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Liz Weston

Q&A: Retirement annuity vs lump sum

August 4, 2014 By Liz Weston

Dear Liz: I am 54 and considering retiring in three or four years. I have been fortunate to work at a Fortune 100 company for 30-plus years and have both a defined benefit pension plan and a 401(k). When I retire, we have the option of taking a lump sum or an annuity. Most financial people I talk to strongly recommend taking the lump sum, though I wonder if it is not just so there is more money to manage? My current inclination is to take the annuity (with survivor benefit for my wife). I think we can live off the annuity alone and use the 401(k) for emergency/fun/help-the-kids money, etc. I think if I took the lump sum and invested it, I’d always worry about what the market was doing. Am I off base?

Answer: Not at all.

Theoretically, you often can make more money by taking a lump sum and investing it than by accepting the annuity, which offers a lifetime stream of payments. But perhaps you’ve heard the quote “In theory, theory and practice are the same; in practice, they are not.” Anyone who knows much about behavioral finance knows there are many, many ways such a plan can go wrong.

You could pick the wrong investments, take too much or too little risk, trade too much or spend too much, and wind up much worse off than if you’d chosen the annuity. You could turn over the investing decisions to a pro, but there’s no guarantee that person won’t make mistakes. Even if he or she chooses great investments and allocates your assets well, your nest egg could still take a hit from the market.

If you were comfortable taking that extra risk to get the extra possible reward of more cash, accepting the lump sum would be the way to go. Since you’re not, there’s nothing wrong with taking the annuity. Opting for a survivor’s benefit means your wife will have guaranteed income should you die first.

Before you pull the plug at work, though, make sure you talk to a fee-only planner who charges by the hour to make sure your retirement plan makes sense. (Planners paid by the hour won’t have a vested interest in how you opt to manage your retirement funds.) Your assets probably will have to last 30 or 40 years, and you’ll have to figure out how to pay for the ever-escalating cost of health insurance. This can be a tricky process, so you’ll want expert, unconflicted help.

Filed Under: Annuities, Q&A, Retirement Tagged With: annuity, lump sum, q&a, Retirement

Monday’s need-to-know money news

August 4, 2014 By Liz Weston

elephantToday’s top story: It’s time to stop ignoring your finances. Also in the news: The best ways to invest in real estate, how to get help for financially assisting your parents, and how you can get rewarded for saving money.

How to Stop Ignoring Your Finances
You can’t keep ignoring the elephant in the room.

The Best Way to Invest in Real Estate
You don’t have to flip houses in order to profit from real estate.

3 Ways to Get Help for Financially Aiding Your Parents
Help is available during difficult times.

Goal-Based Accounts Reward You for Saving Money
Get rewarded for reaching your goal.

How Your Friends Threaten Your Finances
You don’t have to keep up with the Joneses.

Filed Under: Liz's Blog Tagged With: advice, elderly parents, Investments, real estate, Savings, savings accounts, tips

What’s wrong with Disneyland Paris

August 2, 2014 By Liz Weston

The castle at Disneyland Paris.
The castle at Disneyland Paris.

We decided to visit Disney’s European theme park just a few days before we were scheduled to leave France. We aren’t diehard Disney fans, but we had annual passes when our daughter was younger and thought it might be fun to see how the park outside Paris compared with the ones in Anaheim and Orlando.

Bottom line: We had a great time with one notable exception.

Getting to Disneyland Paris is dead easy: we just took a train from the city, the RER “A” line, one branch of which stops right outside the park. We got theme park admission tickets online in advance to avoid the line at the gate.

Using FastPass and a little strategy, we never waited more than about 10 minutes to board a ride. Our perception was that the park wasn’t nearly as crowded as American versions (which may explain why you can find discounted tickets, which aren’t common in the U.S.).

I also made lunch reservations at a restaurant with table service (the Blue Lagoon) two days in advance, and we had a great experience there. I tried to make a dinner reservation as well at Walt’s, but the earliest slot available was 9:30 p.m. We hadn’t become THAT Parisien, so we decided we’d use one of the “food on the go” places that dot the park. And that was our big mistake.

Similar restaurants at the U.S. parks typically have a line leading up to the cashier, where you order, and then a short wait until you pick up your food at the counter behind the cashier. It’s usually an efficient way to feed people, as the lines move quickly.

Not at Disneyland Paris. I spent more than 30 minutes standing in line, with wailing kids and increasingly impatient parents, and I was just two people away from the cashier virtually the whole time. She kept running back and forth to the counter as people complained about their messed-up orders. And this was at a place that had only three options for a main course: a Barvarian hot dog, chicken and a cheeseburger.

A lot’s been written about the lack of a “service culture” in France. I’d never found it a problem before then, because treating people with respect and politeness usually brings good results. But my experience at a theme park did make me miss good old fashioned American efficiency.

Still, a Disneyland Paris visit is well worth the short trip. Here’s some advice to make the most of it:

Plan at least a little in advance. It’s not that hard to find and buy discounted tickets. If nothing else, buy tickets online from the Disneyland Paris site and bring them with you to avoid the lines at the gate.

Make reservations at a table service restaurant or buffet. These are the most expensive options, but they’re also a great way to build a break into your day. You have to call in advance, and the earlier you call the more options you’ll have for venue and time.

Learn the FastPass system. The most popular rides allow you to reserve a time slot in advance. You may have to zigzag through the park to hit all the best rides, but we were able to ride everything we wanted in one day. Some rides run out of FastPasses early, so ask an employee’s advice about which ones to get first.

Bring snacks and water bottles. As with all theme parks, snack prices are especially inflated. You can refill your water bottle at one of the drinking fountains.

One day is fine. Some people advise planning a three or four day visit, or at least one day per park (there are two, Disneyland Paris and Walt Disney Studios). Attractions at the second park are so slim, though, that we didn’t really regret missing it. If you have smaller kids who easily tire, you might want to break up your visit into a couple of days. But we found a one-day visit worked out just fine.

Filed Under: Liz's Blog Tagged With: Disneyland Paris, Eurodisney, Paris, saving money, travel

Friday’s need-to-know money news

August 1, 2014 By Liz Weston

Zemanta Related Posts ThumbnailToday’s top story: Social Security is in better shape than originally though. Also in the news: how to reduce your monthly expenses by having a “bill haggle day”, personal finance tips for recent college grads, and why you may want to wait before upgrading your cell phone.

4 Reasons Not to Panic About Social Security’s Future
Things aren’t as bad as we thought!

Have a “Bill Haggle Day” to Reduce Your Monthly Expenses
It may take multiple phone calls but it’s worth it.

4 Personal Finance Tips For Recent College Graduates
Don’t let your loans intimidate you.

Do the math before upgrading your cellphone
It could be worth waiting a bit to get the latest gadget.

The Most Important Tip For Avoiding Investment Fraud
You’ll want to remember this one.

Filed Under: Liz's Blog Tagged With: cell phones, college graduates, investment fraud, lifehacks, Social Security, Student Loans, tips

The lines at the Louvre: 3 ways to have a better time in Paris

August 1, 2014 By Liz Weston

Sainte-Chappelle
The stained glass of Sainte-Chappelle.

One thing that’s impossible to understand, no matter how many times we visit Paris: the long lines to get into the Louvre.

It’s not that the place isn’t amazing and an absolute must see. It’s that you can skip the lines simply by buying a Paris museum pass.

Even if you’re not big on museums, you’ll want to see the Louvre, the Musee d’Orsay (a grand converted train station with a wonderful collection of Impressionist art) and the lovely Rodin museum and gardens. The admission costs for those three museums equal about 28 euros and the two-day pass costs 42 euros.  You only have to hit a couple more places–such as the jewel-like Sainte-Chappelle, with its breathtaking stained glass; the Conciergerie, with Marie Antoinette’s pre-guillotine cell; the excellent, relatively new Branly, with its collection of African art; the Centre Pompidou modern art museum; the Towers of Notre Dame–to more than offset the cost. Even if you ignore those, you have to ask yourself: what’s your time on vacation worth? So little that you’re willing to spend hours queuing in the hot sun or pouring rain? C’mon, people.

With this in mind, here are three ways to have a better time in Paris without breaking your wallet:

Get the museum pass. It’s 42 euros for two days, 56 for four, 69 for six. Kids under 18 usually get free admission (although we did have to pay a small entrance fee for them at the sewer tour. Yes, there is such a thing, and it’s interesting, although alas you no longer get to ride down the sewers in a boat). Buy your pass at one of the less popular sites to save yourself a long line. The Crypt at Notre Dame is a good place (while you’re there, check out the interactive screens that let you view the cathedral’s construction and the surrounding town from various angles) or the aforementioned Branly, which is between the Eiffel Tower and the Invalides. Stores like FNAC also sell them, and you can check online for other sites.

Use public transport. The downside to Paris’ subway and bus system is that it’s so good, everybody uses it–which means it can be packed. Still, it’s a fast, cheap way to get from site to site. You’ll be using it enough that it makes sense to get a pass if you’re staying more than a couple of days. The tourist pass is easy to get but more expensive; Navigo passes (what locals use) are a little more hassle to get but make riding pretty cheap.

Dine for lunch, picnic for dinner. After several lengthy, heavy French dinners in a row, we decided our stomachs and our wallets would do better dining out at lunch and having lighter meals or picnics with cheese, meat and bread for dinner. Use TripAdvisor to find good places to eat; its reviews are far more robust than Yelp’s (meaning more places reviewed and more reviews per restaurant).

Filed Under: Liz's Blog Tagged With: museum passes, Paris, Paris metro passes, saving money, travel

Thursday’s need-to-know money news

July 31, 2014 By Liz Weston

santa snowmanToday’s top story: Why you should start your holiday shopping immediately. Also in the news: Having the money talk before your kids head to college, ten ways to untangle your finances, and myths first time home buyers shouldn’t fall for.

Why You Should Start Your Holiday Shopping Now
It’s never too early!

Kid going to college? Have the ‘money talk’
Don’t let them fall into the bad credit trap.

10 Ways To Declutter Your Finances
You don’t want them to look like last year’s Christmas lights.

First-Time Home Buyers: Don’t Fall for these Myths
Mythbusting!

Spend More, Save More: 7 Purchases That Pay Off in the Long Run
More money upfront could mean less down the road.

Filed Under: Liz's Blog Tagged With: college kids, hoilday shopping, home buyers, kids and money, mythbusting, tips

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