Retirement no longer in sight?

If you're a baby boomer, your retirement plans have changed. So says the current BusinessWeek cover story. Author Chris Farrell says the hit that your 401k and other investments have likely taken in the last year means you'll be working longer. He demonstrates the impact of an incredibly shrinking nest egg with figures provided by economist Robert Shackleton of the Congressional Budget Office: Assume a married couple is in their early 60s earning $100,000 pretax a year. They need nearly $66,000 a year after taxes to replace 80% of their preretirement income, the standard guideline for retirement income.

If both retire at age 62, they'll receive more than $25,000 in total Social Security benefits and require a portfolio of at least $891,000 to generate the income they need, assuming normal life expectancy. But if the couple waits until age 66 to retire, their Social Security benefits go up, they have more years to feed their portfolio, and fewer years to rely on its earnings, so they need only $552,000 socked away. If they retire at age 70, they need only $263,000.

Anecdotally, I know a couple in their early 60s who were looking forward to retirement in the spring of 2008, nearly a year ago. The economy had gotten so shaky, though, that they decided to hang on a bit longer. That was before the Wall Street meltdown last fall claimed a piece of their savings. They're both still working and have adopted a wait-and-see attitude.

The silver linings? For most people, working keeps the mind sharp and provides a built-in social network. Read the full BusinessWeek story.

Beware the credit counselor

As if we haven't endured enough financial double-talk lately, the airwaves and our email are filled these days with offers to slash our credit card debt. Sounds tempting, but beware. A lot of credit counselors are up to no good.

Don't take my word for it--take the word of Elizabeth Warren, Harvard professor, author, and champion of the middle-class. In "All Your Worth: The Ultimate Lifetime Money Plan, she writes that "...credit counseling has become an industry thick with slick operators who do little more than take your money and leave you deeper in a hole." Some masquerade as nonprofit operations when they're not and many of them are run by big banks and credit card companies, she points out.

Other brands of snake oil identified by Warren: Credit repair offers, FICO repair kits, identity-theft protection and credit-card loss protection. This book was published in 2005, before the credit bubble burst. Its cautionary advice seems even more relevant today.

Adventures in frugality

Retail sales fell twice as much as economists thought they would in December, down 2.7 percent from November, the numbers-crunchers reported yesterday. Compared to December 2007, we consumers spent 9.8 percent less last month.

My guess is that this spending dropoff surprised economists more than the rest of us. With home foreclosures and the unemployment rate climbing, and investment portfolios falling, many of us have revised our shopping lists. We also are revising our shopping methods.

I offer my household as one example. My partner, Harry, and I wanted a carpet runner for our stairs. A few hours in the carpet store pointed to a price tag of $2,000 or so. We figured it was something to think about for a while. As we were thinking, the economy took a tumble down its own set of stairs, inspiring us to be creative with our carpet purchase.

Craigslist came through. We found a brand new carpet runner, purchased years ago but never installed. The owner, who lived five miles away, was moving out, the carpet was still rolled up in the attic, and she just needed to get rid of it. The size, colors, and pattern worked very well for us and the price was less than 10 percent of what we had considered spending last summer. What about installation? We found that on Craigslist, too.

What about you? Any creative shopping (or non-shopping) stories you can share?