at DoubleLine Capital, which oversees $35 billion. Baha, who is based in Los Angeles, was speaking while visiting Europe last week.

Added financier Steve Rattner, who is the former head of the U.S. auto task force, "We should be terrified about the euro crisis because the Europeans are trying to fix a deeply flawed system with the equivalent of Band-Aids,"

And Dan Fuss, vice chairman and portfolio manager at Loomis Sayles, which oversees $172 billion in assets, sees little reason not to be very worried. "We have uncertainties of the wrong kind. Bringing the political cohesion together has proven to be more difficult than I had thought. The headlines coming out of Europe are scary."

To be sure, while these are the views of highly credible investors, they are not necessarily the mainstream. Most economists and strategists still think Europe will be able to muddle through its problems as it has for the past few years. And while the majority of them see weak growth in the United States, they don't expect the economy to slip into a recession.

But most economic pundits were wrong in 2008 when they didn't foresee the financial crisis, and this time around even the optimists have had to pull back their U.S. and global growth expectations in recent months.

What's more, some investors and economists say central banks, including the Federal Reserve, are running low on ammunition after having loosened monetary policy considerably.

The economic crises in global history that have stemmed from excessive debt and financial leverage have proved to be the deepest. And while the United States has managed to maintain slow, if steady economic growth, many European countries are dealing with the threat of deep recessions: very high unemployment and intractable deficits that are only worsening because of the lack of growth.

The modest stimulus measures that have been talked about - top euro zone leaders agreed at a meeting this week to spend 130 billion euros to seek to revive growth and the European Central Bank may cut interest rates at its meeting on July 5 - may be too little, too late given the tsunami of debt some nations in the euro zone face.

"The realization that Spain will most probably need a bailout by the EU has rattled investors' nerves," Baha of DoubleLine said.

Spain, the fourth-largest economy in the euro zone, will need between $350 billion and $400 billion to stabilize conditions in the wake of a real-estate crash, according to Mark Grant, managing director at Southwest Securities Inc., who has been one of the biggest bears on the euro zone throughout the crisis.

"I do not think most people realize how serious the situation is with Spain," Grant said.
Grant, who forecast Greece was going to go bankrupt in January 2010, said on Sunday, "I fear the shades of 2008 are almost upon us once again and the increasing darkness is discernible."

The atmosphere was hardly helped on Sunday when German Finance Minister Wolfgang Schaeuble told Bild am Sonntag in unusually blunt language that Greece's new coalition government should stop asking for more help and instead move quickly to enact more reform measures that had been agreed in return for previous bailouts from European partners. The new Greek government has indicated in a proposal seen by Reuters that it wants tax cuts, extra help for the poor and unemployed, a freeze on public sector layoffs and more time to cut its deficit.

EARNINGS WARNINGS

The impact of the European debt crisis on the global economy is increasingly weighing on such American bellwethers as United Technologies Inc (UTX.N), Procter & Gamble Co (PG.N) and FedEx Corp (FDX.N).

P&G lowered its fourth-quarter earnings and revenue forecasts Wednesday, hurt by unfavorable foreign exchange rates, weak growth in developed markets and a slowdown of growth in China. It is the second time in three months that the consumer products maker has cut its outlook.

Also last week, FedEx said slow global growth would crimp its earnings over the next 12 months. The world's second-largest package delivery company forecast moderate growth for both the U.S. and global economies, citing the debt crisis in Europe and slowing growth in Asia.

Perhaps most pessimistic was UTX Chief Financial Officer Greg Hayes, who said just over a week ago that "the situation in Europe has gotten a lot worse than we had expected" and that the "Spanish market continues to convulse.

Ray Dalio's Bridgewater Associates, $120 billion hedge fund, summed up the state of affairs in a note late last week. "Global growth has continued to slow in a fairly broad way and is now as slow as it has been since 2009," he said. "The expansion in the developed world has not been self-sustaining."
In the developed world, the U.S. economy has slowed the most from 4 percent earlier in the year to the current 1 percent to 1.5 percent rate, said Bridgewater, which described euro zone policies as inadequate to deal with the crisis.

"Europe has kicked the can just about as far as they can without doing something," said John Mauldin, president of investment advisory firm Millennium Wave Investments in Dallas. "It's just like when they got to the Greek moment where they had to say, 'We're going to have to write off bonds.' They're now again to another 'do something' moment, except that this is a lot bigger." (Additional reporting by Steven C. Johnson and Deepa Seetharaman; Editing by Martin Howell and Kenneth Barry)

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