Source: USA TODAY

Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisors answering reader questions about saving, protecting and growing your money.

Q: I would like to start putting some money away for my young grandson’s college education. Should I invest in a 529 plan, IRA or buy a life insurance policy for him? It would not be a large amount at first but the value would grow in time.

A: These three options for college savings have advantages and disadvantages that may or may not be relevant to you, your grandson, and your family.

An IRA, a life insurance policy and a 529 all provide the advantage of tax-deferred or tax-free growth. Growth in the IRA occurs tax-deferred — that is, all dividends, interest and capital gains are not taxed until withdrawal. If the IRA is a traditional IRA, you may also receive a tax deduction for the contribution. If this is the case for you, you will not pay tax on the contribution until it is withdrawn. (You should check with your accountant on the deductibility of IRA contributions.)

Growth in the life insurance policy is tax-deferred. If withdrawals are taken in the form of loans against the cash value, then those are also not taxed. Growth in 529 plans is tax-free, if used for qualified education expenses.

The tax advantages of each account type come with conditions, however. With an IRA, any distributions before age 59 1/2 incur a 10% penalty, which may be waived for education expenses by filing Form 5329 in the same year you take the distribution. With a life insurance policy, if distributions are not taken as loans, then any growth will be taxed at ordinary income rates. With a 529 plan, withdrawals for non-education expenses can be subject to both income tax and penalties.

Gift taxes are a second tax factor for some grandparents. The annual gift tax exclusion amount is currently $14,000.If your contributions to a 529 plan for a grandchild, when combined with all other gifts to that child during the year, exceed the $14,000 annual exclusion, you must file a gift tax return.

Contributions to IRAs and life insurance premiums are not considered gifts, however, any distributions from them to your grandson would be. Direct payments to the school are currently exempt from gift taxes.

Distributions from 529 plans are not considered gifts if used for qualified education expenses, however, contributions are. Grandma and Grandpa can each contribute up to the annual exclusion for a total possible contribution of $28,000 in 2013. 529 plans also allowing bunching of five years of gifts into one year. For example, if Grandma and Grandpa gave no other gifts to Grandson in 2013, they could each contribute $14,000 to his 529 plan ($28,000) and then bunch their annual gifts for 2014-2018 for a total contribution of ($28,000 x 5 =) $140,000. Ask your accountant how to report the bunching of gifts to 529s.

Besides taxes, another consideration is financial aid. If you think your grandson might qualify for need-based financial aid, life insurance policies and IRAs owned by you are not counted in the formula. But a portion of 529 accounts is counted.

Costs and fees are yet another factor to consider. Even small percentage costs can add up over 18 years. Life insurance policies tend to have sales charges, annual administrative fees, mortality fees and investment management fees totaling from 2% to 12%, depending upon the company and the policy. Ask your agent to show you a sample contract, pointing out all of the fees and charges.

It is possible to structure an IRA or a 529 account with funds that have no sales charges, no annual administrative fees, and very low investment management expenses (between 0.1% and 1%), but you should ask a representative to disclose all costs to you, as well.

Flexibility is important, too. For information about qualified education expenses for 529 and IRA accounts, see IRS Publication 970, or ask your accountant or a fee-only financial adviser. The list includes not only tuition, room and board, but also school-required computers, software, Internet service, supplies and activity fees.

If your grandson receives a scholarship, 529 funds can be returned to you without penalty, or, the 529 can be used for a sibling, parent or even your grandson’s children. 529 plans are administered by each state, so there are at least 50 different programs to consider. It is not necessary for your grandson to attend a school in that state in order to participate in its 529 program. A Florida grandmother could open a Nevada 529 plan for her Ohio grandson.

Loans from a life insurance policy’s cash value may be used for any kind of expenses. It is important not to begin taking loans before the policy has an opportunity to build up cash value, or the cash value may diminish too quickly. It is also more difficult to grow the value in a policy where the premiums start out lower and grow over time. Find out how the insurance company decides what interest rate to charge against your cash value for any loans before entering into a life insurance contract.

Your grandson is fortunate you are thinking of him at a young age. With a long time frame, you have many options. Consulting an accountant or fee-only financial adviser would be one way to sort through any other factors unique to your situation.

Holly Thomas, NAPFA-Registered Financial Advisor

Holly P. Thomas, Tampa

Copyright © 2013 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisors answering reader questions about saving, protecting and growing your money.

Q: I would like to start putting some money away for my young grandson’s college education. Should I invest in a 529 plan, IRA or buy a life insurance policy for him? It would not be a large amount at first but the value would grow in time.

A: These three options for college savings have advantages and disadvantages that may or may not be relevant to you, your grandson, and your family.

An IRA, a life insurance policy and a 529 all provide the advantage of tax-deferred or tax-free growth. Growth in the IRA occurs tax-deferred — that is, all dividends, interest and capital gains are not taxed until withdrawal. If the IRA is a traditional IRA, you may also receive a tax deduction for the contribution. If this is the case for you, you will not pay tax on the contribution until it is withdrawn. (You should check with your accountant on the deductibility of IRA contributions.)

Growth in the life insurance policy is tax-deferred. If withdrawals are taken in the form of loans against the cash value, then those are also not taxed. Growth in 529 plans is tax-free, if used for qualified education expenses.

The tax advantages of each account type come with conditions, however. With an IRA, any distributions before age 59 1/2 incur a 10% penalty, which may be waived for education expenses by filing Form 5329 in the same year you take the distribution. With a life insurance policy, if distributions are not taken as loans, then any growth will be taxed at ordinary income rates. With a 529 plan, withdrawals for non-education expenses can be subject to both income tax and penalties.

Gift taxes are a second tax factor for some grandparents. The annual gift tax exclusion amount is currently $14,000.If your contributions to a 529 plan for a grandchild, when combined with all other gifts to that child during the year, exceed the $14,000 annual exclusion, you must file a gift tax return.

Contributions to IRAs and life insurance premiums are not considered gifts, however, any distributions from them to your grandson would be. Direct payments to the school are currently exempt from gift taxes.

Distributions from 529 plans are not considered gifts if used for qualified education expenses, however, contributions are. Grandma and Grandpa can each contribute up to the annual exclusion for a total possible contribution of $28,000 in 2013. 529 plans also allowing bunching of five years of gifts into one year. For example, if Grandma and Grandpa gave no other gifts to Grandson in 2013, they could each contribute $14,000 to his 529 plan ($28,000) and then bunch their annual gifts for 2014-2018 for a total contribution of ($28,000 x 5 =) $140,000. Ask your accountant how to report the bunching of gifts to 529s.

Besides taxes, another consideration is financial aid. If you think your grandson might qualify for need-based financial aid, life insurance policies and IRAs owned by you are not counted in the formula. But a portion of 529 accounts is counted.

Costs and fees are yet another factor to consider. Even small percentage costs can add up over 18 years. Life insurance policies tend to have sales charges, annual administrative fees, mortality fees and investment management fees totaling from 2% to 12%, depending upon the company and the policy. Ask your agent to show you a sample contract, pointing out all of the fees and charges.

It is possible to structure an IRA or a 529 account with funds that have no sales charges, no annual administrative fees, and very low investment management expenses (between 0.1% and 1%), but you should ask a representative to disclose all costs to you, as well.

Flexibility is important, too. For information about qualified education expenses for 529 and IRA accounts, see IRS Publication 970, or ask your accountant or a fee-only financial adviser. The list includes not only tuition, room and board, but also school-required computers, software, Internet service, supplies and activity fees.

If your grandson receives a scholarship, 529 funds can be returned to you without penalty, or, the 529 can be used for a sibling, parent or even your grandson’s children. 529 plans are administered by each state, so there are at least 50 different programs to consider. It is not necessary for your grandson to attend a school in that state in order to participate in its 529 program. A Florida grandmother could open a Nevada 529 plan for her Ohio grandson.

Loans from a life insurance policy’s cash value may be used for any kind of expenses. It is important not to begin taking loans before the policy has an opportunity to build up cash value, or the cash value may diminish too quickly. It is also more difficult to grow the value in a policy where the premiums start out lower and grow over time. Find out how the insurance company decides what interest rate to charge against your cash value for any loans before entering into a life insurance contract.

Your grandson is fortunate you are thinking of him at a young age. With a long time frame, you have many options. Consulting an accountant or fee-only financial adviser would be one way to sort through any other factors unique to your situation.

Holly Thomas, NAPFA-Registered Financial Advisor

Holly P. Thomas, Tampa

Copyright © 2013 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisors answering reader questions about saving, protecting and growing your money.

Q: I have a variable annuity with a portfolio of various index funds, stocks and bonds that has earned well for the last four years when it was allocated for me. Would it be a good idea to rebalance the portfolio to retain the same percentages I started with, or just keep it as is? How would I do that?

A: Your portfolio allocation should be based on your financial goals. Have they changed in the past four years? In most cases, they didn’t.

As an example, if your goal was to retire at a certain age, you probably still want to retire at that age (maybe earlier). But today, your portfolio is worth more and you have a shorter time horizon.

You ask if you should rebalance to the original percentages or keep as-is. I suggest there is a third choice. You may want to adjust your portfolio to reflect a new allocation based on today’s financial goals and current situation. You need to determine the division of index funds, stocks and bonds that provides the best chance of success with the least amount of risk.

If your goals haven’t changed, at a minimum, you would rebalance back to your original percentages.

Your review may determine that your recent success allows you to take less market risk while still providing a similar likelihood of achieving your goals. It sounds like an adviser helped you develop an allocation four years ago. You could return to that adviser (or another one) or re-balance yourself based on your comfort level.

If you want to rebalance yourself, consider a simplified example. Let’s say that your portfolio was divided equally between three index funds. The first is a domestic equity fund, the second is a bond fund and the third is a foreign stock fund.

If you determine that you would like to return to the initial allocation, you would calculate the current percentage of each fund. And you would sell those that are now greater than 33.33% and buy the ones that are below 33.33%. If you change your desired allocation, adjust your percentages accordingly.

Your easiest answer is to leave as-is. After all, your current portfolio has performed well. Why change it?

History provides many examples of why the easiest is not always the best. Think of the rise of the stock market bubble in the late 1990s. Why would you then have rebalanced an equity portfolio that performed so well? The reason was that the level of market risk also had increased. The increased risk was paid for when the bubble burst in the early 2000s.

If your portfolio was created properly four years ago, you are likely carrying too much market risk today. At the very least, a review is warranted.

Robert Burger, NAPFA-Registered Financial Advisor

Sensible Money, Scottsdale, Ariz.

Copyright © 2013 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

For about 20 years, Sue and Steve Manseau kept searching for a financial planner. Like most middle-class Americans, the couple found that the advisers they met didn’t want their business.

Until recently, financial advisers have managed investment portfolios for affluent clients and charged more than the Manseaus could afford. Fortunately, a growing number of financial planners and online websites are serving middle-class families.

The advice that middle-class families need is much different than that of the affluent. “The recession mainly hit the middle class,” says Stephen Brobeck, executive director of Consumer Federation of America. The middle class has been hit hard by job losses and increasingly costly benefits. The housing bubble also caused many home values to plummet. And because few of them have a pension plan, middle-income workers have to figure out how to save for retirement. Smart investing is only a small part of their needs.

“The financial planning decisions of middle-income families are more critical than that of wealthier people because they can’t afford to make any mistakes,” says Sheryl Garrett, the founder and CEO of the Garrett Planning Network, a nationwide network of fee-only financial advisers who specialize in serving the middle class.

The Manseaus, who live in Santa Barbara, Calif., are in their early 60s. Sue is a nurse and Steve is a salesman. Now that their two daughters are grown, their biggest concern is retirement, especially because of some bad investment decisions, the stock market crash and costly mortgages. “I have been afraid that we could not retire and that we are going to be the greeters at Walmart,” Sue says.

Like the Manseaus, two-thirds of middle-class families have made a really bad financial mistake that typically has cost them between $5,000 and $23,000, says a 2012 report by Consumer Federation of America and Primerica. And on average, middle-class families have assets only of $27,300, based on the Federal Reserve Board 2010 survey, down 28% from 2007.

Despite the roadblocks they encountered, the Manseaus never stopped looking for a financial planner who can serve their needs. Last year, when they went to the NAPFA website, a national association of fee-only financial advisers, they found Anna Sergunina, a member of the Garrett Planning Network.

Sergunina immediately understood their needs and came up with a plan to help them deal with their financial problems. “She was able to show us that we really can retire,” Sue says. “It may not be with lots of trips or living in a gorgeous home, but it is doable if we follow what she has recommended. And that is a huge relief.”

The Garrett Financial Network alone has about 325 financial advisers. And NAPFA has other members who serve the middle class.

Today there are also inexpensive online startups that do not just provide calculators or cookie-cutter financial advice. “Technology is not replacing the relationship,” says Esther Stearns, CEO of NestWise, an online website for financial advice. “It is enabling it to reach out to the middle class with real-life financial planners.”

NestWise is starting to open offices in major cities. But families who live in small towns that are far from most financial planners can have an online relationship and a personal NestWise adviser. Clients can talk to them on the phone or use video conferencing.

LearnVest is another new financial site for underserved Americans. In addition to a mobile budgeting tool, it offers an affordable way to call or e-mail a staff of certified financial planners for guidance.

What’s the cost?

Financial advisers traditionally have charged an annual fee based on a percentage of the client’s assets. In contrast, planners who serve the middle class offer a range of services and fees. For example, some clients can pay an hourly fee for an occasional checkup.

At Garrett Planning Network, there is no minimum fee. Its advisers charge different hourly rates that range from about $150 to $300.

At NestWise there is an initial planning fee of $250 and then an annual fee of $575 that can be paid monthly or quarterly. And LearnVest charges a $19 monthly fee, and a one-time set up fee that ranges from $69, for a budget help, up to $399, for a financial plan and investment help.

What do you get for your money?

When looking for an adviser, you need to ask what kind of financial services they offer. Do they start with a basic financial plan or will they provide only an investment plan? Will you have an ongoing relationship with one planner or will you occasionally see a member of a team of advisers?

“Middle class need blocking and tackling, with debt management and cash flow management,” says Eleanor Blayney, CFP Board’s Consumer Advocate. “It’s important for them to find a planner who offers two sides of financial planning and is not simply an investment manager.”

At NestWise, the advisers start by asking what’s most important to clients. A young couple might be focused on buying a home, but they also may have much debt. The adviser will help them understand the trade-offs in life, focusing on spending and savings, as well as investing, Stearns says.

Evelyn and LaChristian Porter, who live in Charlotte, say that student loans and credit card debt have held them back from buying a home and saving money. When they found that they could not afford most financial planners, they turned to NestWise. Now the 34-year-old couple has an adviser who is helping them get their finances in order, set up an emergency fund and plan for their future.

Who can you trust?

Even if financial advisers have a lot of letters after their names, that doesn’t tell you anything about their experience. Among the variety of designations, a CFP, certified financial planner, is often considered the most significant. A PFS, personal financial specialist, and a CFA, chartered financial analyst, also provides credibility.

BrightScope.com provides information about many advisers, including experience, certifications and conduct. If a planner is a CFP you can go to cfp.net to verify their certification and see if they have been disciplined by the CFP Board.

Make sure advisers are not trying to sell a product and are willing to take time to clearly explain their recommendations. It is also important to find someone you are in sync with. When Michael and Lindsey Almeida, who are 30, wanted an adviser, they chatted with several planners who are part of the Garrett Planning Network.

In the end, the couple, who lives in Washington Township, N.J., selected Theresa C. Wan, at TCW Financial Planning. “It was pretty important to make sure that we are comfortable and that we trust her,” Lindsey says. In the past, the Almeidas say they were “mattress people,” because they kept their savings in a bank account, unsure how to invest it.

Wan is now helping the couple get a good financial start in life. She recommends mutual funds for their savings and helps them maximize their retirement plan investments. And that is something they wouldn’t get from most investment advisers. As Michael says, “The big Wall Street types don’t want to deal with our few dollars. They want to work with the big fish and whales.”

Copyright © 2013 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisors answering reader questions about saving, protecting and growing your money. To submit a question, e-mail USA TODAY personal finance reporter Christine Dugas at: cdugas@usatoday.com.

Q: I bought a condo for $100,000 in 2001 and it went up in value to $125,000 until the 2008 stock market crash. Now similar condos in the complex are short selling for $50,000. After a couple of refinancings, I owe $120,000. And I owe association fees, although my unit doesn’t have a pool, gym, central air or washer/dryer. I can’t wait to get out. Should I walk away and ruin my good credit score? Can the banks garnish my wages if I walk away?

A: You’re in a tough, but very common, predicament that doesn’t have an easy answer. Before pursuing a short sale, there are some things to think about.

As you mentioned, your credit score will take a hit, possibly almost as much as with a foreclosure. How will that affect opportunities in your future? Will you need or want to buy another home soon? Or a car? Will you be able to pay your bills on a regular basis going forward to rebuild your credit?

In a short sale, your lender may require you to pay those association fees before agreeing to a sale or may require the buyer to pay them as part of the negotiations. In some cases, the lender may just eat them, meaning an additional hit to your credit.

As far as garnishing your wages, it is possible. It depends though, on whether or not you live in a “recourse” state, and how your lender handles the deficiency. In the handful of non-recourse states like California, the lender cannot come after you for the additional unpaid balance, but in a recourse state the lender may in fact pursue a judgment against you.

If you’re lucky, the lender may agree in writing to relieve you of that obligation, but in others they may keep the option open to go to court at a later date (within the statute of limitation), leaving you to wonder if one day you’ll be served. It’s best to check into your specific state’s laws.

If your loan is insured or guaranteed by the Federal Housing Administration (FHA), you may be eligible for the Home Affordable Modification Program (HAMP®), which will expire at the end of 2013. HAMP may lower your monthly mortgage payments in order to make them more affordable and sustainable for the long term. For information on FHA and participating servicers, call FHA’s National Servicing Center at (877) 622-8525.

Is it a financial hardship for you to stay in your condo? If that’s the case and your mortgage is owned by or guaranteed by Fannie Mae or Freddie Mac (or other participating lenders) you may be eligible for special protections under the Home Affordable Foreclosures Alternatives (HAFA) Program. In the HAFA program the lender agrees to accept the sale price as full satisfaction of your loan, with the additional benefit of a smaller impact on your credit. Visit www.makinghomeaffordable.gov to see if you qualify.

Many short sellers are unpleasantly surprised at tax time to find out that their short sale came with a tax bite. That’s because the IRS considers cancellation of debt to be income, and therefore taxable. There is a bit of an escape clause to that; canceled debt that is attributable to qualified personal residence debt is excluded from tax, at least through 2013. If you used any of the cash out of your refinance for anything other than improving your home, your ability to exclude the canceled debit is limited.

What’s right for you is going to depend on your cash flow situation as well. If you are comfortable financially in the condo, staying put at least for now will avoid the negatives that come with a short sale.

But if you find yourself borrowing from Peter to pay Paul and your mortgage, it could be simply a matter of time before you must walk away. In that case, consider cutting your losses now, rather than prolonging the inevitable.

Erin Baehr, NAPFA-Registered Financial Advisor

Baehr Family Financial, Randolph, N.J.

Copyright © 2013 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisors answering reader questions about saving, protecting and growing your money. To submit a question, e-mail USA TODAY personal finance reporter Christine Dugas at: cdugas@usatoday.com.

Q: If interest rates are close to zero are bonds still a good investment?

A: Bonds in limited circumstances can still be a good investment.

Before you make any decisions, it’s a good idea to review the basics of bond funds. Bond values move in the opposite direction of interest rates, so the value of a bond will drop when rates go up, and vice versa.

It’s important to know a bond fund’s duration and credit quality, because that information will tell you how risky the fund is, and if it’s right for your situation. For example, if a fund’s average duration, a measure of interest-rate sensitivity, recently stood at six years, that suggests that the fund’s shares would lose about 6% if interest rates rose 1 percentage point.

If you buy individual bonds and hold them to maturity, you will not lose principal because interest rates rose. But inflation can take a major bite out of your portfolio returns over time. That’s because there is a difference between the nominal return, which is the return that a bond provides on paper, and the “real” or inflation-adjusted return. If you invest $100 in a short-term bond with a 1% yield, your investment rises to $101 over the course of the year. But in real money, you may have lost purchasing power because inflation is running at about 1.50% a year.

Bond funds tend not to hold their bonds to maturity and as a result they will lose principal when interest rates rise. However, bond funds may attempt to protect their portfolio by shifting to shorter durations and cash when rates start to rise. If rates have peaked, they could end up buying long-term bonds at discounted prices.

Interest rates have been low for more than three years. During that time, investment-grade bonds have returned nearly 20% since then, vs. 0.20% for money-market funds. But no one knows how far they’ll rise and when that will happen.

My recommendation is to use low-cost bond mutual funds with durations of roughly two to four years and whose managers say they are worried about the sudden return of inflation damaging the bond market.

Recently, many retail bond investors have shortened the term of their bond holdings to intermediate term or short term so as to reduce the risk of being hurt by a sudden upward movement in interest rates.

Bond investors tend to be cautious older people who remember the great inflation of the 1970s and the 1994 mortgage bond crash, so they are definitely positioning themselves to protect from a bond market blowup. Thus, it is unlikely there will be a mass panic out of bonds.

Even though bond prices are very high, there are reasons why these prices are legitimate. There have been periods in U.S. and Japanese history where interest rates stayed very low for more than 20 years. We have only had low rates for about seven of the last 10 years. However, long-term bonds are still risky, in case inflation was to return along with higher interest rates.

I view bonds as a parking lot for assets, like paying for parking to protect a car, while waiting for the right opportunity to buy stocks after a stock crash.

What I mean by saying “paying for parking” is that today’s bond yields are so low that it feels like the low rate has an “opportunity cost” compared to what people were used to getting a decade ago from bond yields. I would rather endure the pain of this opportunity cost than risk losing money in what I feel is an overpriced stock market.

Don Martin, NAPFA-Registered Financial Advisor

Mayflower Capital, Los Altos, Calif.

Copyright © 2013 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

This year the Dow finally broke through the 14,000 barrier for the first time since October 2008, but no thanks to the risk-averse Millennials.

The Millennial generation, which ranges in age from 18 to 34, has been raised during the stock market crash and the Great Recession. No wonder two-thirds of them save the cash left over from their paychecks and 18% of them pay off debt, according to a study by market research firm Lab42, out Tuesday.

Most of their debt is credit card and student loans. Although they are considered responsible, it’s unclear how well they will manage debt as they take on mortgages and other major loans, says Gauri Sharma, CEO of Lab42.

And it’s also unclear how well they will invest for their future. Now 43% of them describe themselves as conservative investors, according to a study released in February by management consulting firm Accenture.

“They grew up seeing boom and bust cycles, and therefore are fairly skeptical about aggressive investments,” says Alex Pigliucci, global manager director of Accenture Wealth and Asset Management Services.

Also called Generation Y, the Millennials face a new retirement world that puts most of their retirement future on their own shoulders. Unfortunately, as young American workers have watched their income fall since the recession, they don’t have much money to put away for retirement.

And if they continue to shy away from well diversified retirement investments they are ignoring one of their advantages. Because they have decades before they will retire, they can easily tolerate market volatility and make the most of their investments.

Even if the smart, tech-savvy generation of Millennials are told about the benefits of the stock market, they still may have no appetite for risk. “They are scared of the market and understandably so,” says Alan Moore,a financial planner and founder of Serenity Financial Consulting in Milwaukee. “Many have seen their parents lose 50% of their retirement savings in six months.”

Moore understands the problems that Millennials face because he is 25 and many of his clients are members of his own generation. And if they are only willing to invest 40% of their savings in stocks at a young age, vs. 80%, he tells them that they will have to consider other options to boost their retirement savings, such as saving more, buying a smaller home, or working longer.

But retirement savings does not create much top-of-mind awareness among Gen Y. “With Millennials that I talk to, retirement is so far off that it doesn’t seem to be something that needs to be talked about now,” says Jinnie Regli, a Millennial who is a client service administrator at Milliman, a consulting and actuarial firm.

In fact, many of them, 41%, say that vacations and travel are the most important reasons for saving money, while 31% put retirement at the top of their savings list, according to recent report by LIMRA, an industry-sponsored research group.

When it comes to financial issues, Millennials have more immediate needs than retirement or vacation. About half of them, 52%, have student loan debt that averages $37,100 and 45% of them have credit card debt that on average totals $5,448, according to a study released last year by ING Retirement Research Institute.

For Millennials life is a balancing act between saving money and paying down debt. Regli advises them to contribute whatever they can to their retirement account. “Never think that anything you contribute is too small,” she says. “And if your plan offers a match, remember that not contributing to the plan is like throwing away free money.”

Copyright © 2013 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

“Retirement job” seems like an oxymoron. And yet a growing number of Americans say that they plan to continue to work during their retirement years.

Unfortunately, finding employers willing to hire them is not easy.

“The elephant in the workplace is still age bias,” says Tim Driver, founder and CEO of RetirementJobs.com. “Because of the Baby Boomers and the lower birth rates of younger people, job supply and demand will eventually favor mature workers. But that is still some time off.”

The demand for older workers has only declined during the recession as many of them have lost their jobs. Last year, the unemployment rate of Americans 65 and older was 6.2%, up from 3.1% in 2007, says AARP Public Policy Institute, based on Bureau of Labor Statistics.

“It’s not easy for an older unemployed worker to find a job, nor is it easy for an older retiree to return to the workforce,” says Sara Rix, senior strategic policy adviser at the AARP Public Policy Institute. “In this economy the employer is going to say, ‘I can get two younger workers for the same price as one older worker.’”

In March, 51% of job seekers 55 and older were unemployed for 27 weeks or longer, compared with 41.7% of those ages 25 to 54, according to the AARP Public Policy Institute’s analysis of the federal Current Population Survey.

Many unemployed older Americans who are cash-strapped and need to keep earning money cannot be rehired because they have not kept up their skills. Others want to find a new career that would give them more flexibility and help them stay engaged and make a difference in life.

At least there are a number of programs and websites aimed at helping older job seekers. A program called the Plus 50 Initiative was launched by the American Association of Community Colleges in 2008. “We started doing personal enrichment classes, volunteering activities and workforce training,” says Mary Sue Vickers, director for the Plus 50 Initiative.

But because of the economic collapse, the program decided to focus only on workforce training. “It helps meet the needs of adults 50 and older, and it increases their prospects in high-demand fields,” Vickers says.

Dory Brinker, who lives in Brewster, Mass., has decided to go to the Cape Cod Community College to study human services alcohol and drug abuse counseling. She seldom thinks about her age until she is in the classroom and the other students are 50 years younger than she is.

Brinker will turn 70 in October. Over the years the former teacher has also raised three children and owned a nursing school. She always wanted to get a master’s degree and Ph.D. “But when the kids were growing up, I got too busy,” she says.

Now she works part time at a shelter for families who are recovering from alcohol or drug abuse. And when she finishes the program at the community college, she plans to go on for a college degree. “I love school,” she says. “The job means a lot to me and I’m not sitting home bored.”

Brinker found out about the shelter through people she knew. But for most older Americans, jobs don’t just fall into their laps. “Typically, they have to pound the pavement, or today’s equivalent, which is sending out loads and loads of résumés,” Rix says.

In part, older workers have a harder time finding work because they are less efficient in networking and using social media. And many employers believe that older workers lack creativity and are generally unwilling to learn new things, says an Urban Institute 2012 report.

Seniors need to better use job-search tools and know what type of employers are most likely to hire older job seekers. The Plus 50 Initiative at community colleges has focused on health care, education and social service because that will increase their job prospects in high-demand fields, Vickers says.

Currently, workers who were 65 and older tend to work in retail, professions, education and health services, says AARP, based on the 2012 Current Population Survey. Fewer worked for the information sector, which includes telecommunications.

The one industry category where age bias doesn’t exist is elder care, Driver says. His firm has launched a separate service where families can find high-quality certified elder care providers.

And to make the job search easier for older Americans, RetirementJobs.com has a certified age-friendly employer program. About 100 major companies have been identified as among the best places for employees above age 50. And AARP has a program for the best employers for workers over 50.

The Plus 50 Incentive can help older Americans improve themselves and make major career changes. For many years, Patricia Zimmer, who lives in St. Louis, was a stay-at-home mom who home-schooled her children. She is now 58, the kids are grown and she is divorced.

Recently Zimmer started the patient care technician program at St. Louis Community College. “It is something that I had wanted to do for 20 years,” she says.” I’m also doing it out of necessity. But I wanted to do something that would stretch me.”

As Baby Boomers approach retirement age they realize that they may be living well into their 80s or 90s. And many of them don’t want to spend 30 years sitting on their porch. But they probably don’t want to continue doing the same job they’ve had for 20 or 30 years.

They have a different mindset, and they will be creating a new retirement job world. “We’re only a little way into this phenomenon,” Driver says. “It is playing itself out before our eyes. And the more it happens, the more culturally accepted it is for someone with gray hair to be in an office cubicle.”

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