Money april2016 by egarel07

Spring Retirement Guide

P. 54

T S BEIN L E V A TR 6 1 O 2

The Top 1O Destinations for Your Money Plus: The Best Hotels, Airlines, Cruises, Travel Cards, and Apps to Get You There Starts on page 38 APRIL 2016

What to Buy When Hot Stocks Cool Down

Get More From Your Rewards Card

7 Ways to Cut Your College Costs

P. 31

P. 26

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Iâ&#x20AC;&#x2122;ll turn all this hard work into something sweet.

A simple score for your retirement plan. We designed the Fidelity Retirement ScoreSM to help you understand where your plan stands today and what moves you can make to be even better prepared for your someday.

Answering 6 simple questions gets you a numerical score that shows you how well you’re saving today.

See ways to strengthen your plan and boost your score.

We’ll show you how your score compares to others like you.

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E V E R Y S O M E D AY N E E D S A P L A N S M

IMPORTANT: The projections or other information generated by the Fidelity Retirement Score regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Your results may vary with each use and over time. Investing involves risk, including risk of loss. Guidance provided by Fidelity through the Fidelity Retirement Score is educational in nature, is not individualized, and is not intended to serve as the primary basis for your investment or tax-planning decisions. The trademarks and/or service marks appearing above are the property of FMR LLC and may be registered. Fidelity Brokerage Services LLC, Member NYSE, SIPC. © 2016 FMR LLC. All rights reserved. 750382.1.0

Be sure to consider all your available options and the applicable fees and features of each before moving your retirement assets. The trademarks and/or service marks appearing above are the property of FMR LLC and may be registered.

Before investing, consider the fundsâ&#x20AC;&#x2122; investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully. Fidelity Brokerage Services LLC, Member NYSE, SIPC. ÂŠ 2016 FMR LLC. All rights reserved. 748123.2.10

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APRIL 2016 VOLUME 45, NUMBER 3

Contents F E AT U R E S

P H O TO G R A P H S U S E D I N I L L U ST R AT I O N B Y G E T T Y I M A G E S

COVER STORY

The most value-packed destinations, airlines, cruises, hotels, and more. by Susie Poppick, Stirling Kelso, and Kara Brandeisky Page 38

SPRING RETIREMENT GUIDE

Take Charge

Are You Ready?

To navigate a skittish market, make the most of these powerful saving tools. by Penelope Wang

Explore our foldout quiz to learn what the latest research means for you. by Cybele Weisser

Buckle Up in the Bear Zone

Photo illustration by

se a n f r e e ma n

As you near the goal line, get defensive with your portfolio. by Carla Fried

78 Seven Ways to Cut Your College Costs Your kid got into school! Now you have to cover the bill. Hereâ&#x20AC;&#x2122;s the plan. by Kim Clark with Kaitlin Mulhere

APRIL 2016

m o n e y. c o m

Progressive Casualty Ins. Co. & affiliates. Business insurance may be placed through Progressive Specialty Insurance Agency, Inc. with select insurers, which are not affiliated with Progressive, are solely responsible for servicing and claims, and pay the agency commission for policies sold. Prices, coverages, privacy policies and commission rates vary among these insurers.

APRIL 2016 VOLUME 45, NUMBER 3

15%

of your home value is the most you should spend on a new kitchen. Five Things to Know About Renovating Your Kitchen, page 28

Plan 21 / TRIM YOUR CAR COSTS Save thousands a year by shedding one set of wheels.

24 / HOW TO SURVIVE

28 FIRST 15 / THE BIG NUMBER 16 / SOCIAL CURRENCY 17 / THE STATS 18 / TECH

P H O T O G R A P H B Y T E R R Y J . A L C O R N /G E T T Y I M A G E S

IN THIS ISSUE

6 / Money.com 9 / Editor’s Note 84 / The Numbers

Cover photograph by GETTY IMAGES

A CAREER CHANGE Lay the right financial groundwork before you make the big move.

26 / GET MORE FROM

COLUMNS 37 THE INTELLIGENT INVESTOR

REWARDS CARDS To take full advantage of all the points you can rack up on plastic, follow this plan.

92 MONEY WELL SPENT

28 / FIVE THINGS Smart strategies for saving money on a new kitchen.

Find the Courage to Take the Plunge

Grandma’s Second Home

Do you fear getting soaked by today’s topsy-turvy market? These funds make it easier to dip your toes in stocks right now. by John Waggoner

How the arrival of a new grandchild led this couple to invest far more than they had ever planned on a vacation home nearby. by Marlys Harris

Invest 31 / THE DEATH OF COOL EQUITIES Why betting on what’s trendy has suddenly become risky business.

MONEY (ISSN 0149-4653) is published monthly (except one in January/February) by Time Inc. PRINCIPAL OFFICE: 225 Liberty Street, New York, N.Y. 10281-1008. Periodicals postage paid at New York, N.Y. and additional mailing oices. POSTMASTER: Send all UAA to CFS. (See DMM 507.1.5.2). NON-POSTAL AND MILITARY FACILITIES: Send address corrections to MONEY Magazine, P.O. Box 62120, Tampa, FL 33662-2120. Canada Post Publications Mail Agreement No. 40110178. Return undeliverable Canadian addresses to: Postal Station A, P.O. Box 4326, Toronto, Ontario M5W 3H4. GST No. 888381621RT0001. © 2016 Time Inc. All rights reserved. Reproduction in whole or in part without written permission is prohibited. MONEY is a registered trademark of Time Inc. U.S. subscriptions: $15 for one year. SUBSCRIBERS: If the Postal Service alerts us that your magazine is undeliverable, we have no further obligation unless we receive a corrected address within two years. Your bank may provide updates to the card information we have on ﬁle. You may opt out of this service at any time. CUSTOMER SERVICE AND SUBSCRIPTIONS: For 24/7 service, go to MONEY.COM/CUSTOMERSERVICE. You can also call 800-633-9970; write MONEY, P.O. Box 62120, Tampa, FL, 33662-2120; or email help@money.customersvc.com. MAILING LIST: We make a portion of our mailing list available to reputable ﬁrms. If you would prefer that we not include your name, please call or write us. PRINTED IN THE U.S.

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APRIL 2016 VOLUME 45, NUMBER 3

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TAX FILING WITHOUT FEAR It’s that time of year again. Take the headache out of tax season with timely updates on what’s new for 2016, ways to max out your refund, common filing flubs to avoid, and how to keep the auditor at bay. Plus, where to find the best tax prep help and what you need to DIY. money.com/taxguide

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COLUMNIST

money.com/besttravel

TIPS FROM THE PROS

Find answers to hundreds of frequently asked questions in the Ultimate Retirement Guide.

In this video series we harness the wisdom of top financial professionals for insider advice on investing, careers, saving, college, real estate, and more.

money.com/retirementguide

money.com/protips

HOW TO RETIRE RICHER

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APRIL 2016

CAROLINE CENIZA-LEVINE offers career tips and strategies for success. @sixfigurestart

G E T T Y I M AG ES ( 3 ) ; COU RT ESY O F SU BJ ECT (C E N I Z A- L EV I N E )

After reading this issue’s Best in Travel feature (page 38), check out our interactive world map to find the destinations that match your vacation style and budget.

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Just because you don’t see it, doesn’t mean it isn’t there. Introducing the newly redesigned Volkswagen Passat with Blind Spot Monitor, one of seven available Driver Assistance features.* Passat. Where family happens.

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When equipped with optional Front Assist

Simulated image. *Driver Assistance features are not substitutes for attentive driving. See Owner’s Manual for further details and important limitations. For more information, visit www.iihs.org. ©2016 Volkswagen of America, Inc.

Write the Editor: editor@moneymail.com

EDITOR’S NOTE

A New ‘Best’ Makes Its Debut

I L L U ST R AT I O N B Y A L E X A N D R A C O M PA I N -T I S S I E R ; P H O T O C O U R T E S Y O F D A N S A E L I N G E R S T U D I O

ACATION PLANNING is surprisingly stressful in my family. Also in the magazine this month, you’ll find My husband and I are often at odds over what matters our Spring Retirement Guide, starting on page most about our getaway. For me, it’s all about the experi54. This three-story special report will help ence. Sometimes I want to unwind on a beautiful beach, you take full advantage of the tools you have and other times I’m looking to recharge by taking in the to build a comfortable nest egg; provide incaptivating sights of a place I’ve never been; either way, I want sights from the latest research; and, especially great amenities, food, and service to be part of the trip. For my for those near or in retirement, allow you to husband, travel is all about the deal. Given how expensive a vacabetter weather the volatility that’s expected tion can get, he can only enjoy it, or even contemplate going, if he’s to rule the markets this year. convinced we’re getting a bargain. Meshing our priorities is a more I hope you enjoy the issue. challenging and tense process than seems fitting, since we’re talking about how we can relax and have fun. That’s why I am both personally and professionally excited to introduce MONEY’s newest franchise, our Best in Travel Awards. Marked by our signature focus on value and data-driven methodoloDIANE HARRIS twitter.com/dianeharris gies, these rankings identify today’s biggest-bang-for-the-buck destinations, airlines, hotels, cruises, loyalty programs, travel cards, and more—that is, the places and services that ofer you the best experiences for the best price. THE DRIVE TO RETIRE As metaphors for an ideal post-work life go, a To come up with the winners in 10 categories, a team classic 1949 Cadillac convertible, connoting comfort, quality, and style, led by editor-at-large Marc Peyser, special projects ediis spot-on. Below, photographer Dan Saelinger (right) preps the lighting for the opener to our Spring Retirement Guide on page 54. tor Susie Poppick, and reporter Kara Brandeisky spent three months poring over more than 12,000 data points from 41 sources, covering every aspect of the travel experience. They then layered on additional research as well as dozens of interviews with industry experts to get a qualitative perspective. You will find the fascinating results of their eforts starting on page 38. After that head to our website, money.com/besttravel, where you’ll find additional lists, expanded write-ups, and related videos, along with a very cool interactive tool that provides key cost data for the 200 most popular U.S. and international destinations in our database. I am sure my husband and I will get inspiration for our next great vacation from this package, and I hope you and your family do as well.

APRIL 2016

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APRIL 2016 THE BIG NUMBER SOCIAL CURRENCY THE STATS TECH

Value of fake refunds the IRS caught last year Stealing your identity and scoring a tax refund in your name is big business for crooks. The Federal Trade Commission fielded 221,854 complaints through November 2015, up from 109,250 in 2014. While people who have had their Social Security numbers compromised are the most vulnerable, everyone is at risk.

Photograph by

mauricio alejo

FILE BEFORE THE CROOKS As many as 80% of Americans file their taxes after April 1. That gives identity thieves a lot of time to claim your return before you do. It’s too late to get a huge jump on this year, but earlier is still better. Even if you won’t get a refund, thieves can still cook up a return in your name. GET A PASS CODE If your identity was stolen before, or if you’ve ever lost your wallet and think you may be at risk, fill out Form 14039, which lets you apply for an Identity Protection PIN. It will lock you into using an IP PIN (you get a new one every year), but it will also lock out anyone without it. REPORT PROBLEMS If you discover you are a victim of taxrefund ID theft (likely via a letter from the IRS), inform the police and credit bureaus. You’ll find detailed instructions at identitytheft.gov. But be patient: The IRS takes nine months, on average, to resolve these cases. —MARTHA C. WHITE APRIL 2016

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FIRST Join the conversation: twitter.com/money facebook.com/moneymagazine • pinterest.com/moneymagazine

SOCIAL CURRENCY

READERS TO THE RESCUE

“I loaned a niece $30,000 to save her house, and I have not been repaid seven years later. How can I talk to her?” Do not email it, text it, or use any of the forms of communication that will only muddy the waters. This is family, so just talk about it.

house for repayment. Otherwise, you should suck it up—and chalk it up as a learning experience for all parties involved.

gary eddy South Point, Ohio

kurt anderson Grand Junction, Colo.

Try to come up with a written agreement; have an attorney help draft a payment plan if need be. If bad turns to worse, you can get a lien placed on the

If you have a hard time confronting the issue, write down talking points and go over them. Most likely, she won’t be able to give you a check that

THE EXPERT SAYS

Usually with a family loan you don’t want to take legal action, which can be costly anyway. At this point, it’s probably best to forgo any interest and focus on getting your principal back, even if it’s just $100 at a time. A site called LoanBack.com allows you to easily track payments moving. curtis e. arnold

jennifer pavsek Haleiwa, Hawaii

Never lend money to anyone unless you can afford to not have it paid back. Look at every loan as a potential gift.

philip kalinowsky Tyngsboro, Mass.

You have to get this aired out. If she doesn’t take you seriously or want to pay you back, you may want to pursue this legally or write it off as a lesson learned.

travis doto

Remind your niece that you were there when she needed the money. She either needs to take out a loan or sell the house so she’s no longer indebted to you. Lexington, Ky.

Want solutions to a financial dilemma in your life? Email your question to social@moneymail.com. To join our reader panel, go to moneymatterspanel.com.

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APRIL 2016

WHAT’S YOUR BEST TIP FOR SAVING ON TRAVEL EXPENSES?

3 (PA G E

“Book last minute. It’s easy to find deals on flights, hotels, and cruises.” —sarah shaw “Hotel reward programs can lead to real savings. When you become an elite member you can get extra points, free breakfasts, and better rooms.” —mark griith “Get an airline credit card and use it for everything.” —kristin wilson “Have more than one set of dates in mind. Book where you get free cancellations so if the price drops, you can rebook at the lower price.” —mike hamborg

Muncie, Ind.

lashanda stewart

FACEBOOK QUESTION OF THE MONTH

“Every single thing I pick up to buy I say, ‘Want or need?’ Then I put the ‘wants’ back.” —danielle meredith “If your hotel doesn’t offer free breakfast, go to a grocery store for cereal and milk and put them in the room fridge.” —kelly pique “Pack snacks and an empty water bottle to fill up after airport security. Airport food is expensive.” —tiffany bonneau

P H O T O G R A P H B Y S H AY L A H U N T E R

Co-author, The Complete Idiot’s Guide to Person-to-Person Lending

night, so perhaps come up with a few payment options.

SEE VEL T TRA GREA LESS FOR 8 )

FIRST Next month’s question: What new skill got you the biggest salary bump? Vote at facebook.com/moneymagazine.

THE STATS MONEY READERS WEIGH IN POLL: What is your landscaping

and gardening bill each year? LESS THAN $100

48%

Lawn and Garden Central COST TO CREATE A GARDEN POND

Do it yourself

$565

HOW MUCH TO BUILD A SMALL RAISED GARDEN NEAR YOU? 1. Charleston, S.C. $519 2. Austin $548 3. Rockford, Ill. $609 4. Sacramento $618 5. New York City $789

VS.

$500 TO $1,000

11%

21%

$2,155

AVERAGE ANNUAL HOME GARDENING SPENDING

$359 HOW AMERICANS SPEND $3.5 BILLION TO GROW FOOD

AVERAGE LAWN MOWER COSTS

50%

GARDENING STARTER KIT

(PLANTS AND SEEDS NOT INCLUDED)

Gardening gloves

20%

Professional

DOWN FROM THE 2002 PEAK: $466

PAIN IN THE GRASS Americans spend an average of 14 hours a week on their lawns. Only 35% hired a professional to help. The average amount spent: $45 a week.

MORE THAN $1,000

$100 TO $499

Electric $162

Vegetables

22%

WHAT YOU SAVE BY GROWING YOUR OWN Tomatoes $9.50 (per square foot grown)

Cucumbers $8 Sweet peppers $3.60 Green beans $2.50 Carrots $3.50

PAGING THE TREE DOCTOR: THE COST OF SELECTED PROJECTS

Herbs Removal

Gas $197

$658

Riding (42-inch)

$1,419

15%

Fruit trees

Trowel

Moisture meter

Garden soil with fertilizer

$64

13%

Berries

TOTAL

$87

Maintenance

$417

Inspections

$150

NOTE: Money.com poll conducted in February 2016 with 845 responses; raised and starter garden sizes: two-by-two-by-four feet; prices for lawn mowers and gardening tools based on averages of five most popular models. SOURCES: DIYorNot.com; “National Gardening Survey,” the National Gardening Association;

CheapVegetableGardener.com; Bureau of Labor Statistics; National Association of Landscape Professionals; Angie’s List; Home Depot; HomeAdvisor.com

m o n e y. c o m

FIRST

TECH

WHAT’S WORTH THE MOST

Spring Gadget Cleaning

MACBOOK PRO: UP TO $1,500

Why dig through your old electronics? They might be valuable. Here are some no-sweat ways to cash in. —DOUG AAMOTH

Not all trade-ins are created equal. Recent Apple laptops and smartphones hold their value the best; expect to sell them for about 75% of what you paid. Apple tablets (60%) and Android phones (50%) also have decent ROI. Not

GALAXY S6: UP TO $450

SURFACE PRO 4: UP TO $1,400

m o n e y. c o m

willing to forgo 20% to 40% of the sale, tradefor-cash sites such as Gazelle, uSell, Glyde, and Amazon Trade-In

APRIL 2016

handle most details, from pricing to mailing labels. Some even wipe your gadgets. Speaking of which ...

REMEMBER TO WIPE Be sure to clear out all your personal data. Use the reset option in your phone’s

settings menu and the systemrecovery option on your computer or console.

If you’re concerned about missing a step, search the web for speciﬁc instructions. Whatever you do, don’t just chuck your castoffs in the garbage. Some municipalities will ﬁne you. Big retailers often offer in-store recycling.

For more of MONEY’s technology reviews, go to money.com/tech.

P H O T O G R A P H Y B Y G R E G O R Y R E I D, P R O P S T Y L I N G B Y L I N D E N E L ST R A N

TOP DOLLAR VS. LEAST HASSLE There are two easy ways to sell your gadgets. An eBay auction is the more lucrative, but that requires taking photos (sharp ones really do pay off) and arranging for shipping. If you’re

worth the trouble: Android tablets, old printers, keyboards, and mice. But a ﬂatscreen monitor can fetch $50 after ﬁve years. Naturally, likenew gizmos are worth more than damaged goods.

Americaâ&#x20AC;&#x2122;s emblem stands for great strength and long life.

With that in mind, letâ&#x20AC;&#x2122;s talk retirement.

Visit us at mutualofamerica.com or call us at 1-866-954-4321.

P R O P C O N ST R U C T I O N A N D S T Y L I N G B Y L I N D E N E L ST R A N

Trim Your Car Costs CUTTING 4,000 POUNDS OUT OF YOUR GARAGE COULD SAVE YOU THOUSANDS OF DOLLARS A YEAR. by Daniel Bortz

Photograph by

g r e g o ry r e i d

IF YOUR HOUSEHOLD is like most, you probably have two or three vehicles in your driveway: one for yourself, one for a spouse, maybe one for a teen. Indeed, 57% of U.S. families own two or more cars, KPMG found. Between gas, maintenance, fees, and insurance, the average cost to owners was $4,375 per vehicle in 2015, AAA found—even while fuel prices plunged. That’s money that you could be using for family trips or retirement planning. (The cash you’ll get by selling won’t hurt either.) So could you save by dumping one vehicle? Over the past half-dozen years, new car- and rideAPRIL 2016

m o n e y. c o m

Plan

SAVE ON CAR COSTS | CAREERS | CREDIT CARDS | HOME

sharing services have revolutionized the way people get around, creating a new set of alternatives. IBM forecast this year that the number of consumers 35 and older who use car- and ride-sharing as primary modes of transportation will more than double by 2025. Attitudes have shifted too: “Owning a car today feels like a burden to many people,” says Ben Stanley, the IBM study’s co-author. Abandoning car ownership altogether might not be practical. But eliminating even one vehicle could pay of for many families. Follow these steps to calculate whether you would beneﬁt by cutting back.

KNOW YOUR BASELINE First, understand how your family racks up mileage, says Atlanta ﬁnancial planner Brandy Wright. In particular, look at how often you use multiple vehicles at the same time; consider not only commuting but also night and weekend trips. If you doubled up only a few times a week, you’re a strong candidate for downsizing, says David Levinson, a civil engineering professor and researcher at the University of Minnesota’s Center for Transportation Studies. Then, to compare costs, understand what you’re spending now. Charge all your gas purchases? Check your account statements to see last year’s damage. Add what you spent on maintenance and insurance. If you have a lease or loan, factor that in. Average newcar payments were about $482 a month last year, Experian says.

PRICE OUT ALTERNATIVES Now ﬁgure out how you’ll cover times that you need more than one

m o n e y. c o m

APRIL 2016

car. Your commute may be the biggest hurdle, so consider whether you or your spouse can use public transit or a carpool, or buddy up with colleagues and split the gas. For other trips, you may need a family heart-to-heart. Can you coordinate your schedules to cut the number of times you’ll have a conﬂict? Once you’ve reduced those, ﬁll in the gaps. The closer you live to a city, in general, the more options you’ll have. If you just need a few one-way trips, try taxis or ride-sharing services. Nationwide, the average Uber trip runs about $16, according to SherpaShare. For weekend errands, particularly if you’re hauling groceries or other goods, car sharing may work

Road Test A typical family could save big by selling one car and using a mix of transportation options. Costs Over Five Years AVG. CAR OWNER

DOWNSIZER

Gas

Public transit

$8,407

$5,033

+ Insurance

+ Car sharing

$5,575

$4,895

+ Maintenance/ tires

+ Uber

$4,568

$4,160 SUBTOTAL

+ License/ taxes/ registration

Less car sale

$3,325

$10,900

TOTAL COST

$21,875

$3,188

$14,088

NOTES: Assumes Zipcar two hours a weekend, public

transit commute, one Uber trip a week, five-year-old car owned outright. SOURCES: AAA, American Public Transportation Assn., SherpaShare, ZipCar, Edmunds.com

better. Zipcar, for example, ofers a $70 annual membership (plus a $25 one-time fee) with weekend hourly rates starting at $8.50. Families can save $154 to $435 a month by using car-sharing services, UC– Berkeley’s Transportation Sustainability Research Center found. Whatever the best options for you, tally the costs and compare them to what you’re spending now. (See chart below for an example.) Now figure out which vehicle to sell. The more a car is worth, the more you’ll gain by scaling back, but be practical: If you chaufeur your kid’s swim team around, you obviously can’t dump the minivan and keep the coupe. The average five-year-old vehicle goes for $10,900 in a private-party sale, Edmunds.com says. (Driving an old clunker into the ground? Selling it may make environmental sense, but not financial.) If you have outstanding car loans, sell the most valuable vehicle you can live without, then pay of the debt.

TIP THE SCALE Still on the fence? Tweaking some transit habits might make downsizing pay of. Bundling errands into a single day, for instance, may save money on car sharing, says Susan Shaheen, co-director of the Berkeley research center. And try to avoid Uber’s hated surge pricing, which hikes fares at times of high demand. To do so, you may just need a little patience, says Northeastern University professor Christo Wilson, coauthor of new research from Northeastern investigating Uber’s costs. “Surge prices often last less than 10 minutes,” he explains.

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How to Survive a Career Change TO MAKE A SMART SHIFT, AVOID IMPULSIVE MOVES AND LAY YOUR FINANCIAL GROUNDWORK IN ADVANCE.

by Alexa von Tobel I STARTED my professional life on the trading desk at Morgan Stanley. For someone just out of college I made good money, but I already had the itch to build something of my own. Within two years I had left my job, started and deferred business school, and shifted gears to build a company that would let me focus on my real passions: entrepreneurship and personal finance. Fortunately, I had built up a solid emergency fund to give myself more flexibility. But for almost half of the people who fantasize about a career shift, financial insecurity is what keeps them stuck, according to a recent Harris poll.

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Whether you are following a dream or looking for more income, flexibility, or other benefits, making a professional change can be a strategic, life-enhancing move. But it can also strain your finances, at least in the short term. The following moves will help prepare you and your family for the change. Build a cushion. When I started my company, I had to go without a regular paycheck in order to get everything of the ground. I used my emergency savings—I called it my freedom fund—to support myself. Generally, I recommend at least six months of take-home pay as an emergency fund, but if you’re planning a career change, I’d suggest at least 12 months’ worth, to help you cover costs without having to take a job you don’t actually want.

Slash your budget. Creating that large a cushion is hard but essential. Even if you expect to make more money eventually, you’ll probably need to take a more junior position, with a smaller paycheck, during your transition. If the role you seek requires schooling, you’ll also face education expenses and a longer period without income. Map out your budget carefully to determine the cost of your current essentials; don’t forget big one-off items that won’t appear monthly, such as annual memberships and holiday gifts. Then ﬁnd areas where you can cut. Be ruthless: I was still single and supporting only myself when I didn’t have a paycheck, but I had to learn to say no to pricey social outings, travel, and dinners out. Parents have even greater ﬁnancial responsibilities to cover. Plan for school. If new training is part of the equation, try to start classes while you still have income. If you go full-time, seek teaching jobs or fellowships on sites like FinAid.org. You may also be able to ofset costs by earning extra money through tutoring, taking other side gigs, or renting out space in your home through Airbnb. Keep on saving. Any retirement contributions you make now maximize the time your money has to grow—so don’t stop setting aside long-term savings. Even if you leave a 401(k) in place rather than roll it over, open an IRA and try to keep contributing there while going through the career switch. Columnist Alexa von Tobel is the founder of LearnVest. Catch her columns and videos at Money.com.

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m i k ey bu rt o n

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SAVE ON CAR COSTS | CAREERS | CREDIT CARDS | HOME

of your rewards, limit yourself to just one card with an annual fee.

PAY STRATEGICALLY

Get More From Rewards Cards NOT TAKING FULL ADVANTAGE OF YOUR CREDIT CARD POINTS? YOU CAN DO BETTER. by Taylor Tepper WHEN IT COMES to maxing out credit card points, you may have better intentions than follow-through. People are more likely to select a card for the rewards than for other beneﬁts, like rental-car insurance, according to a recent J.D. Power survey. So far, so good. But once they’re at the register, only 14% actually pick the card they use for the points it delivers, a separate Bankrate survey found. Even worse, one in ﬁve pointscard holders didn’t redeem any bounty last year, according to NerdWallet. That’s a freebie fail. To claim more points and perks, use these strategies.

fee: $75), which gives 6% back on the ﬁrst $6,000 on groceries per year. But heavy drivers should seek better rewards for gas purchases, and web shoppers may fare better with a no-fee Discover It, which ofers extra cash when you buy via its shopping portal. To avoid cutting into the value

Maximize Your Payoff See what a mix of credit cards delivers in one year, after fees, for a $2,000-a-month spender.

FIX YOUR MIX Cards vary widely on the purchases they reward and the benefits they deliver, so you need a combo that fits your spending style. Start with a no-fee cash-back card like Citi Double Cash, which gives a flat 2% on all purchases. Then add a card that ofers higher rewards in the categories where you spend the most; you may need to pay an annual fee for this. Many families would do well, for instance, with American Express Blue Cash Preferred (annual

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HOW REWARDS ADD UP IF YOU … Use only a flat 2% cash-back card:

$480 Switch groceries to a targeted 6% card:

$645 Add a travel rewards card, then cancel it:

$1,325 NOTES: Assumes $500 a month on groceries, $400

on travel and restaurants. Cards: Citi Double Cash, American Express Blue Cash Preferred, and Chase Sapphire Preferred, canceled after a year, with Chase points redeemed on travel. SOURCE: MONEY research

Once you have the mix right, become a conscious purchaser. Avoid cash entirely, and select the right card for each transaction. Using Blue Cash Preferred for groceries? Great. But it delivers only 1% in many other places, so switch to the ﬂat 2% card for other spending. Got a Discover It? Use that only online or in the categories where it delivers 5% back, but pay attention: These change quarterly. And don’t carry a balance. Finance charges will also undermine your rewards.

JET IN AND OUT Travel cards, which tend to have higher fees (often around $100), need a diferent strategy. The sweetest cards deliver upfront bonuses based on the first three months of spending and waive the fee in the first year. So for most people, the best payof comes from swapping in and out, rather than committing. The game plan: Sign up before a big trip, get your bonus, cash in, and close the card. Then pick another card next year and repeat. “The most savvy reward seekers often sign up for new cards each year,” says Ben Woolsey, president of CreditCardForum.com. The exception: bona fide jetsetters. If you drop $1,500 or more monthly on travel and restaurants, you could use a Chase Sapphire Preferred card and get 2.5% on that spending. You’d also avoid foreign transaction fees and, by using points on hotels and airlines, get upgrades and other benefits.

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KEEP YOUR OUTLAY IN SYNC WITH YOUR HOME

Cap your kitchen renovation budget at 15% of your home’s value, suggests John Bredemeyer, president of Realcorp, a national appraisal firm based in Omaha. (Check your town assessor’s site or a real estate site). For budgeting purposes, figure about 30% on cabinets; 14% on appliances; 10% on countertops; 5% on lighting; 4% on plumbing fixtures; 2% to 3% on paint; 1% to 2% on tiles, and 35% on construction costs, such as windows, flooring, and labor.

TO CUT COSTS, HOLD ON TO WHAT WORKS

STAY SKIN-DEEP IF YOU’RE MOVING SOON

You can slash the price tag by limiting how much of your old kitchen you replace, says Portland, Ore., kitchen designer Chelly Wentworth. Sticking with original windows can save $500 to $1,000 per window; keeping the wood ﬂoor currently hiding underneath layers of linoleum and vinyl could save you $2,000. Simply leaving the sink and appliances in the same locations probably means you can reuse existing plumbing, saving you perhaps $200 to $500.

Things to Know About

GET MORE SPACE FOR LESS BY STEALING IT

Unless your house was built in the past 20 years, your kitchen is almost certainly undersized. As long as you’re tearing stuf out, expand as well. By repurposing space from a hallway, or a no-longer-needed chimney, closet, or porch, you can grow at perhaps half the per-square-foot costs for an addition. Depending on the project and location, you might pay $100 to $300 a square foot to recapture space vs. $200 to $400 to build new.

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Renovating Your Kitchen by Josh Garskof

IT PAYS TO PAY FOR YOUR DESIGN

While the designers at home centers, kitchen stores, and cabinet shops won’t charge you a fee, they aren’t working for free. Their paychecks come from the retailer or manufacturers of the products they’re selling, which limits your choices. Skip the freebies and hire a veteran designer without any conﬂicts of interest. Expect to pay 3% to 10% of your project costs for design—a fair price for a kitchen plan that really works.

APRIL 2016

If you expect to put your house on the market within a decade, skip the $60,000 full kitchen redo and go for a cosmetic upgrade only. You can have old cabinets painted for $1,000 to $5,000 or refaced with a wood veneer and new doors and drawer fronts for some $5,000 to $7,000. A new faucet and new cabinet hardware can be yours for under $500, new lighting for $500 to $2,000, depending on how far you take it.

Illustrations by

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P R O P S T Y L I N G B Y L I N D E N E L ST R A N

The Death of Cool Equities IN A FICKLE MARKET, BETTING ON WHAT’S TRENDY HAS SUDDENLY BECOME RISKY BUSINESS. by Taylor Tepper

Photograph by

g r e g o ry r e i d

WALL STREET’S trendiest companies are finding out what fashionistas have known all along: One day you’re in, and the next day you’re out. Take Tesla Motors, the $24 billion electric-car maker run by a real-life Tony Stark. The stock has trounced the market every year since going public in 2011, yet it’s down 30% since August. The same goes for Chipotle and Shake Shack. Once craved by Wall Street traders and famished millennials alike, these locally sourced fast-casual joints have lost about a third of their value since the summer. So what exactly does the market covet these APRIL 2016

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Invest

THE DEATH OF COOL EQUITIES | THE INTELLIGENT INVESTOR

days? Pretty much the exact of fortune could simply be overdue. earnings ratios. So watch out for opposite. For instance, Hormel Netflix (NFLX). The streaming-video By the time Wall Street spots a trend giant and content producer entered Foods, the stodgy meat processor and gets around to exploiting it, the January riding high, after beating the that brings you Spam, has seen its fad has usually jumped the shark. market by 133 percentage points in stock soar 48% since the start of In January one fund company filed 2015, and nearly quadrupling in 2013 August, even in the midst of a major plans to launch an ETF that, you (the stock took a breather in 2014, market pullback. Shares of Waste guessed it, tracks stocks with social sinking 7%). But even after dropping Connections, which has zero buzz on media buzz to invest in what’s cool. 20% this year, Netflix shares are social media—the company collects That probably means the cool astonishingly expensive, with a P/E municipal trash in small cities and kids’ party is over. Here’s how you ratio that’s about 11 times higher than suburbs—have also zoomed 25%. can profit in a market that’s suddenly that of the broad market (see chart). Call it the death of cool, a cool of, less enamored of shiny toys: Sure, the company is growing, and or simply a “regression to the mean,” LOOK FOR MORE COOL SHOES TO DROP revenues are up 55% since 2013. But but stocks of trendy companies have The only things this market hates costs are rising too. This is partly an suddenly fallen out of favor. These more than cool and trendy stocks are unintended consequence of Netflix’s companies—many of which are trying ones trading at triple-digit price/ own success. Now that the company to disrupt their industries, be it tech has established a market or media or hamburgers— for streaming video, more are partly victims of the and more competitors—like shaky markets. Investors see gyrations old media leaders such as in the Chinese economy HBO—are ofering similar and plummeting oil prices services. That competition as canaries in the coal for content will likely boost Trendy stocks like Shake Shack and Chipotle have turned cold lately vs. shares of boring industry stalwarts … mine for a possible global expenses as competing recession. That would bids for programming STOCK PRICE MOVEMENT make life tough for all could drive up prices. companies, but especially Netflix’s push to expand McDonald’s Chipotle Shake Shack 25% for untested outfits riding overseas could also boost on buzz and potential, as the company’s costs. 0 opposed to profit growth. “Netflix expects to continue –25 That’s why in times like to burn cash at an inthese, investors often hitch creased rate for the next –50 their wagons to estabseveral quarters,” notes lished players with steady, Wedbush analyst Michael Aug ‘15 Feb ‘16 if unspectacular, earnings. Pachter. “Boring companies are Perhaps more trouYet despite the losses, these … as are shares of many doing better because they bling, Netflix’s U.S. stocks remain frothy … other buzzworthy outfits. are less volatile in a subscriber growth has P/E RATIO P/E RATIO volatile market,” says disappointed lately, so this Leah Miller, chief execuis no fallen angel that you 176 167 tive of Red Anchor Wealth should expect to bounce 99 Management, in Charlesback quickly. 22 16 63 59 ton, S.C. What’s more, cool stocks generally don’t pay EMBRACE THE BORING Netflix Tesla Amazon S&P Shake Chipotle McDonald’s .com 500 Shack dividends, which scared The corollary to the death investors usually crave. of cool equities is the rise of NOTES: Price/earnings ratio based on projected profits. SOURCES: Ycharts.com, Bloomberg Of course, this reversal boring stocks. And you

Cooling Off

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can’t get more humdrum in the fast-food world than the Golden Arches. McDonald’s (MCD) struggled mightily between 2012 and 2014 as newer and hipper eateries like Chipotle, Shake Shack, Habit Burgers, and Noodles & Co. became increasingly popular. In the past year, though, the narrative began to shift after Chipotle was hit with an E. coli crisis, McDonald’s hired a new CEO, and Mickey D’s customers started getting Egg McMuffins around the clock. Not only did the all-day breakfast juice same-store sales, but the successful launch is a sign the company is overcoming past execution problems, says Morningstar analyst R.J. Hottovy. To be sure, MCD isn’t exactly a bargain. After the stock soared 27% over the past year, its 22 P/E ratio is higher than the S&P 500’s. But the stock has still trailed the market over the past three years and is cheaper than Shake Shack, Chipotle, Wendy’s, and Restaurant Brands International, parent of Burger King and Tim Horton’s. Plus, McDonald’s is in the S&P 500 High Quality Rankings, an index of companies with strong balance sheets, steady earnings, and low debt—exactly the type of stocks that thrive in rocky markets. In the Great Recession of 2008, Mickey D’s returned 8% while the market sank 37%. Don’t care to buy individual stocks? You can capture established names such as McDonald’s and Hormel Foods through PowerShares S&P 500 High Quality Portfolio (SPHQ). The ETF tracks the S&P 500 quality index and is in our MONEY 50 list of recommended funds. Or go with SPDR Global Dow ETF (DGT), which owns shares of the biggest industry titans—many of which happen

BORING COMPANIES ARE DOING BETTER BECAUSE THEY ARE LESS VOLATILE IN A VOLATILE MARKET.” —LEAH MILLER, RED ANCHOR WEALTH MANAGEMENT

to be boring, such as McDonald’s and Procter & Gamble.

HUNT FOR FALLEN ANGELS CAREFULLY At first blush, the fact that Chipotle (CMG) continues to sport an above-average P/E—after losing about a third of its value—may be a sign that investors still think it’s special. It also means, however, that the stock remains frothy. And now investors are beginning to wonder if the stock deserves to trade even at these levels. “We question why Chipotle of today should be valued like Chipotle of yesterday,” notes Deutsche Bank analyst Karen Short. While management has put into place safeguards to prevent another E. coli scare, “there is tremendous uncertainty on how well they will be received,” she says. Even before the health crisis, Chipotle was earning less per location than Shake Shack, whose profits are forecast to grow faster than Chipotle’s over the next five years. And then the chain sufered as big a drop in consumer perception as General Motors did in 2014 when it had to recall millions of faulty ignition switches, according to the YouGov Brand Index. As for a stock that seems hyped but really isn’t, check out Twitter (TWTR). Though it’s considered part of the “in” crowd, Twitter has actually been treated more like a geek by investors. Following a

brief one-month honeymoon after going public in late 2013, the microblogging site lost threequarters of its value. Yes, Twitter boasts 305 million monthly active users, but today that trails Facebook (1.6 billion) and Instagram (400 million). Can you say #fail? But now that all the sky-high expectations have been completely dashed, there’s a positive case here. For starters, Twitter is finally on the verge of turning an actual profit, a big step for a social media stock. Advertising revenue in the U.S. and internationally grew by almost 50% compared with a year ago, and more companies are advertising on the platform than ever before. “We see Twitter as an opportunity in the making,” says Mike Desepoli of Desepoli Wealth Management in Port Jeferson, N.Y. The challenge: The company’s “current strategy is adequate to retain users, but inadequate to attract new ones,” says Wedbush’s Pachter, who has a neutral rating on the stock. So as Facebook did a few years ago, Twitter needs to find a way to get its customers’ parents to create a handle. Broadening your appeal from early-adopter millennials to Gen Xers and boomers is exactly how to lose buzz. But in this market, that may be the best way to go.

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THE DEATH OF COOL EQUITIES | THE INTELLIGENT INVESTOR

Invest

(CWB), though, are securities issued

by blue-chip names like Wells Fargo and Intel. The ETF is up 6.3% annually over the past three years. That’s half the S&P 500’s returns but three times the gains for bonds.

USE OPTIONS AS A CUSHION

Find the Courage to Take the Plunge FEAR GETTING SOAKED BY TODAY’S MARKET? SOME FUNDS MAKE IT EASIER TO DIP YOUR TOES INTO STOCKS.

by John Waggoner EVERY ONCE IN A WHILE you notice a small drawback about investing, such as, say, the occasional horriﬁc plunge that makes you wonder if you’ll ever be able to retire. The timing of this year’s slide was particularly troublesome, as taxpayers are usually ﬂush with tax refunds and bonuses to deploy. Yet there are funds for the skittish that allow you to get your feet wet but won’t leave you high and dry if stocks spring back soon. And no, we’re not talking about pricey funds that use hedge fund tactics.

Illustration by

taylor callery

Covered call funds sound exotic, but they’re not. These funds sell call options—the right for others to buy your stock at a set price—on their holdings. The contracts bring in income that can cushion losses in a downturn. If prices rise enough for the option to be exercised, though, your gains will be limited. “Options are a better riskmanagement tool than bonds,” since they always move in the opposite direction of stocks, which isn’t guaranteed with fixed income, says Randy Swan, manager of Swan Diversified Risk. Over the past year PowerShares S&P 500 BuyWrite Portfolio (PBP) has been flat while the market is of 6%. In 2008 the ETF lost nearly 29%—but that was eight points less than the broad market.

TURN TO HYBRID INVESTMENTS A convertible bond, as the name implies, is debt that can be converted into the company’s stock. The bonds become more valuable as share prices rise; if the stock languishes or falls, you still get paid interest, though less than what conventional bonds ofer. Over the past 20 years convertible funds averaged 6.9% a year, vs. 7.3% for the S&P 500 with dividends reinvested. Convertibles are issued by companies of all sizes, but some are smaller ﬁrms that can be at risk in a weak economy, warns David King, portfolio manager at Columbia Threadneedle Investments. Among the top holdings of SPDR Barclays Convertible Securities

TAKE A BALANCED APPROACH The simplest option is the one you’re most familiar with: balanced funds, which are typically invested about 60% stocks and 40% bonds. Fixed-income yields are still low, but even at these levels bonds ofer you protection. In January, when the S&P 500 fell 5%, Vanguard Balanced Index (VBINX) lost 2.8%. If stocks come roaring back, though, these funds won’t shine. But if you’re nearing retirement or just tired of being terriﬁed, they’ll help you stay in the game. Columnist John Waggoner is the author of three books on Wall Street and investing.

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MONE Y COVER STORY

BEST IN TRAVEL 2016 m o n e y. c o m

APRIL 2016

NEW YORK CITY: Our No. 2 Domestic Destination The Brooklyn Bridge, gateway to the city’s hottest borough

The best trip for your money just landed. For MONEY’s first Best in Travel Awards, we crunched thousands of data points to locate the most value-packed destinations, airlines, hotels, and more on the planet. By SUSIE POPPICK, STIRLING KELSO, and KARA BRANDEISKY with SHALENE GUPTA, SARA MORROW, TAYLOR TEPPER, and ALEXANDRA MONDALEK

AUSTIN: Our No. 6 Domestic Destination Tubing on the nearby Guadalupe River

A VACATION SHOULD FEEL LIKE A REWARD, but that doesn’t mean it should break the bank. The trouble is that most travel guides either ignore the expense factor or obsess over it, turning the bargain hunt into the main adventure. MONEY’s first Best in Travel Awards shift the focus to a more universal—and useful—metric: value. We selected all of our winners— from the domestic and international destinations to the best airlines, hotels, cruises, and travel cards—because they land in a travel sweet spot: great choices at great prices. To locate where quality, cost, and value intersect, we relied not on our reporters’ favorite haunts, but on something far less subjective: data. With input from more than 40 sources—including TripAdvisor, Numbeo, Hotels.com, J.D. Power, and Onboard Informatics—we considered financial factors, such as overall costs and price trends, as well as experiential ones, such as cultural attractions and tourist amenities. The result is a list that’s both timely and handy, packed with the kind of intel that makes saving money as easy as a walk on the beach. Call it your ultimate vacation value guide.

MONEY’S BEST IN TRAVEL METHODOLOGY MONEY weighed more than 12,000 data points in 222 travel-specific areas. Here’s how we picked the winners:

DESTINATIONS We examined the 100 most popular travel destinations in the U.S. and the 100 most popular overseas, based on

total web searches for a given location, hotel rooms booked, plane tickets purchased, and the volume of reviews for local touristrelated businesses and points of interest. We then ranked the destinations, giving the most weight to places with

a drop in year-over-year prices, as well as the most high-quality amenities based on travelers’ reviews. We also considered overall costs, weather and crime reports, and transportation options. Only one city was chosen in each state. Rankings also considered

FROM TOP: The San Diego coast at Point Loma Sunset Cliff Park; the grouper taco at Little Italy’s Bracero Cocina de Raiz restaurant

additional MONEY research and reporting.

TRAVEL SERVICES For each category (hotels, airlines, car-rental companies, cruise lines, credit cards, all-inclusive resorts, and frequent-flier programs), we chose a top pick (platinum) and a runner-up (gold). Rankings

were based on overall cost, year-over-year price declines, and travelers’ satisfaction surveys, with extra emphasis placed on tourists’ perceived value. For apps we focused on those that saved users money, then tested each to see how they performed. For a full methodology, go to money.com/besttravel.

hotel chains BEST IN TRAVEL

2016

Home Away From Home MONEY ranked the 71 biggest national hotel chains based on average cost per night and year-over-year price changes, along with customer ratings in a variety of areas: the reservation process, check-ins, room quality, food and beverages, services, facilities, and fees. We also factored in reader reviews from our sister publication Travel + Leisure.

PLATINUM

Wingate by Wyndham

DOMESTIC DESTINATIONS

San Diego CALIFORNIA

–2.5% Airfare decline year over year

P R E V I O U S S P R E A D : P H OTO G R A P H S B Y G E T T Y I M A G E S ; PAT R I C K B Y R D/ A L A M Y. T H I S S P R E A D, C L O C K W I S E F R O M B OT TO M L E F T: C O U R T E S Y O F B R A C E R O ; R O N T H O M A S /G E T T Y I M A G E S ; C O U R T E S Y O F W Y N D H A M .

WHY IT WON: The best combination of outdoor attractions, cultural landmarks, great weather, and affordable hotels in the country.

The best weather of any big city in the country (263 sunny days a year). The best zoo in the world (sorry, Bronx). Gorgeous beaches, acclaimed theaters, and new foodie destinations all over town. All that and average four-star hotel rooms go for less than $200 a night. San Diego may be overshadowed by the City of Angels 120 miles to the north, but it’s pretty heavenly too. And this year San Diego is shining brighter than ever. Overall, the city ranked No. 3 on our list of the best parks and outdoor venues in the country. On May 14, the San Diego Zoo celebrates its centennial with free events. The baseball All-Star Game comes to the city in July. And March saw the opening of the Liberty Public Market (libertypublicmarket.com),

a 30-stall food hall located in a renovated, ’20s-era warehouse in the Liberty Station neighborhood. Not that the city needs more food options. With more than 9,000 bars and restaurants, San Diego ranks No. 5 on our list of top eateries (and drinkeries). In a town known for its Mexican food, it may be surprising that San Diego’s Little Italy has also become a culinary pit stop. The Bajainspired Bracero Cocina de Raiz (bracerococina.com) makes a great carrot aguachile ($17) and ofers $1 of beers during happy hour. You won’t have trouble ﬁnding great, afordable hotels. San Diego has more top-rated hotels than Chicago, San Francisco, and Las Vegas. At the retro Pearl Hotel in Point Loma you’ll pay as little as $126 a night.

Rooms at Wingate by Wyndham cost about $100 per night in 2016, down 9% over last year, according to Hipmunk. But customers still give it higher satisfaction scores than many upscale hotel chains (and even a few luxury ones), thanks in part to the free Wi-Fi, 24-hour fitness centers, and hot breakfast you’ll find at every one of its 150plus hotels.“A lot of ‘extras’ are a given—that’s something people appreciate,” says Krista Canfield, getaway expert at the crowdsourcing website Gogobot. Nights at the chain’s Manhattan location—three blocks from the Empire State Building—start at just $176 in early April. GOLD

Four Seasons Hotels and Resorts The Four Seasons has always meant luxury, and its

rooms are still rated No. 1 among all North American hotel chains, according to Travel + Leisure. But if you have ever wanted to pamper yourself at one of its 96 locations worldwide, the time is now. While Four Seasons hotel rooms can run $400–$500 a night, that’s down 10% from the year before, according to Hipmunk. And the Four Seasons is famous for its luxe list of complimentary amenities, from canoeing in Maui to salsa lessons in Costa Rica. Kids under 5 also eat free at every one of the hotel’s properties.

TRAVEL TIP: BOOK DIRECT. Search the web for low prices, but then go to the hotel’s website and check for a better deal. “Some hotels have decided they’re sick of paying Expedia and Booking.com, and they want to reward you for booking directly from them,” says Jason Clampet of the travel website Skift.

The redesigned lobby at a Wingate hotel

Illustrations by

m i ch a e l b r a n do n m y e r s

DOMESTIC DESTINATIONS 2016

New York

–6.1%

N E W YO R K

Hotel prices year over year

WHY IT WON: New York has more A-list sights than any U.S. city, and the cost of hotels and flights is dropping. Go give your regards to Broadway.

Everyone knows that New York ain’t cheap, but it’s been getting cheaper. The Big Apple is our only location where both hotel prices (down 6.1%) and airfares (down 3.3%) fell year over year. Credit for that goes to competition among airlines and a hotel-building boom. There were more than 100,000 rooms in 2015, up from 73,000 a decade earlier. “We’ve added the entire inventory of San Francisco,” says Fred Dixon, president

and CEO of NYC & Co., the city’s tourism bureau. Two hot neighborhoods are downtown, as in downtown Manhattan and downtown Brooklyn. At the sleek W Hotel near the World Trade Center memorial, you can find a room for $175 a night. Over the bridge in Brooklyn, the Nu Hotel mixes old-school touches like hardwood floors with funkier nods such as in-room hammocks. Rooms start at $225, but you can find deals

on Jetsetter.com for $125. Saving money out on the town means thinking like a native. Grab a great lunch from the ethnic food carts around Rockefeller Center for less than $10. If you’re hungry for some theater, hit one of the city’s three discount TKTS

PLATINUM

Ikos Oceania

Prime seating at the Ikos Oceania’s infinity pool

resorts BEST IN TRAVEL

Away From It All

2016

No one likes to worry on vacation, and at an all-inclusive resort you need to think about only one bill. MONEY started with TripAdvisor’s list of the Top 25 All-Inclusive Resorts in the World, then picked the winners using price data and guest ratings of amenities, room cleanliness and comfort, hotel staff, location, perceived value, and overall satisfaction from TripAdvisor, Orbitz, and Kayak.

It’s no wonder 100% of Orbitz reviewers recommended this Greek resort. Located on a private, ﬁr-lined stretch of the Aegean Sea, the Ikos Oceania is home to three pools, a spa, free tennis, mountain biking, windsurﬁng, canoeing, snorkeling, yoga, and what Ikos calls the gastronomy. “One way all-inclusives are starting to distinguish themselves is by the chefs they’ve got on site,” says Gabe Saglie of deal site Travelzoo. Ikos Oceania boasts two with Michelin stars among its four restaurants. The

Times Square, at the heart of the city that never sleeps

booths, but wait until late afternoon when the lines have thinned. And at the Museum of Natural History and the Metropolitan Museum of Art, it’s okay to ignore the suggested entrance fee and pay what you want.

average bill is $304 per person a night, according to TripAdvisor, and if you book ﬁve or more nights directly with Ikos Resorts, it will give you free transfers to and from Thessaloniki International Airport, a $150 value. GOLD

Beloved Playa Mujeres If you want to stay closer to home, head to Beloved Playa Mujeres, nestled on

Mexico’s Caribbean coast. Beloved Playa Mujeres is just a short drive from Cancún’s nightlife and Riviera Maya’s archeological sites but still offers the appeal of a secluded getaway. It’s certainly pricey—$528 per person a night, according to TripAdvisor. But that includes unlimited premium alcohol, four restaurants, 24hour room service, three pools, sailing, snorkeling, kayaking, and more.

TRAVEL TIP: AVOID CONSTRUCTION ZONES. See a suspiciously low price near the end of the high season? Proceed with caution. Resorts often set aside three to six weeks of construction for upgrades and renovations, says Saglie of Travelzoo, and offer discounts to compensate for the trouble.

BEST MONEYSAVING APPS

SKYSCANNER Using data from every major airline (including Southwest), this app selects itineraries based on shortest layover, optimal departure times, and best price. Especially on overseas flights, Skyscanner often finds flights that are cheaper (by $100 or more) than you could snag on your own.

MONEY rated the most popular travel apps, then tested each to find which ones could save you the most money. The winners:

Memphis TENNESSEE

–10.3% Airfare drop year over year

P H OTO G R A P H S B Y, C L O C K W I S E F R O M L E F T: C O U R T E S Y O F I K O S , C H R I STO F F E R A S K M A N /G E T T Y I M A G E S , G E T T Y I M A G E S , M A R I O TA M A /G E T T Y I M A G E S .

WHY IT WON: With the drop in airfares, a new Graceland hotel, and all that great barbecue, you won’t be singing the blues here.

The time has come to take singer Marc Cohn’s musical suggestion and go walking in Memphis. The average roundtrip airfare has fallen almost $50 year over year, and a four-star hotel room costs $154 a night on average. Somewhere Elvis is smiling. One of the best deals in town are the free outdoor performances at the Levitt Shell, built in 1936 in downtown’s Overton Park. For an even more down-home introduction to Blues City, try the Hi-Tone Cafe, a dive bar where locals gather for live music ($10 cover for some shows) and cans of Wiseacre Brewing’s Tiny Bomb, made

with local honey ($5). Along with the music, Memphis is known for its finger-licking barbecue joints, such as Central BBQ (cbqmemphis.com). “The pulled-pork sandwich ($5) and mac and cheese ($3.50) are essential orders,” says Holly Whitfield of ILoveMemphisBlog.com. Elvis fans should keep tabs on the new Guest House at Graceland, located about eight miles from the city center and set to open in October (graceland.com/ lodging). Introductory rates will start at $159 a night. Celebrating Elvis Week along Memphis’s main musical drag, Beale Street

Fort Lauderdale FLORIDA

WHY IT WON: Beautiful beaches where sunny

days outnumber cloudy ones by 2 to 1. Plus: Airfares have fallen three years in a row.

Miami gets the jet-setters— and the sky-high prices. Fort Lauderdale gives you the same ocean beach for less. The average hotel with four stars on travel-booking site TripAdvisor will cost you $40 less in Fort Lauderdale than in Miami. Thanks to the ever-expanding Fort Lauderdale airport, the average roundtrip airfare dropped by almost $30 a ticket last year. Even Florida’s 6% sales tax is a bargain compared with most states’, and Broward County, home to Fort Lauderdale, is one of the few with no local tax. If it’s your first time in town, stroll along the beach between Sunrise Boulevard and Bahia Mar, says Erik

$161 Average cost of a hotel room

Petersen of Fort Lauderdale Magazine. The main shopping strip, Las Olas Boulevard, is dotted with restaurants. At Mangos (mangosonlasolas.com), the Las Olas shrimp with olives and artichokes over pasta is a specialty ($21). After dinner, stay to dance to the music performed by local bands (no cover fee). Fort Lauderdale hotels average $161 a night, according to Hotels.com. You can even find a waterfront bargain: Ocean-view rooms at the Sun Tower Hotel & Suites (suntowerhotelsuites.com), start at $149 a night in May. ABOVE: Sunrise along an

as-yet unpopulated stretch of beach in Fort Lauderdale

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BEST MONEYSAVING APPS

DOMESTIC DESTINATIONS

GASBUDDY Crowdsourced data on fuel prices nationwide. We found an average differential of 41¢ a gallon across ﬁve metropolitan areas. Use it before you return the rental car.

2016

rental cars BEST IN TRAVEL 2016

Hit the Road MONEY ranked the eight largest rental car chains based on average daily rates from Kayak and customer satisfaction ratings of airport shuttles, the reservation process, the pickup and return processes, and overall costs and fees from J.D. Power.

The luminous fountains at the Bellagio Hotel

Las Vegas N E VA D A

$199/night Average price of a ﬁve-star hotel

WHY IT WON: If you’re looking for a great deal on a five-star hotel, Vegas is a sure bet. Head downtown and you’ll eat for less too.

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ner, as Vegas has become one of the country’s new culinary capitals, ranking just behind San Francisco and Houston on TripAdvisor’s list of top restaurant cities. That said, even a top-end restaurant such as db Brasserie—home to a $139, 42-oz. prime côte de boeuf—has daily $1 oysters specials, from 5 to 6 p.m. You’ll also save if you venture outside the casino zone. Carson Kitchen (carsonkitchen.com), where entrées range from $15 to $19, helped lead the revitalization of downtown and is an easy cab ride from the Strip, says Andrea Bennett of Vegas magazine.

GOLD

Enterprise

Alamo

Enterprise was the runaway winner when it came to customer satisfaction, scoring top marks for its cars, reservation process, pickups, and returns. “When you leave the location, you’ve been asked at least twice, ‘How’s the customer service been today?’” says Rick Garlick of J.D. Power. But the white-glove treatment doesn’t cost an arm and a leg. While Enterprise isn’t always the cheapest option, customers still rated it No. 1 in value for its costs and fees. Earn loyalty points with Enterprise Plus.

Alamo’s prices are 7.4% lower than its sister company, Enterprise (they are owned by the same parent corporation) but has only slightly lower customer-satisfaction ratings. That makes Alamo popular among cost-conscious travelers, Garlick says. Plus, you can save even more if you join Alamo’s loyalty program, which automatically shaves another 5% off your rates and gives you access to other deals and perks. “The loyalty program makes it easy to enjoy beneﬁts like complimentary upgrades within a short amount of time,” says Saglie of Travelzoo.

TRAVEL TIP: DRIVE A BETTER BARGAIN. Unlike airlines and hotels, car-rental companies generally don’t charge cancellation fees. Continue to shop until you’re at the rental counter. If you see a better rate, cancel and drive away in the cheaper car.

P H OTO G R A P H B Y J E N J U D G E /G E T T Y I M A G E S

What’s the biggest jackpot in Vegas? It could be the hotel prices. Thanks to a huge supply (almost 150,000 hotel and motel rooms) and prices kept low to lure gamblers, the average five-star room costs about $199 a night. You can even get a room overlooking the dancing fountains at the famed Bellagio for $189 a night in April. Las Vegas is now also easier and cheaper to get to, thanks to new direct flights on Frontier, Southwest, and Virgin America. The average roundtrip airfare has dropped to $254, a 7.1% decline over the previous year. On the other hand, it’s easy to go for broke on din-

PLATINUM

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Roll over your old 401(k) into a new account and get up to $600. Visit tdameritrade.com/rollover for details or call 800-213-4583.

OPENTABLE Make a lunch or dinner reservation and earn points that can be converted to gift cards. Some restaurants offer 1,000 points, worth $10 (though the majority give you 100 points, or $1). The app works at more than 33,000 restaurants worldwide.

BEST MONEYSAVING APPS

DOMESTIC DESTINATIONS 2016

Austin

No. 9 Lowest cost of living

TEXAS

WHY IT WON: Some of the best things in Austin really are free. The rest is affordable for travelers too.

Austin is famous for its live music, growing foodie reputation, and ofbeat personality. But what visitors don’t always appreciate is how afordable the self-proclaimed capital of “weird” can be. Austin ranks No. 9 of the 100 destinations on our list in overall lowest cost of living, which includes the price of food, restaurants, and entertainment.

The view of the skyline from across Lady Bird Lake

One great way to take advantage of Austin is to spend time outdoors. Austin ranks No. 18 on our list for the quantity and quality of its parks. Among the favorites: the hike-and-bike trail around downtown’s Lady Bird Lake and the

PLATINUM

Crystal Cruises

cruise lines BEST IN TRAVEL

Set Sail for Less

2016

Part floating hotel, part bottomless buffet, part portholed tour guide, cruise ships may be the hardest workers in the travel biz. To find the best, we compiled surveys of cabins, food, and more from industry sources Cruise Line, Cruise Critic, CruiseCompete, and Allthingscruise.com, as well as from our sister magazine Travel + Leisure. Then we looked for where fares held steady or declined in recent years. We even checked with the CDC for the cleanest lines.

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No doubt about it: A Crystal Cruise (crystalcruises.com) is a splurge. Rates on seven-night trips average around $7,700 per person. But that’s a relative bargain for this luxury line, with the average fare down 6% between 2014 and 2015. What do you get for your money? A true all-inclusive experience (no fees for food or beverages, or gratuities, for instance) and an almost two-to-one staff-guest ratio. Crystal ships are also more intimate, with about 500 rooms, compared with

city and the lake. Rooms in April start at $180 a night, 27% below the average price in Austin. “Grab a cocktail and patio table at Contigo,” says Zagat Austin editor Veronica Meewes. Try the rabbit with sage dumplings ($17; contigotexas.com).

2,000 for the mega-lines. And you can ﬁnd deals—if you plan well ahead. Book before April 29 for travel in 2017 and you can land a sevenday Caribbean trip for $2,050. GOLD

Princess Cruises It was a Princess ship that starred in the ’70s TV series The Love Boat, and the line has been a main-

stream favorite ever since. With weeklong trips hovering in the $2,200 per person range since 2013, Princess gets high marks from cruisers for its rooms and food. Some Princess ships hold more than 3,500 passengers, but the line is known for some cozy innovations, such as its “movie under the stars” on the top deck (ice cream, popcorn, and blankets included).

TRAVEL TIP: BOOK IN THE NEW YEAR. While you can luck into a last-minute deal anytime, cruise lines are eager to fill their ships, so many offer early-bird incentives. Look for cabin discounts, free upgrades, deals on drinks, and excursion packages.

P H OTO G R A P H S B Y J U L I A R O B I N S O N / R E U T E R S ; C O U R T E S Y O F P R I N C E S S C R U I S E S

Onboard the Regal Princess

nature paths, swimming holes, and rock climbing walls in the city’s 832-acre Barton Creek Greenbelt, an urban oasis. A good home base: The Hyatt Regency, in the downtown area, features a pool and stunning views of the

Â© 2016 Starwood Hotels & Resorts Worldwide, Inc. All Rights Reserved. Westin and its logo are the trademarks of Starwood Hotels & Resorts Worldwide, Inc., or its affiliates. *3pm late checkout based on availability.

A D AY I N T H E P O O L WI LL H ELP YO U SWI M WITH THE SHARKS MAKE MONDAY BETTER

BOOK A WESTIN WEEKEND

Enjoy more pool time with 3pm late checkout* on Sunday.

DOMESTIC DESTINATIONS 2016

Santa Fe

–2.5%

NEW MEXICO

Decrease in average airfare

WHY IT WON: Spend your days gallery hopping and pay next to nothing in entertainment costs. Even the airfare is a bargain.

The Pueblo architecture extends to new buildings, such as the Inn at Loretto.

Santa’s Fe’s charms have always been funky, eclectic— and cheap. It ranks No. 4 on our list for museums, and the Santa Fe Gallery Association says there are more than 200 art galleries in town. Spend all day art hopping and you’ll never spend a dime, if you can resist buying a painting. Even if you can’t, a Santa Fe trip will still leave you with spare cash. The average roundtrip airfare

has fallen 2.5% year over year. Hotels are also generally afordable; the average cost is just $159 a night. For easy access to downtown, try the Sage Inn, an adorably kitschy, Southwest-themed spot with free breakfast and Wi-Fi (santafesageinn.com, from $94). The city also scores high on our amiability index, which looked at intangible factors, including crime rates, weather, and air quality. In fact, Santa Fe was No. 3 overall, behind two locations in Hawaii. Two inexpensive, arty destinations that are also worth a stop: the Georgia O’Keefe Museum ($12) and the restored Jean Cocteau Cinema, a 128-seat art-house theater. If you’re lucky, you might catch the theater’s owner, Game of Thrones mastermind and Santa Fe resident George R.R. Martin, taking tickets.

SOURCES: DESTINATIONS: Onboard Informatics, TripAdvisor, STR, Hopper, Trivago, Numbeo, Hotels.com, Statista, Travelmath, Factual.com, InfoGroup, Walkscore.com, TravBuddy, and Travel + Leisure. AIRLINES: Department of Transportation, Statista, Flightglobal.com, Airportechnology.com, Nationsonline.org, Hopper, Skytrax, and J.D. Power. RENTAL CARS: J.D. Power and Kayak. HOTEL CHAINS: J.D. Power, Hipmunk, Hotels.com, Gogobot, and Travel + Leisure. RESORTS: Kayak, Trip Advisor, and Orbitz. CRUISE LINES: Cruise Critic, CruiseCompete, Cruiseline.com, Allthingscruise.com, CDC, and Travel + Leisure. FREQUENT-FLIER PROGRAMS: J.D. Power, Wanderbat, Travel Codex, Switchfly, and airline websites. CREDIT CARDS: NerdWallet and ValuePenguin. TRAVEL APPS: Google, the iTunes Store, Appcrawlr, PC Magazine

FROM TOP: The Old Town Square, as viewed from the Old Town Hall Tower, colorful Bohemian glass, a Czech signature for centuries

ON THE WEB

HOW MUCH TO TRAVEL IN …? Having trouble deciding where to go? Check out our interactive map for a quick price comparison of more than 200 top vacation destinations worldwide. You’ll find it, along with travel videos and additional guides, at money.com/besttravel.

BOOKING.COM Links to more than 800,000 hotels with especially good deals (up to 50% off the list price) on same-day reservations.

BEST MONEYSAVING APPS

credit cards BEST IN TRAVEL 2016

What’s in the Cards? A good credit card can be a great traveling—and saving— companion. To make our selections, MONEY compared the cards’ sign-up bonuses, rewards, and fees. Then we consulted the pros at NerdWallet and ValuePenguin for their calculations. BEST GENERAL TRAVEL CARD

Chase Sapphire Preferred

INTERNATIONAL DESTINATIONS

Prague

CZECH REPUBLIC

+7% Value of dollar vs. koruna in past year

WHY IT WON: This beautiful capital has long been one of Europe’s

CLOCKWISE FROM LEFT: PHOTOGRAPHS BY ROBERT HARDING/ALAMY; MARTIN CHILD/GETTY IMAGES; PHILIP GAME/GETTY IMAGES

secret values. With the strong U.S. dollar, it looks even better.

Some people call spire-filled Prague the Rome of the North. In recent years it has taken on the look of Hollywood, too, as a location in The Bourne Identity and Casino Royale. It’s obviously a beautiful city, with castles and cathedrals dotting the city, and its lovely Vltava River. It’s also a bargain. Your dollar goes about 7% further this year vs. the Czech koruna. And because Prague isn’t Paris or London, the lower profile means lower prices overall. The average five-star hotel room costs $135 a night. One grand choice: the Lokal Inn (lokalinn.cz), which is housed in a restored 18thcentury building near the landmark Charles Bridge. Rooms start at $98 a night.

Prague ranked No. 9 for museums on our international list, and you’ll want to check out the original manuscripts of Beethoven’s Fourth and Fifth symphonies at the Lobkowicz Palace (tickets, $11; lobkowicz.cz), suggests Nathalie Nagy, a travel adviser with Protravel International. Close by, stroll through the Mala Strana district, known for its cobblestoned alleys lined with small shops and cafés. And wherever you go, try the trdelnik (about $2 at sidewalk stands), a rolled pastry baked around a metal rod and doused with sugar and butter. But you can aford to eat well just about anywhere. The cost of a day on the town has fallen almost 10% in the past year.

You can cash in your stash at the rate of 1¢ for each point earned, but devote your collection to travel and each point is worth 25% more: 10,000 points will buy you $125 worth of airline tickets or a hotel room stay.You can transfer the points to one of Sapphire’s partners, which include United, Southwest, and British Airways; Hyatt, Marriott, and Ritz-Carlton hotels; and more. Chase waives foreign transaction fees for Sapphire Preferred customers, and if you have to cancel your trip because of illness or bad weather, the card provides $10,000 in travel insurance. ANNUAL FEE: $95 (waived first year) BEST HOTEL CARD

Starwood Preferred Guest Starwood points are worth about 2.3¢ each when they’re redeemed for hotel stays, much more than the Hilton HHonors card and the IHG Rewards Club Select. You can also transfer your Starwood points to more than two dozen frequent-ﬂier programs; you even get a 5,000-point bonus when you transfer 20,000. To reap the card’s

WHAT’S YOUR FAVORITE VACATION DESTINATION? TELL US ABOUT IT: letters@moneymail.com

beneﬁts, you’ll have to stay at one of Starwood’s 1,200 hotels, but those include Westin, W, and the St. Regis—some of the nicest brands. Starwood also charges no foreign transaction fees. ANNUAL FEE: $95 (waived first year) BEST LOYALTY AIRLINE CARD

Southwest Rapid Rewards Premier Other cards offer higher sign-up bonuses and similar rewards, but this Southwest card gives you more value per transaction than its rivals—a third more than the Gold Delta Skymiles card, estimates ValuePenguin .com’s Robert Harrow. That means you can earn a free ﬂight from Dallas to Baltimore with your 25,000-point sign-up bonus alone and still have points left over. Best of all, you get 6,000 free bonus points each year. ANNUAL FEE: $99

TRAVEL TIP: RING UP LOYALTY POINTS. Many travel services let you earn or redeem their loyalty points with a partner in another industry. If you’re deciding between two companies, check if you’re already eligible for one of them via a partner program.

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INTERNATIONAL DESTINATIONS 2016

Marrakesh

–14%

MOROCCO

Average hotel cost year over year

WHY IT WON: One of the safest cities in Africa is also one of the most affordable. Hotel, dining, and other tourism costs are 30% less this year.

This Moroccan city is a shoppers’ paradise that’s gotten even better as the dollar has appreciated almost 7% in the past year vs. the dirham. The bargainhunting center is in the walled Medina quarter, with souks selling spices, jewelry, leather goods, colored-glass lanterns, and more. For an unusual shopping and culinary

A sweets seller in the Marrakesh market

experience, sign up for a half-day cooking class at the Sanssouci Cooking School (cooking-school.com), which starts with a trip to the marketplace for ingredients before preparing a meal with a dada, a Moroccan cook ($165 per couple).

DOMESTIC PLATINUM

airlines

Southwest

BEST IN TRAVEL 2016

Take Flight

5 50

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Southwest has become competitive with the major legacy carriers, so you can ﬂy it almost anywhere.

have patios or balconies and include breakfast and afternoon tea. Rooms start at $91. Marrakesh is also remarkably crime-free. It’s the safest African destination on our list, with a lower crime rate than Vienna and Edinburgh.

DOMESTIC GOLD

says Travelzoo’s Saglie. And Alaska will get you where you need to be—it has one of the highest on-time arrival rates in the industry.

Alaska Airlines

INTERNATIONAL PLATINUM

Alaska Airlines doesn’t fly only to Alaska. This regional airline has started to compete with big carriers on popular crosscountry routes like L.A. to New York City and offers a lot of flights in and out of the Pacific Northwest. Alaska also offers some of the best fares in the industry: The average flight costs just $199, according to Hopper. Then there’s the service. Alaska has attracted a loyal following with its perks, like regional beer served onboard,

Singapore Airlines When you’re taking an 18-hour ﬂight to Asia, you want to hunker down with some good movies and tasty food. Customers give Singapore some of the highest ratings for amenities like food,

drink, entertainment, seat comfort, and value for the money, according to Skytrax. “Singapore Airlines is known for being among the very best in terms of service,” Saglie says. “Flying that route on another airline, even if you’re saving on the ticket, you tend not to get the quality of experience.” And at $703 per average fare, Singapore is still less expensive than half of international airlines, according to Hopper.

TRAVEL TIP: TREAT YOURSELF. Check out first class—prices for premium seats have dropped 20% to 30% in the past few years, Saglie says. Short flights feature some of the best first-class deals, since frequent fliers usually don’t cash in miles for briefer trips.

P H OTO G R A P H B Y K E V I N M A L L E T T/G A L L E R Y STO C K .

MONEY started with the 11 largest domestic airlines and 27 largest international airlines based on market share, biggest fleets, and most passengers. MONEY then ranked the airlines based on average fares, average wait time, baggage and change fees, and customer-satisfaction ratings (for reservations, check-in, boarding, aircraft, flight crews, in-flight services, food and drink, entertainment, seat comfort, service, amenities, fees, and overall value).

The best thing about no-frills Southwest Airlines is that the low price (just $256 on average, according to Hopper) includes so much. Want to check two bags? They’re free. Need to change your reservation at the last minute? No problem.You won’t be able to choose your seat ahead of time, but many ﬂiers are happy to trade that small reassurance for a fee-free ﬂight—customers rank Southwest No. 1 in value for cost and fees, according to J.D. Power.“You don’t feel like you’re getting slapped around,” says Clampet of Skift. Plus,

You’ll find excellent lodging values all over the city—the average price of a room has dropped 14%. If you can, stay in a riad, a traditional house surrounding a garden courtyard. At the Riad Berbere (leriadberbere.com), all the rooms

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INTERNATIONAL DESTINATIONS

BEST MONEYSAVING APPS

HOPPER Search for a route, and the tool shows you a daily breakdown of the lowest airfares. If your departure dates are flexible, you can save hundreds of dollars. The app will also alert you when the price drops.

2016

frequent fliers BEST IN TRAVEL 2016

Get Miles and Miles MONEY ranked the frequent-flier programs at the nine biggest airlines based on overall customer satisfaction; ease of earning points and exchanging them for an upgrade; and cancellation fees. PLATINUM

JetBlue

Morning tai chi at Taipei’s Chiang Kai-shek Memorial Hall

Taipei TA I WA N

Decline in hotel room rate vs. last year

WHY IT WON: Looking for a clean and affordable Asian experience? You’ll breathe easy—and eat for less—in the Taiwanese capital.

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the cleanest and safest cities in the East? Eat local food, for one thing. There are more than 3,000 restaurants rated four stars or better on TripAdvisor. At the Ningxia Road Night Market, a seafood feast will barely cost you $20, says travel writer Adam H. Graham. For a feast of another kind, the National Palace Museum houses one of the largest collections of Chinese art in the world. Enter after 4:30 p.m. and admission is only $4.50. You can take in the whole city from the 89th floor of the Taipei 101 building. The ride up costs $15, and thanks to that crystal-clean air, you can see practically forever.

GOLD

Alaska Alaska Airlines is one of the few carriers that still lets you earn points based on miles flown, not dollars spent. That’s a big plus for leisure travelers, who don’t often pay the full business class or even coach fare, explains Saglie of Travelzoo. You’ll need just 12,500 points to earn a free one-way flight, and 20,000 points for elite status and its priority boarding, second free checked bag, and more.

TRAVEL TIP: LEAVE ON WEDNESDAY. The secret to saving on airfares: Fly when others don’t. On average, seven-day trips starting on Wednesdays are 15% cheaper than seven-day trips that start on Sundays, according to data from Fareness.com, a site that helps people find dates with the lowest fares. Flying on an “off-peak” week—away from big holidays—you can often cut your fare by 30% to 50%, says Fareness.com founder Scott Wainner.

P H OTO G R A P H B Y M AT T H E W WA K E M /O F F S E T

If you’re looking for a valueminded overseas vacation, check out Asia, which placed five of the top 10 destinations on our list. In Taipei the average hotelroom price dropped almost 11%, and the new Taiwan dollar decreased 5% vs. the American dollar. But what really put Taipei ahead of its neighbors are its more intangible qualities. The air in Taiwan’s capital is, on an average day, four times cleaner than it is in Beijing—and cleaner than the air in Chicago too. Taipei also ranks No. 9 in our list of 100 cities for the lowest crime rates. So what’s to do in one of

–10.5%

While frequentflier programs usually favor globetrotting business travelers, JetBlue’s program is a rare good deal for leisure travelers. You need just 15,000 points to earn elite status— the lowest threshold in the industry. What’s more, family pooling allows you to collect your points with your spouse’s and your kids’, an unusual perk that helps the points add up faster. Elite status will get you two free checked bags, expedited security, and com-

plimentary spirits on long flights.

SPRING RETIREMENT GUIDE

e k a T e g r a h C OF YOUR RETIREMENT No matter what kind of retirement plan youâ&#x20AC;&#x2122;re in, you have the power to steer your way to a secure life once your working days are over. Get a grip on your future by following these four timely guidelines and learning from people who are on their way to retirement success. BY PENELOPE WA NG PHOTOGRAPH BY DAN SAELINGER PLUS

ARE YOU READY FOR RETIREMENT?

BUCKLE UP IN THE BEAR ZONE

Take this quiz to learn the latest research on saving, investing, and more. Page 63

A weak stock market can threaten your retirement security. Fight back. Page 72

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SPRING RETIREMENT GUIDE

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Additional reporting by Alexandra Mondalek

P R E V I O U S S P R E A D : S E T D E S I G N A N D P R O P S T Y L I N G B Y D O M I N I Q U E B AY N E S

turbocharge—your retirement. You pay no taxes on the earnings you contribute. Money is automatically dene of the most powerful posited into your account, making the process eforttools at your disposal less. You have a menu of diversiﬁed funds in which you on the road to retirecan invest. Your boss can ment security is taxmatch a portion of what you put in, and your plan may advantaged savings. regularly raise your contriThat’s especially butions slowly and steadily, easing you toward a high important today, when savings rate. alarming market drops Ideally, you’re looking at a simple, low-cost plan with and disheartening predictions of low returns to useful tools and top-notch come may have you worrying about your future funds. In reality, you might be struggling with a stingy finances on a nearly daily basis. match, high fees, poor inNow, when most people think of a retirement vestment choices, and little or no guidance. When you savings account, they think of the gold standard: need to save aggressively the 401(k), the most common workplace retirefor retirement, low contribution limits may stymie ment account. But even if you don’t have a 401(k)— you. And no matter what choices you have, you can and 57% of working households, in fact, don’t have sabotage yourself by turnone through a current employer—you still have ing your plan into a piggy bank or cashing out early. access to other tax-deferred plans. But if you know how to minimize these plans’ drawbacks and maximize their advantages, you’ll be able to turn your tax-deferred savings into the secure and At a job with the government, a nonproﬁt, or a school, prosperous retirement you’re looking for. you might have a Thrift Savings Plan, 403(b), or 457. When On the following pages, you’ll learn four key you’re self-employed, your options include a SEP-IRA and strategies for doing just that. And you’ll meet the increasingly popular solo 401(k), ofered at a low cost some retirement savers who will show you some by many brokerages and fund groups. of the smartest moves you can make. So get ready Despite the variations among these and other plans, most to take the driver’s seat and get well on your share basic qualities that can help you jump-start—and way to retirement success.

T H I S PA G E : P H O T O G R A P H B Y S U S A N A R A A B ; S T Y L I N G A N D G R O O M I N G B Y S U S A N H E Y D T

BE A CH E A PSK ATE Over the past few years, retirement savers have absorbed an important message: Keeping costs low is crucial. The lower your investment fees, the more gains you can hold on to. Fund fees are falling, according to a 2015 survey by the 401(k) rating firm BrightScope and the Investment Company Institute trade association. From 2009 to 2013, 401(k) stock funds’ average expense ratio—the percentage of assets each year that go to the manager, not you—fell to 0.54%, down from 0.64% in 2009. Trends are similar at 403(b)s, the usual retirement plans at nonprofits and state and local governments. (For a guide to plans, including information about eligibility and contribution limits, see the table on page 59.) In your retirement plan—especially if you work for the federal government or a large company or nonprofit—you might see low-fee funds not open to you otherwise, since individuals don’t have a big plan’s bargaining power. At a smaller operation, however, you might find yourself paying high fees instead. The BrightScope/ICI 401(k) data show that workers in small plans—those with less than $10 million in assets—pay an average of 0.81% for domestic stocks, vs. just 0.44% for savers in plans holding at least $1 billion. Over 25 years, paying those higher fees would set you back $34,000, assuming 6% average annual gains on a $100,000 opening balance. “When it comes to retirement investments, one of the first things you should look at is the cost of each fund,” says Wharton economics professor Olivia Mitchell.

“We always tried to take advantage of the options that would help us grow our money.” —PHILLIP THOMPSON

SMART MOVES KNOW YOUR COSTS. Have a 401(k)? Check your account statements for fund fees. Have a 403(b)? You may have to search company websites or call customer service to get the expense ratios. Work for the U.S.? For each of the funds in your Thrift Savings Plan, the expense ratio is a minuscule 0.03%. GO LOW, IF YOU CAN. Choose funds with the lowest expense ratios. Those are usually index funds, though larger plans may have actively managed portfolios with rock-bottom fees. A good benchmark: Look for U.S. stock funds with expense ratios below 0.5%, bond funds below 0.4%, and specialty funds (such as international funds) below 0.8%. If you have an IRA or a solo 401(k), where you can get a wider selection, index funds are your lowest-cost option. LOOK ELSEWHERE, IF YOU CAN’T. Should your employer’s funds be too expensive, invest only enough to take full advantage of any match. Then put the rest of your money—up to $5,500, if you’re under 50—in a Roth IRA, an individual retirement account that not only grows tax-free but also lets you withdraw earnings tax-free after age 59½. Your

PHILLIP AND TANJA THOMPSON Home: Leesburg, Va.

Occupations: Attorney, mediation counselor

Ages: Both 53

Retirement savings: $495,000

SOUND STRATEGY: Keeping a streak alive. Switching jobs from public service to private industry and self-employment—then, in Tanja’s case, back to the government—hasn’t derailed this couple’s savings, which started with accounts they opened when in the armed forces. Phillip, who heads his own law firm and a separate management consulting business, has two SEP-IRAs. Tanja, who has a 401(k) from a prior defense industry job, returned to funding a TSP upon taking a civilian government job in 2008. Says Tanja: “We never closed any accounts.”

SPRING RETIREMENT GUIDE

ability to contribute to a Roth, though, starts phasing out once your income exceeds $184,000 for married couples ﬁling jointly ($117,00 for singles). If you max out a Roth or can’t save in one, try a traditional IRA, which lets your money grow tax-deferred until retirement time. But ﬁrst look at your W-2—and your spouse’s, if you’re married—to see whether box 13, labeled “retirement plan,” is checked. No checked boxes? Your contribution is deductible. At least one checked box in the house? Deductibility phases out at $61,000 if you’re single, $98,000 if both spouses participate in a plan, and $184,000 if only one is covered. If you don’t qualify for a deduction, you can save in a taxable account that holds tax-efficient investments—those that generate few short-term gains or dividends. Your best bets are index funds and municipal bonds.

“I’ve been a power saver in the last 15 years, but I lived my life too.” Home: Hartsdale, N.Y.

Occupation: College administrator

Age: 62

Retirement savings: $600,000

SOUND STRATEGY: Stepped-up savings. Miner has long stretched to save, beginning 30 years ago when, barely making ends meet as a divorced mother, she first deposited $2,000 into a traditional IRA. When she took a job at Fordham University in 2000, her savings really picked up. Her 5% mandatory salary contribution to her low-cost 403(b) was matched by the school, which later raised its contribution to 11%. But Miner didn’t stop there: She has been putting another 15% into a supplemental annuity. Her advice: “Max out! Max out!”

PICK TH E RIGHT MI X Another key factor in retirement investing is your asset allocation—speciﬁcally, your mix of stocks and bonds, says William Bernstein, author of The Four Pillars of Investing. “How much you keep in stocks is the biggest determinant of your return,” he says. With more stocks you have greater growth prospects—but also wilder portfolio gyrations. You need, he says, “an asset mix you can live with.” In 403(b)s for major universities and institutions, and in big 401(k)s, you’re likely to have a good menu of low-cost funds that you can use to build a winning portfolio—both one-stop, ready-made funds and those you can combine to create a custom recipe for yourself. But elsewhere you may have a menu of risky, exotic, or costly investments, especially in smaller plans, such as 403(b)s for public school districts. “The K–12 system is still the Wild West of retirement plans,” says Dan Otter, head of the 403bwise.com information site. Should your workplace options fall short, get any match and move on (see “Look Elsewhere, If You Can’t” on page 57). Then, wherever you invest, use these strategies: SMART MOVES ONE-STOP SHOP. Your easiest option is also one of the best: a target-date retirement fund. This

P H O TO G R A P H B Y J E R E M Y K R A M E R ; S T Y L I N G A N D G R O O M I N G B Y C Y N T H I A L A W S

JAN MINER

Alternatively, if you’re in a high-cost 403(b): Once you’ve gotten your match, contribute to your 457 plan, if available. A 457, ofered by about 15% of employers with 403(b)s, may have better choices, says Scott Dauenhauer, a ﬁnancial adviser in Murrieta, Calif. In a bad Simple IRA? Ask if the plan has a designated ﬁnancial institution. If not, you can direct your savings to the fund group you want, says Louisville planner Andrew Sloan.

PLANS AT A GLANCE

INDIVIDUAL

SMALL BUSINESS

BUSINESS, GOVERNMENT, NONPROFIT

Even if your workplace doesn’t offer a 401(k), the most common type of retirement account, you still have plenty of opportunities to save for retirement while deferring your taxes. Here’s a quick guide to the universe of plans. PLAN

WHO’S ELIGIBLE

MAXIMUM ANNUAL CONTRIBUTION

EMPLOYER MATCH?

ANNUAL CATCH-UP STARTING AT AGE 50

USUAL INVESTMENT OPTIONS

401(k)

Private company employees

$18,000

Usually 1% to 6% of pay

$6,000

Mutual funds (19 on average)

403(b)

Employees at nonprofits and state and local governments

$18,000

Often; typically 3% to 5% of pay

$6,000 (more for some longtime employees)

Funds and annuities (29 on average)

457

Some government and nonprofit workers

$18,000

Rarely

$6,000 (sometimes more for employees near retirement)

Menu of mutual funds

Thrift Savings Plan

Federal government employees, including the military

$18,000

5% for those in the Federal Employees Retirement System

$6,000

10 funds, including five target-date funds

SEP-IRA

Small-business employers and employees

25% of salary, up to $53,000 (same for all personnel)

All contributions come from employer

None, but contributions are permitted after age 70½

All funds offered where account is held

Simple IRA

Small-business employers and employees

$12,500

3% match (or 2% employer contribution to all employees)

$3,000; contributions are also permitted after age 70½

Menu of funds

Solo 401(k)

Sole proprietors and their spouses

25% of profits plus $18,000, up to $53,000

$6,000

All funds offered where account is held

Roth IRA

All earners making less than income phaseouts

$5,500

$1,000

All funds offered where account is held

Traditional IRA

All earners

$5,500

$1,000

All funds offered where account is held

NOTE: Contribution limits are for 2016. SOURCES: IRS.gov, PSCA.org, TSP.gov

all-in-one fund, found in over 70% of 401(k)s and 403(b)s and widely available in IRAs, is tailored for people retiring near a certain year—say, 2030. Each fund gives you an age-appropriate mix of stocks, bonds, and cash, and automatically gets more conservative as you age. If you don’t have a target-date option, you can approximate one with a mix of three index funds: U.S. and international stock funds, plus a bond fund. GET HELP. You don’t have to be one of the 1% to receive advice. About 30% of 401(k) plans, for instance, supply help face-to-face, by phone, or online, reports the PSCA, a retirement-plan trade group. That can pay of. A 2014 study by Financial Engines, which provides ﬁnancial advice to 401(k) participants, compared the returns over seven years of people who received guidance and those who didn’t. People who got help earned median

annual returns that were 3.3 percentage points higher. Investing with online services such as Wealthfront and Betterment? These so-called robo-advisers provide guidance based on computer models, though they may not be able to buy and sell retirement funds for you. Annual fees generally range from free to 0.35% of assets you invest with them.

SET A LOFT Y TA RGET The more you sock away, the less you’ll rely on the stock market to come through for you. If you’re a 30-year-old saving 15% of a $75,000 salary, for example, you’ll need only 5% average annual returns to end up with $1 million by retirement time. Save only 6%, though, and you’ll need 9% returns.

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SPRING RETIREMENT GUIDE

For a secure retirement, upper-income families should save at least 15% per year—a combination of employee contributions and any employer match—according to a 2014 study from the Boston College Center for Retirement Research. Although your employer may nudge you in that direction, it’s on you to keep going. About one-half of 401(k) plans and 16% of 403(b) plans now auto-enroll employees, most commonly to make a 3% contribution. But studies have found that auto-enrolled workers tend not to raise their contributions. And if you’re a freelancer or small-business owner, you have to contend with the lack of a match and the challenge of budgeting unpredictable earnings. If you’re young, you have to balance saving for retirement with immediate burdens like student debt and entry-level salaries. SMART MOVES WORK YOUR WAY UP. If your savings rate is low, instantly jacking it up may be noble—but also unrealistic. If you can, sign up for an auto-escalation feature—less than half of 401(k) and 403(b) plans have one in place—which will auto-

matically raise your contribution by a percentage point or so per year. Or just pick a date each year to do it yourself. Getting a raise? Dedicate some of that to your retirement account. As your earning power grows, you can raise your contributions—first to the usual limits, which the IRS adjusts for inﬂation, then using catch-up contributions, which are additional amounts you can put in, usually starting at age 50. If you’re launching a business with a handful of employees, a Simple IRA can be an ideal starter retirement plan, says Michael Cuneo, a ﬁnancial adviser in Plainview, N.Y. You, the boss, can save up to $12,500 annually for yourself; you’re required to ofer employees a 3% match on their salary (or just contribute 2% of their pay to them outright). In contrast, if you open a SEP-IRA, you can put away as much as 25% of your salary, up to $53,000—but you would also have to give employees the same percentage of their salary.

WILLIAM AND SARA OSBORNE

Home: Louisville

Occupations: Energy buyer, interior designer

Ages: 27 and 26

Retirement savings: $10,000

SMART STRATEGY: Automating their savings. The burden of paying down $30,000 in student loans hasn’t sidetracked the Osbornes, married in 2013, from their retirement goals. One key move: William signed up for his 401(k) with a 6% contribution (maximizing the match), which has begun automatically increasing one percentage point per year. “The whole experience has been pretty painless,” he says. “In fact, it took a couple of paychecks for me to notice that the auto-increase had kicked in.”

HOW HAVE YOU TAKEN CHARGE OF YOUR RETIREMENT? pwang@moneymail.com

P H O TO G R A P H B Y D A N N Y G H I T I S ; H A I R A N D M A K E U P B Y L A U R A C O STA

“I don’t miss the money, since it’s been pulled from my paycheck since day one.” —WILLIAM OSBORNE

AUTOMATE. Freelancers don’t have an employer the years. If you cash out your plan before you hit retirement handling automatic payroll deductions. So if age or borrow from it and fail to repay, you’ll have to pay not that’s you, set up regular transfers from your only income tax on the money but also a 10% penalty. The checking account through the financial instituCenter for Retirement Research released a study last year tion where you hold your SEP-IRA or solo 401(k). showing that a diligent 30-year-old saver would end up with That way your account will grow without extra a retirement account 34% larger at age 60 than that of a efort on your part. saver who borrowed from his account and cashed out his Does a fluctuating income make you hesitate plan as often as people normally do when changing jobs. So to commit money? Don’t delay deposits until the keep deferring taxes on that tax-deferred money. last minute. A 2014 study by Vanguard found that SMART MOVES people who waited until year-end to make IRA CHOOSE WHICH WAY YOU ROLL. Each time you change employcontributions ended up, on average, with $15,500 ers (and odds are you will), decide what to do with the money less after 30 years, vs. those who invested early at the job you’re leaving. You can keep it there (most plans on. So starting in January, contribute a small allow that), move it into your new plan (if the new plan peramount each month or each quarter—enough to mits it; not all do), or roll it over into an IRA. Take into account add up to half the total you think you’ll be able to both investment selection and the convenience of consolidaput in that year, says Marguerita Cheng, a finantion. Financial firms will make it easy for you to roll your cial planner in Rockville, Md. By starting early in money over into their IRAs. While the government’s TSP the year, you’ll benefit from extra compounding. GO BEYOND YOUR LIMITS. Once you’ve hit the conpermits rollovers from tax-sheltered accounts, not all 401(k)s tribution limit on your workplace plan, use the and 403(b)s do; you’ll have to check your new plan’s rules. power of automatic transfers to stow When you move your money, do what’s called a additional money in an IRA or a taxable trustee-to-trustee transfer, or direct rollover, in GET READY account. Run a side business? “You could which your old plan’s custodian sends money diTO RETIRE conceivably max out more than one rectly to the new one. Having your old plan just write For more about plan,” says Jefrey Levine, a CPA with Ed you a check can backfire: If you don’t move it into a saving and investing Slott and Co. Say, for example, you’re new plan within 60 days, the IRS will charge you for retirement, see under 50 and earn $100,000 at your fulltaxes and a penalty. MONEY’s Ultimate time job, plus $35,000 from an unrelated SIT ON YOUR HANDS. In certain cases you should leave Retirement Guide, one-person business. You can save not your account alone, even if you don’t like your investat money.com/ only $18,000 this year in your primary ments there. If you hold an annuity in a 403(b), you retirementguide. job’s 403(b), before any match, but also may have to pay a surrender charge (which deup to $6,505 of your side income in a creases over time) if you transfer the money out. You may want to wait for the surrender charge to fall before movSEP-IRA—25% of earnings after accounting for ing your money. And for the first two years after you open a self-employment tax and other adjustments. Simple IRA, the only place you can move the money without Or let’s say you’re a full-time sole proprietor penalty is to another Simple IRA. For more rules, see the netting $100,000. You can save up to about $18,600 retirement-plan rollover chart at IRS.gov. in a SEP-IRA. But switch to a solo 401(k) in this ASSESS YOUR PROGRESS. However much you have already case, and you can save about $36,600. To see how saved, you may wonder whether you’re on pace for a secure much you can put away, try Vanguard’s plan conretirement. Estimate your future income by entering your tribution calculator (money.us/vanguardpcc). account balances and savings rate in the T. Rowe Price Retirement Income Calculator (troweprice.com/ric). For a K EEP IT G OI NG less detailed—yet almost fun—quick check, adjust the sliders on Vanguard’s interactive retirement income calculator (money.us/vanguardric). The feedback you’ll get will help Whichever tax-deferred account you use, the abilyou map out the rest of your journey. ity to delay paying taxes for years, or even decades, has a powerful economic impact. That is, assuming you keep the 401(k) in a taxdeferred account even as you change jobs over A P R I L 2 0 1 6 m o n e y. c o m

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Your kids have finally left the nest! How much more per year, on average, will you and your spouse save for retirement? A

You’re trying to set a realistic savings target so you can retire at 65. What annual return should you figure on for a 60% stock/40% bond mix? A

8% to 10%

6% to 8%

5% to 7%

3% to 4%

ANSWER: C. Until recently, 6% to 8% long-term returns for a balanced portfolio, based on what stocks and bonds delivered in the past, was a reasonable assumption. Bad news: “Those historical returns are just not realistic for retirement today,” says David Blanchett, head of retirement research at Morningstar Investment Management. Even after the 9%-plus drop since last May, stocks look expensive, he says. Meanwhile, 10-year Treasury bond yields, recently 1.75%, are far below the long-term norm and widely expected to increase. Rising rates will depress bond prices. Vanguard’s 10-year forecast for a 60/40 portfolio is now 5% to 7%. BEST MOVE: You’ll probably need to save more to make up for not-so-great expectations, but there’s a less painful way to boost your returns: Replace pricey mutual funds (expense ratios above the 1.3% average) with ultra-low-cost index funds or ETFs (0.10% to 0.40%). For more, see “Take Charge of Your Retirement” on page 54.

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Less than 1%

ANSWER: A. Last year the Center for Retirement Research looked at workers’ 401(k) savings rates over several decades, crossreferenced with W-2 data showing whether they were supporting dependent children. The finding: Parents did save more after the kids left the nest, but by an amount so small (an average of less than 1% of income) that it barely moved the needle. So much for the power-saving years. How come? The empty nest may be more theoretical than real, since many parents support their children long past college. Cutting loose

could also be to blame: A separate CRR study found that parents spend another $2,000 a year on discretionary items, on average, when their children leave home. BEST MOVE: It’s okay that you want to take an epic vacation with your spouse. Just splurge sparingly so you don’t squander this rare chance to pad your retirement accounts. Decide ahead of time how much more you need to save, says Jacksonville financial planner Carolyn McClanahan. Then put a process in place— automatic raises to your 401(k) contribution, say— to make it happen.

Your son took out $31,000 in student loans (that’s typical). How much does that college debt raise the risk that he won’t be able to amass enough for retirement? A B

2% 5%

C D

10% It’s a wash over time.

ANSWER: B. If today’s retirees had started their working lives with the average student-loan debt of recent college grads, they would be 5% more likely to be facing a shortfall, a 2016

More than 10%

study from the Center for Retirement Research found. Debt payments get in the way of saving, as well as delay home buying, leaving future retirees with less equity to tap.

While 5% may not sound big, the impact for the younger generation is roughly equivalent to the Social Security retirement age being raised by a couple of years, says CRR senior research economist Anthony Webb, co-author of the study. BEST MOVE: Help your child weigh borrowing costs when picking a school. At money .com/colleges, you can see the cost of 700-plus bestvalue colleges, plus the average student debt.

You want to make a gradual exit from work. What is the chance your company will back your plans? A

You’re counting on working past age 65. What is the chance you’ll actually work that long? A

14%

26%

37%

61%

ANSWER: A. According to the Employee Beneﬁt Research Institute, about a third of workers intend to stick it out past 65, but only 14% of retirees actually have. And half of retirees report having to quit earlier

To boost your savings Better health insurance

To stay physically fit To stay mentally active

ANSWER: D. Americans may not be putting away as much as they should for retirement, but once there, most aren’t seeking out work solely for the cash. In a recent Merrill Lynch survey,

staying mentally active was the No. 1 reason retirees cited for taking a job. Staying physically active came in second, with extra spending money a distant third. BEST MOVE: Ready to skip out on office

19%

52%

71%

ANSWER: B. A 2015 survey from the Transamerica Center for Retirement Studies found that 41% of workers would like to “phase” into retirement with part-time or flexible work. Problem is, the survey found, only 19% of firms support this kind of gradual exit. Fewer than 5% have a formal program in place, another survey found. BEST MOVE: “In my experience, companies fear ‘brain drain’ and are absolutely open to working with people on a case-by-case basis,” says Nancy Collamer, author of Second-Act Careers. Think about your skills and expertise—and what holes your leaving would create. Then meet with your boss and propose a flexible arrangement you both can live with.

life altogether? A job isn’t necessarily the only way to stay sharp. There’s some thought that mastering games and learning new skills are good for your brain. But many scientists are skeptical of the

claims made by the “brain training” industry, citing the need for more research. Physical activity has also been shown to improve mental ﬁtness, so kill two birds by taking a long walk.

I L L U ST R AT I O N S B Y T W O A R M S I N C .

What’s the most likely reason you’ll take a job after you retire?

than planned, most often because of health problems or a layof. “Folks think, ‘I’ll solve my savings problem by working longer,’ but in reality they may not have the opportunity,” says Stuart Ritter, a senior ﬁnancial planner at T. Rowe Price. The type of work you do matters too. A University of Michigan study of latein-life workers found that those in creative, less physically demanding jobs were more likely to stay on past 65. BEST MOVE: Plan for an earlier exit. If your goal is to save $2 million by age 65, you’ll need 15% more (or $300,000) in order to retire at 60. Says Ritter: “If you’ve saved in a way that it’s a choice for you, that’s a much better place to be than assuming it’s going to happen.”

WE HELP THOSE WHO

The average out-of-pocket cost for nursing care for couples 85 and older comes to $18,331 over two years. As a single, what should you expect to pay? A

You’ve heard retiree medical costs top $250,000. Do you know how much is for routine care? A B

$9,000 $25,000

C D

$41,000 $110,000

ANSWER: C. The total nut for health care is daunting. EBRI researchers analyzed out-of-pocket retiree health care spending, dividing it into regular expenses, such as

doctor’s visits and meds, and irregular costs, such as surgery. Hospital visits and nursing care made up the lion’s share. Assuming you live until 90, you’ll need to have $41,000 set aside at age 65 to cover the regular costs. BEST MOVE: “What we found was that you can budget for the regular costs, which are stable and predictable,” says Sundipto Banjeree, co-author of the study. When you’re calculating a budget, add co-pays, premiums, and drugs. For irregular costs, you’ll need another pot to tap or long-term-care insurance.

DO GOOD

$15,321

$20,472

ANSWER: C. Older people living on their own—mostly women—often wind up shouldering huge expenses for nursing care, EBRI reports. Couples 85 and older pay an average of $2,165 for in-home care, vs. $5,320 for singles. Even if you have a partner now, there’s a good chance you’ll wind up single: While 54% of women age 65

$25,540

$29,788

to 74 are married, after 75, over two-thirds are single. BEST MOVE: Spell out your wishes for treatment and care in writing, says planner and former ER doctor McClanahan. “Even when families know it’s a money drain, the default is to do everything. Having a plan in place increases the chances of keeping the costs down.”

ANSWER: B. Assuming that good health gives you more years, you’re looking at a You’re bigger bill. Living in retirement heading into for 30 vs. 20 years adds retirement in great $172,000 to your total health shape. That means care costs. Those extra years you’ll spend less on of doctors’ visits add up. But being healthy has its ﬁnancial health care, right? advantages too, namely lower costs year to year. The averA True B False age household with a healthy older man pays 19% less per year out of pocket than one with a man in poor health, according to data from the University of Michigan Health and Retirement Study. BEST MOVE: To keep annual costs down, get moving. Research backs up the payoff of exercise. In a 2014 study, a group of seniors who began an exercise program of daily walking plus strength training were 28% less likely to become disabled vs. a group who engaged only in gentle stretches over a 2½-year period.

DO WEL

SPRING RETIREMENT GUIDE

On average, how much will your spending drop as soon as you retire? A

You figure you’ll downsize to save dough. What is the chance you’ll follow through with that plan? A

31%

51%

61%

81%

ANSWER: B. Are you betting on lower housing expenses to make up for a savings shortfall? A new study from Merrill Lynch and Age Wave found that among

What will make you happiest in retirement? A

More time with family No more 9-to-5 grind

A pension check Pursuits you love

12%

15%

30%

hobbies, says Jeanne Thompson, vice president at Fidelity Investments. But make sure you have a handle on your budget. Separate your expenses into ﬁxed (health care and housing) and discretionary, so you know where you can cut back if your savings are dwindling faster than planned. A shift shouldn’t be hard: Average spending drops off after year six, as many people adopt a quieter lifestyle.

retirees who moved, only 51% opted for a smaller home. Moreover, some 30% actually upgraded to a larger place— with one in six of them citing the need for more space for an adult child. BEST MOVE: Housing costs account for 40% of the typical retiree’s budget, so think hard about pulling up roots. Cashing out and moving to a lower-cost area can be a silver bullet for retirees who haven’t saved enough, says Baltimore financial planner Tim Maurer. But you have to actually do it.

ANSWER: A. Forget the rule of thumb that you’ll live on 70% of your preretirement income. According to EBRI, the average household spends just 8% less during the ﬁrst two years of retirement. Nearly half (46%) actually spend the same or more in the early years. BEST MOVE: It’s okay to splurge at ﬁrst: Many nearretirees envision a retirement that includes travel and

ANSWER: C and D. In a survey of retirees, HR consultant Towers Watson found that those with pensions reported lower levels of financial anxiety and higher overall satisfaction than peers who relied on investment income. Keeping a busy schedule—whether via work or hobbies—has also been matched to more happiness, as has socializing. And while you’ll want to spend time with your

children, there’s no need to get too close. Research out of Texas Tech found that living within 10 miles of kids made retirees less happy. BEST MOVE: No pension? You can mimic the steady checks of a pension by putting a portion of your savings—say, enough to create an income to cover essential living expenses—into an immediate annuity. Shop at immediateannuities.com.

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SPRING RETIREMENT GUIDE

You’re a guy who just turned 70. How likely is it that you will live another two decades? A B

You plan to take $40,000 a year from a $1 million nest egg that’s 50% in stocks. What’s the chance your funds will last 30 years? A

28%

45%

60%

83%

ANSWER: C. Brace yourself for bad news: The latest research has found that a 4% withdrawal rate is probably too high. According to

Morningstar’s Blanchett, a portfolio made up of 50% stocks and 50% bonds has a 40% chance of running out in three decades—which might be a higher fail rate than you can tolerate. BEST MOVE: If your goal is to comfortably withdraw $40,000 a year, you’ll need to save more than $1 million. “Three percent is the new 4%,” says Blanchett. At that rate, the chance your nest egg will last three decades climbs to 86%. Alternatively, you can stay flexible, starting with a 4% withdrawal rate and pulling back if the markets fall. For more on how to implement a flexible withdrawal strategy, see the following story on managing your portfolio.

You’re in your late seventies. What portion of retirees your age get more than 50% of income from Social Security? A B

25% 36%

C D

55% 75%

ANSWER: C. According to the latest data from AARP’s Public Policy Institute, while only 33% of Americans in their late sixties depend heavily on Social Security,

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for 55% of retirees ages 75 to 79, those benefit checks make up more than half their income. A report from Aon Consulting found that even high-earning retirees (those with incomes above $150,000) get a quarter of their income from Social Security.

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BEST MOVE: Chances are, Social Security will be more important to your retirement plan than you think, especially as time goes on, since your benefits increase with inflation. In order to maximize your payouts, wait as long as possible to start collecting. Your benefit will grow 25% to 30% if you claim at full retirement age (between 66 and 67, depending on when you were born) vs. claiming at age 62. Wait until age 70, and you’ll see another 32% pop.

9% 19%

C D

25% 30%

ANSWER: B. According to the latest Society of Actuaries calculations, a 70-year-old man’s chances of hitting age 90 are 19%. And today a 70-yearold woman has a 30% chance of living two more decades, and a 53% chance of reaching 85. BEST MOVE: One way to guard against outliving your savings: Put a portion—no more than 20%, experts advise—in a deferred-income annuity (popularly known as a longevity annuity), which gives you a guaranteed income starting many years down the road (say, at age 85). Thanks to new Treasury Department rules, you can buy a type of longevity annuity within your IRA. The funds in this qualified longevity annuity contract (or QLAC) aren’t counted toward your required minimum distributions at age 70½, letting more of your portfolio grow tax-free until you need it.

RETIRE WITH MONEY For weekly retirement news and advice, sign up for this email newsletter from editor-at-large Penelope Wang. Go to money.com/newsletters.

WHAT’S YOUR BIGGEST RETIREMENT QUESTION? letters@moneymail.com

A BOND YOU’RE NOT FAMILIAR WITH FROM A COMPANY YOU’VE NEVER HEARD OF? It could be the smartest retirement investment you make. FREE Bond Guide Without cost or obligation Call (800) 316-1837

The Main Advantages of Municipal Bonds Investors are attracted to municipal bonds for three reasons, safety of principal, regular predictable income and the tax-free benefits. Together, these three elements can make a compelling case for including tax-free municipal bonds in your portfolio. Potential Safety of Principal Many investors, particularly those nearing retirement or in retirement, are concerned about protecting their principal. In March of 2012, Moody’s published research that showed that rated investment grade municipal bonds had an average cumulative default rate of just 0.08% between 1970 and 2011.* That means while there is some risk of principal loss, investing in rated investment-grade municipal bonds can be a cornerstone for safety of your principal. Potential Regular Predictable Income Municipal bonds typically pay interest every six months unless they get called or default. That means that you can count on a regular, predictable income stream. Because most bonds have call options, which means you get your principal back before the maturity date, subsequent municipal bonds you purchase can earn more or less interest than the called bond. According to Moody’s 2012 research,* default rates are historically low for the rated investment-grade bonds favored by Hennion & Walsh. Potential Triple Tax-Free Income Income from municipal bonds is not subject to federal income tax and, depending on where you live, may also be exempt from state and local taxes. Triple tax-free can be a big attraction for many investors in this time of looming tax increases. About Hennion & Walsh Since 1990 Hennion & Walsh has specialized in investment grade tax-free municipal bonds. The company supervises over $2 billion in assets in over 15,000 accounts, providing individual investors with institutional quality service and personal attention. Our FREE Gift To You We’re sure you’ll want to know more about the benefits of tax-free Municipal Bonds. So our experts have written a helpful Bond Guide for investors. It’s free and comes with no obligation whatsoever.

© 2016 Hennion and Walsh. Securities offered through Hennion & Walsh Inc. Member of FINRA, SIPC. Investing in bonds involves risk including possible loss of principal. Income may be subject to state, local or federal alternative minimum tax. When interest rates rise, bond prices fall, and when interest rates fall, bond prices rise. *Source: Moody’s Investor Service, March 7, 2012 “U.S. Municipal Bond Defaults and Recoveries. 1970–2011.” Past performance is not guarantee of future results.

SPRING RETIREMENT GUIDE

e l k c u B p U WHEN YOU HIT THE BEAR ZONE Running into a stock market snarl just as you’re taking the off-ramp to retirement can throw your portfolio off course. But fear not: There’s plenty you can do to get around such hazards and arrive at your destination safely. BY CARLA FRIED PHOTOGRAPHS BY DAN SAELINGER

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P R E V I O U S S P R E A D : S E T D E S I G N A N D P R O P S T Y L I N G B Y D O M I N I Q U E B AY N E S

know what happened then: The market entered a 2½year bear that cut stock values in half.) Add to this hen you hit the open the fact that equities aren’t cheap, the U.S. economy reroad, you’re focused mains stuck in a low gear, on getting to where and China’s economic engine appears to be seizing you need to go and up, and it’s only logical to making good time. assume that at the very least major potholes and Yet you know there hazards lie ahead. will be places along Watching your portfolio bounce around is unnerving the way where you must slow down and take some at any age, but it’s especially precautions—for instance, to yield to oncoming traffic tough for those who are near retirement or have just and avoid speed traps. Well, investing for retirement made the transition. is much the same. While your main task is to establish “Making a mistake when you’re 30 years old with a long-term goal and plot out a portfolio that will get just $50,000 and decades of time to save is a lot diferyou there (see “Take Charge of Your Retirement” on ent than if you’re now at page 54), avoiding accidents is also crucial. The most retirement and need to start drawing down all that critical impediment you need to be wary of: running yo u h ave m a n age d t o into a bear market just as you’re about to retire. save—and make it last,” says Scott Bishop, director of financial planning at STA Wealth Management in Houston. “The fear of making that transition, esThat’s because suffering even modest losses early in pecially in a bear, can be strong.” retirement—we’re talking about as little as a 10% decline in Before you get too nervous, though, take a the first year of withdrawals—can prematurely deplete a breath. The risk of your retirement being mauled seemingly solid investment plan (see table on opposite page). by a bear is mitigated by a crucial fact: You’re not Unfortunately for investors who are nearing retirement, a robot. While retiring into a downturn can be the market looks to be entering bear territory. True, the dangerous, “it presumes retirees just set their 14% decline in the S&P 500 index from May 2015 through plans and then never change them for the next 20 mid-February doesn’t qualify as a bona ﬁde bear market or 30 years,” says David Littell, co-director of the yet (the technical deﬁnition is a 20% drop). But the likeliretirement-income program at the American Colhood that a sustained downturn is lurking ahead appears lege. “That’s not what people do. They adjust.” to be growing stronger. You can too. You probably already have, as Consider that this bull market is now more than seven you’ve survived two of the biggest bear markets years old and only one rally in history has lasted longer—the in history in just the past 15 years. So now is a one that ran from December 1987 to March 2000. (And you smart time to reexamine your strategy and make any necessary adjustments to navigate bear traps that may appear. The following steps will help m o n e y. c o m A P R I L 2 0 1 6 make sure your retirement is on the right course.

SPRING RETIREMENT GUIDE

DOWNSHIFT THE RIGHT WAY On the road to retirement you never want to slam on the brakes so hard your portfolio comes to a complete stop. “Retirees who bailed out of stocks and never got back into the market or waited too long have missed a lot of important growth” since the 2008 bear, notes T. Rowe Price ﬁnancial planner Stuart Ritter. Still, you need to slow your roll. EASE BACK ON STOCKS—FOR NOW. As you segue into retirement, you know to ratchet down your exposure to equities. But rather than starting with a typical 50% or so in stocks and reducing that weighting as you age, consider the case for taking the “glide path” less traveled. Retirement security expert Michael Kitces and Wade Pfau, a professor of retirement income at the American College, suggest dropping to an even more conservative stock allocation early in retirement—as low as 30% or so. Then when you get past the ﬁrst few years, gradually increase that to as much as 60% over 15 years to ensure that your nest egg continues to grow in retirement. Going ultraconservative at the outset serves a purpose: A 30% stock/70% bond portfolio kept losses down to single digits in some of the worst bears in history (see table on the next page). Minimizing the efects of market crashes not only protects your nest egg, but also will make it less likely that you’ll feel so stressed that you’ll make rash decisions that undermine your long-term goals. There’s an especially strong case for lightening up on stocks now. After rallying for seven years, equities have become expensive and remain so, even after the recent slide. History says the more expensive stocks are, the lower the likely gains you can expect from them in the future. Historically, the price/earnings ratio for stocks, based on 10 years of earnings—a method popularized by Yale economist and Nobel laureate Robert Shiller—has averaged about 16. Today this “cyclically adjusted” P/E ratio (CAPE) is more than 24. A study by AQR Capital Management found that when the market’s CAPE hovers at this level, stocks have averaged annual inflation-adjusted gains of just 0.9% over the subsequent decade. Not surprisingly, Research Affiliates forecasts the S&P 500 will deliver real annual returns of just 1.2% over the next 10 years, well below the

long-term market average of 7%. “Given where valuations are, it’s not a bad thing to get defensive,” says Kitces, a principal at Pinnacle Advisory Group. Indeed, an overvalued market like this lends itself to a conservative strategy that grows more aggressive over time. That’s because to trim your equity stake below 50%, you would have to scale back on stocks at a time when they’re expensive (in other words, sell high). Then over time, as corporate earnings grow while stock prices struggle, you would be adding to your equity allocation as P/E ratios improve (buy low). Whichever glide path you choose—the traditional route or the one Kitces and Pfau recommend—the odds are good that your nest egg will last at least 30 years if you follow a conservative withdrawal strategy (see “Are You Ready for Retirement?” in the gatefold starting on page 63). CUT BACK ON LOW-GRADE STOCKS. If you are five years or so from retiring and are looking to begin ratcheting down, begin by funneling fresh retirement contributions into bonds and cash for the remainder of your career. But the next step is to pare down equities in your existing portfolio. Where to start? Jettison the most vulnerable stocks in a potential bear market. That includes funds that focus on more speculative fare— companies with potential but little or no profits (think of biotech companies such as Vertex Pharmaceuticals or cloud-computing giant Salesforce.com) or sizable debt (such as Boston Scientific). In anxious markets, investors also have little patience for frothy stocks, especially if there’s another market scare. This explains why small-cap growth-stock funds—with an average portfolio P/E of more than 25 based on projected earnings, vs. around 16 for the broad market—have fallen 16% over the past year. That’s about 10 percentage points more than the S&P 500. HANG ON TO HIGH-QUALITY SHARES. In choppy markets, “high-

WHY TIMING MATTERS Even a modest 10% loss can upend a solid plan. Say you retire at 65 with $1 million and see average gains of more than 7% a year: BIG EARLY LOSS

CONSISTENT

BIG EARLY GAIN

–10.0%

7.6%

29.0%

7.6%

Return year 30

29.0%

7.6%

–10.0%

Value in year 30

$98,000

$1,512,000

Return in year 1 Ann. return years 2 to 29

NOTES: Assumes $62,000 withdrawn in year one, with future withdrawals adjusted 3% for inflation. SOURCES: American

Association of Individual Investors; “Retirement Income Redesigned,” by Harold Evensky and Deena B. Katz

SPRING RETIREMENT GUIDE

quality” stocks tend to hold up better than speculative fare. These are companies with stable earnings, low debt, and a history of being able to deliver shareholder returns regardless of market conditions. From last year’s market highs to the February lows, MONEY 50 fund PowerShares S&P 500 High Quality ETF (SPHQ) lost less than 6% while iShares MSCI USA Quality Factor ETF (QUAL) sank 8%. Both held up better than the 14% decline of the S&P 500 during that time. Dividend payers are another way to cope with a bear market, especially for retirees who are tapping their portfolios for income. “With dividend stocks and bonds, you can get a yield of more than 3%, and that gets you close to your income needs, so you don’t need to worry much if the market goes down,” says Houston planner Bishop. SPDR S&P Dividend ETF (SDY) and PowerShares International Dividend Achievers ETF (PID), which are both in the MONEY 50 list of recommended funds and ETFs, yield 2.6% and 4.8%, respectively. FUEL UP ON HIGH-GRADE BONDS TOO. After years when investors worried about income in a low-yielding market, the focus has shifted to the other role bonds play—providing ballast. That means it’s time to lighten up on low-quality bonds, where defaults are on the rise. Moody’s predicts that junk bond defaults will hit 4.4% this year, the highest level since 2010. While junk bond funds ofer higher yields than investment-grade debt, they’ve fallen 8% on average on a total return basis over the past year. By contrast, Vanguard Total Bond Market Index Fund (VBMFX), which holds only high-grade debt, is up 1.2% during this stretch.

WHY STRATEGY MATTERS Taking extra precautions at the start of retirement can dramatically reduce the odds of suffering a double-digit loss early on. PORTFOLIO ALLOCATION

30% stock/70% bonds

2007–09 BEAR

1987 CRASH

1973–74 BEAR

–2.3%

–4.4%

–3.6%

40% stock/60% bonds

–6.7%

–6.8%

–5.9%

50% stock/50% bonds

–11.2%

–9.2%

–8.2%

60% stock/40% bonds

–15.7%

–11.7%

–10.5%

70% stock/30% bonds

–20.1%

–14.1%

–12.8%

NOTES: Portfolio returns in past bear markets are based on performance of large U.S. stocks and intermediate government bonds. Data are based on month-end returns. SOURCE: Morningstar

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If your bond stake is tucked into a high-quality fund or ETF tied to the Barclays U.S. aggregate bond index, like Vanguard Total Bond, you’ve got plenty of bear protection. The median return for this index when stocks are falling is a 5% gain. True to form, when stocks sank 37% in the 2008 market crash, Vanguard Total Bond returned 5.1%. DON’T AVOID ALL RISK. Stocks in Europe and Japan are expected to see 15% greater volatility than U.S. shares, according to Research Affiliates. Emerging-markets stocks may be 60% bumpier. Yet this doesn’t mean you should avoid foreign equities, since a bear market in the U.S. does not mean other global markets must follow suit. And owning international stocks is not just a smart long-term diversiﬁcation move, but it also comes with a kicker—they’re cheap right now. Research Affiliates forecasts foreign stocks in mature markets will deliver a 5.9% annualized real return over the next 10 years and emerging-markets stocks could return 8.6% a year. Because of the volatility, though, limit your total foreign stake to 30% or so of the money you keep in equities.

TUNE UP YOUR GUARANTEED INCOME Steve Vernon, an actuary and a research scholar at the Stanford Center on Longevity, has a sureﬁre solution for bear scares. “Nothing helps sleeping at night more than knowing you have a fixed stream of income that won’t be impacted by what’s going on in the markets,” he says. The key is to maximize your guaranteed sources of income. SETTLE ON A SOCIAL SECURITY STRATEGY. You can start receiving Social Security at age 62, but if you delay until age 70, the payout will be 76% higher. “Even if you are going to tap other assets to live of before age 70, you still come out ahead delaying Social Security,” says the American College’s Littell. What if you don’t have enough income to cover your needs until 70? Couples have an option. The higher wage earner can delay until 70 while the other spouse taps beneﬁts earlier. GET THE BASICS COVERED. Take a small piece of your retirement savings and buy yourself guar-

WHAT STEPS ARE YOU TAKING TO PROTECT YOUR PORTFOLIO? letters@moneymail.com

anteed income. For example, $100,000 in an immediate fixed annuity these days would entitle a 65-year-old male to a lifetime monthly payout of $555, and $535 for a 65-year-old woman. (Women’s longer life expectancy is the reason for the diference.) That’s the equivalent of an annual withdrawal rate in excess of 6%. Stick with a single-premium immediate annuity. Since payouts are based partly on market interest rates—which are still low—start with a small contract now and buy in intervals over a few years. You can get quotes at ImmediateAnnuities.com. If you’re five to 10 years from when you want the payouts to start, look into a fixed deferred annuity. You pay your premium today and designate when you want the income to begin. TURN DOWN THE LUMP SUM. Many private-sector employers, eager to shed traditional pension obligations, have been ofering employees the option of taking lump sums today. Vernon recommends sticking with the pension’s annuity payouts, as you’ll have a hard time safely creating as big a guaranteed stream of income from a lump sum.

EASE OFF CRUISE CONTROL When you run into trouble, you have to be willing to change course. “If a bear market has you worried, temporarily reducing your spending is always your best and biggest lever,” says T. Rowe’s Ritter. The good news is you’re adept at making

such adjustments already. “The year you replaced the roof and didn’t take a vacation, or the year a child was born and you reduced spending on yourself, are examples of how we always have exhibited the ability to adjust spending when needed,” he says. STICK TO A SAFE SPEED. If you’re on the cusp of retirement, you need to settle on a withdrawal rate that gives your portfolio a high probability of surviving for 30 years or so. Traditionally, a 4% initial withdrawal rate—with adjustments for inflation in subsequent years—was a conservative starting point. And it still is if you’re willing to downshift your withdrawals after lousy years for stocks. If you don’t plan to be so flexible, start at 3%. It’s safer given modest expectations for investment returns. SLOW DOWN AT ROADBLOCKS. Financial planner Jonathan Guyton and computer scientist William Klinger have studied how retirees can adapt to downturns to assure they outlive their assets. A simple rule: In any year when your portfolio falls, skip your annual inflation increase. Say you tapped 4% of a $1 million nest egg in year one, or $40,000. And assume your plans called for taking $41,200 in year two. In the event of a pullback, forgo the 3% inflation adjustment and stick to $40,000. TAP ON THE BRAKES WHEN WITHDRAWALS ARE GAINING SPEED. Say you pulled out 5% of a $1 million portfolio to generate $50,000 of income. Now assume the market fell and reduced your nest egg to $800,000. If you were to withdraw more than $50,000 the following year, that would represent at least a 6% withdrawal rate—which would be 20% greater than your original 5% strategy. Whenever market losses cause your withdrawal rate to climb 20% above original levels, reduce your income for the coming year by 10%. In this example, you would slash your withdrawal to $45,000. While this sounds harsh, the opposite rule applies when stocks are surging, allowing you to tap 10% more income in years following big market gains. Guyton and Klinger found that retirees with a diversified portfolio (50% stocks, 40% bonds, and 10% cash) who followed all of these rules could have started out with an initial withdrawal rate as high as 4.6% and still not run out of money for 30 years. In the big picture, these course corrections aren’t that major, but they ensure that no matter how many down markets befall you in retirement, you and your portfolio will get to where you need to go.

Congrats! Your child has gotten into a great college. Now you just have to find enough money to pay for it. Here are seven ways to bridge the gap. By Kim Clark with Kaitlin Mulhere

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How to Pay for College Now

ou’ve sweated out the ACTs, SATs, and APs. You’ve toured so many leafy campuses you can barely keep them straight in your head. You’ve proofread essays late into the night and kept an anxious eye on application deadlines. You’ve nagged, as appropriate, and forked over your credit card, as needed. In other words you’ve done your parental duty, whatever it took, to get your kid into a great college. But even as the fat acceptance packages begin to arrive in your mailbox—showing that your child’s (and your) hard work has paid of—you know you’re not

done yet. Getting a son or daughter into college is one thing. Figuring out the best ways to actually pay those ginormous tuition bills is another. It’s no secret that a college education is among the biggest expenses most families ever face, and one that’s getting costlier by the year. Little wonder that a Gallup poll last fall found that paying for college is now the No. 1 ﬁnancial concern of parents with kids under age 18, topping retirement and big medical bills. But it doesn’t have to be as bad as you may fear. For one thing, few families really have to pay the scary sticker prices that colleges advertise (see the table on

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How to PAY F O R COLLEGE N OW

maintaining a certain grade point average, often a 3.0. The average college student’s GPA drops about 0.6 of a point after high school, according to research published by Columbia University, so even if your student had a B-plus average in high school, keeping it up might be difficult. If your student is receiving need-based aid, you’ll want to know how that could change in future years as well. For example, if you have another child who will be entering (or finishing) college before this one graduates, that could result in larger (or smaller) grants. Arriving at a reasonable estimate won’t be as simple as multiplying freshman-year costs by four. For one thing, assume colleges will raise prices by the recent average of 3% a year or so. Plus, many students no longer graduate in four years. The average now tops 4½ years, and lots of students take far longer than that. Finally, some colleges are much better than others at helping their students graduate on time. You can get a sense of each school’s track record by checking their four-, five-, and six-year graduation rates at CollegeResults.org. A college where your child will finish in four years may be less expensive in the long run than a seemingly cheaper school where you’d be writing checks for five years. MONEY’s college rankings, at money .com/colleges, provide the net price of a degree for more than 700 schools, factoring in the average time it takes students there to graduate.

page 81). Plus, by following the seven simple strategies on these pages, you can trim the tab by at least $5,000 a year and possibly $10,000 or more. If your child has been accepted by one or more schools, you’ve probably received letters spelling out how much aid each college is willing to give. “Spelling out” may be too generous a term, however. While financial aid letters are supposed to reveal your net cost—how much you would owe after any grants and scholarships—not all colleges follow the same format or provide the same information, notes Holly Morrow, a vice president of uAspire, a Boston-based nonprofit that advises students on financial aid. Colleges may omit some costs or list expensive parent loans as “aid.” To fairly compare offers, start with each school’s total cost of attendance, then subtract only grants and scholarships to get your net price per year. Make sure you’re accounting for all your expenses: not just tuition, fees, room, and board, but books, travel, laundry, and other living expenses. (One handy rule of thumb: The College Board says the average student spends about $4,200 a year on those extras.) If a college’s aid letter isn’t clear, call to get more details. Consider, too, any major costs you might face that would exceed the averages. For example, if one college on your list is just down the road and another is way across the continent, figure you’ll need to spring for some plane tickets if your child opts for the more distant school. Don’t stop there. “One of the worst things you can do is to focus solely on getting through the next year,” advises Kal Chany, author of Paying for College Without Going Broke. Instead, try to estimate what it will cost to get your student from freshman orientation all the way to graduation. For example, if your child was awarded merit aid for the first year, you can’t assume that it will automatically continue. That may depend on

Do a Financial Aid Face-Off

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4.6 Typical number of years that college students now take to graduate.

When you read those financial aid letters, take a close look at their lists of costs. They may well include items you don’t need, notes uAspire’s Morrow. In particular, focus on these three biggies: Health insurance. Many colleges automatically add a student health insurance plan to their list of charges. But if your child has good health coverage through your family’s plan that can be used at the college, you can usually decline the

Pare Unnecessary Costs

Forget the Official Price Tag Few students pay the full costs that colleges publish. These estimates are for a family with an income between $65,000 and $105,999 and a freshman starting school next fall.

additional insurance. At some colleges that alone could knock more than $1,000 of your annual bill. Dorm rooms. If your child plans to live on campus, the college will typically bill you for a standard double room. But students who are willing to bunk in a triple or live in an older building that might lack some amenities can often cut their costs by as much as $2,000 a year. Dining plans. Colleges often assume that every student wants a full 21-meal-a-week cafeteria plan. But if your child generally sleeps through breakfast or tends to grab lunch on the go, you can opt for a more limited plan, potentially saving as much as $1,000 a year, says Al Hofman, a college funding adviser in New London, Conn. You can always upgrade later if that plan isn’t adequate. Once you know the bottom-line price for each school, you can sometimes use that as leverage to bargain for a bett e r a i d p ac kage. You’ll have your best shot at private colleges of similar quality, which may match or beat another school’s ofer if they consider your student especially desirable. That often means higher grades or test scores than the average for that school— information you can find at CollegeData.com. You can try to negotiate by phone or visit the campus and do so in person. That worked for Erin Dymowski, a Maryland mom of five. Instead of immediately sending a deposit to her son’s top choice, Ithaca College, the family visited the campus and told a financial aid officer their son preferred Ithaca but had a better ofer from Hofstra. The financial aid officer asked the family to write an appeal letter requesting additional aid. Ultimately Ithaca sweetened its scholarship ofer, bringing the family’s net cost down to about $17,000 a year, from $19,500. You can also ask for more aid based solely on need, especially if your circumstances have changed or if you have a burdensome expense

Cut a Better Deal

Private University $49,600

Average published price

- $18,000

` Average grant from

the school (89% of freshmen receive one)

= $31,600 - $5,500 = $26,100 - $3,000 - $2,500

Estimated net price after grants

` Federal student

loan

Estimated out-of-poc ket price

` Amount studen

t can earn

` Federal tax credit

20,600

In-State Public University $24,800

Average published price

- $5,500 = $19,300

` Federal student loan

- $3,000 - $2,500

` Amount student can earn

Estimated out-of-pocket price

` Federal tax credit (AOTC)

13,800

Amount family would need to raise from income, savings, or additional borrowing

(AOTC)

Amount fam ily to raise from would need in or additiona come, savings, l borrowing

SOURCES: MONEY calculations based on data from the College Board and National Association of College and University Business Officers

that wasn’t reflected in your financial aid forms. For example, you might have lost your job since you filled out the Free Application for Federal Student Aid (FAFSA), or someone in your family may have been through a major illness, notes Megan McClean, managing director of policy and federal relations for the National Association of Student Financial Aid Administrators. To make your case, send a letter to the school, providing any relevant documentation and asking for a “professional judgment review.” While there are no official statistics on how many needbased appeals prove successful, virtually every college will at least consider one. If you’ve been saving money in a 529 plan for your child over the years, now’s the time switch into spending mode. Joe Hurley, founder of Savingforcollege.com, suggests starting to pay as many bills as you can out of that account and

Make Paying Easier for Yourself

TELL US HOW YOU’RE CUTTING THE COST OF COLLEGE: college@moneymail.com

How to PAY F O R COLLEGE N OW

continuing to fund it while your child is in school. In most states, you’ll get a tax break on the money you contribute, even if it’s in the plan only briefly before you spend it. If your relatives want to chip in too, ask them to hold of until the spring of your child’s sophomore year. That way, the college won’t reduce any need-based grants because of the extra family resources. And to reduce your risk in a stock market meltdown, make sure your 529 is invested in a target-date fund based on your child’s age or move the money into bond and stable-value funds. When tuition bills come due, bear in mind that you probably don’t have to spring for the whole semester at once. Nearly every college ofers parents some sort of interest-free payment plan, sometimes with a modest set-up fee of $50 or so, notes Paula Bishop, a Bellevue, Wash., CPA who specializes in college planning. Typically those plans let you pay in six to 10 installments throughout the school year. Some schools, such as the University of Colorado, require that the payments be made via automatic debit from a checking or savings account. A handful of colleges, such as the University of Southern California, let you pay with a credit card without an additional service fee, which means you can rack up some frequent-flier miles or get a little cash back to put into your college fund. An array of tax breaks awa i t s yo u i f yo u qualify based on your family income. They include the American O p p o r t u n i t y Ta x Credit (AOTC), the lifetime learning credit (LLC), and several types of tax deductions. The AOTC is the most lucrative—worth a maximum of $2,500 of your tax bill for the year as long as you paid at least $4,000 in tuition. It’s open to married couples earning less than $180,000 a year (or singles earning less than $90,000). Since you can use only one of the college tax credits at a time, you’ll want to take the AOTC first.

Let Uncle Sam Help

m o n e y. c o m

APRIL 2016

12 The maximum number of hours per week a student should work during the school year, according to research.

One snag: You can’t pay the $4,000 using any tax-advantaged money, such as your 529 college savings plan. So to maximize your AOTC, plan to pay the first $4,000 of tuition each fall out of current income, a loan, or from other savings. You can claim the AOTC for only four years per child. But you may be able to squeeze up to $2,000 more out of Uncle Sam if you earn no more than $130,000 (or for single parents, $65,000). To do that, plan to pay some tuition after Jan. 1 of your child’s senior year. That will entitle you to claim the lifetime learning credit in year five, which reduces your tax bill by 20% of your tuition costs, up to $10,000 in tuition. If you aren’t eligible for the LLC, you might be able to take the tuition and fees deduction, which can be worth $1,000 or so, depending on your tax bracket. You may also qualify for a student loan interest deduction if you borrowed. You can learn more about all of these breaks at irs.gov. No matter how generous a parent you are, the burden of paying for college shouldn’t fall entirely on you. If your family has to borrow, the best way is for your child to take out federal student loans. They charge low interest rates and ofer new, income-driven repayment plans that limit graduates’ loan payments to just 10% of their disposable income. What’s more, graduates who work for 10 years in public service jobs can have some of their debt forgiven. The government will lend any undergraduate who files a FAFSA at least $5,500 as a freshman, $6,500 as a sophomore, and $7,500 as an upperclassman. If your student plans to attend a college that will cost more than what the FAFSA calculates as your expected annual contribution based on your income and assets, you can get some of the money to cover the shortfall in the form of subsidized federal loans. They’re an especially good deal because they don’t charge in-

Make Sure Your Kid Has Skin in the Game

writes a blog called “Suddenly Frugal” and has two daughters in college. “When Mommy’s paying, it doesn’t matter how much they spend. But when it’s their earnings it’s, ‘Holy cow, we need to cut!’ ” Ingram says. She and her husband require that their daughters work during the summer to pay for books (about $1,200) and during the school year to cover incidental expenses. Don’t overdo it, though: Working more than 12 hours a week during school can impair academic performance and increase a student’s odds of dropping out, according to research by financial aid expert Mark Kantrowitz at Cappex.com. If all these tactics c o m b i n e d a r e n’ t enough to cover the cost of your child’s dream college, borrowing on your own is another possibility. Among your options: PLUS loans. The federal government will lend you as much as your child’s full net cost of attendance. This academic year, PLUS loans cost 6.8% in interest plus 4% in initial fees. PLUS loans for the 2016–17 academic year will most likely carry a slightly lower rate. Parents with good credit can usually find cheaper deals in the private market, but PLUS loans still have advantages. The government has lenient eligibility standards—rejecting only those with “adverse” credit, such as a recent bankruptcy. PLUS loans will also be forgiven if the parent or student dies or the parent becomes disabled. Home-equity loans. Interest rates on homeequity loans and lines of credit started at around 5% in early 2016, and the interest is generally taxdeductible, for as much as $100,000 in debt. The tradeof is that if you later run into a financial emergency and can’t pay the loan back, your home could be at risk. Before you borrow at all, though, it may be better to revisit your list of colleges. You might find a lower-cost school that your child would love every bit as much.

Borrow Smartly, If You Need To

terest while your student is in school. But any undergrad can take unsubsidized loans, where the interest clock starts ticking immediately. Last year’s federal loans carried interest rates of 4.29%, and because interest rates have been falling in recent months, loans for the 2016–17 academic year could be less expensive still. Another way for your child to contribute is through a job. Working 10 to 12 hours a week during the school year can generate $1,500 to $2,300, which is often enough to cover books and things like laundry, snacks, and entertainment. A summer job might bring in another $1,500 or more. The beneﬁts of working in college are more than financial. Research shows that students who work about 12 hours a week during the school year do better academically than their peers without jobs. Plus, many prospective employers like to see some work experience on a new grad’s résumé. Working also teaches life skills like time and money management, says Leah Ingram, who

MORE ONLINE For more advice on choosing a great college—and paying for it—visit the MONEY College Planner at money .com/colleges.

APRIL 2016

m o n e y. c o m

THE NUMBERS

STOCKS & FUNDS BIGGEST MUTUAL FUNDS BY CATEGORY CATEGORY

TOTAL RETURN

EXPENSES (AS % OF ASSETS)

ONE YEAR

THREE YEARS1

–4.5% –6.8 –7.0 –13.2 –6.1

11.1% 10.0 10.4 8.0 10.1

–8.0 –11.9 –16.3 –16.3 –13.7

8.4 8.8 5.7 5.7 9.7

0.79 0.09 0.10 0.07 0.27

–14.9 –17.4 –13.0 –10.7 –17.2

6.0 5.7 6.8 3.2 4.6

0.09 0.36 0.09 0.96 0.09

–2.8 –6.7 –5.8 –6.8 –10.0

7.9 6.8 7.2 5.1 5.1

0.59 0.56 0.56 0.34 0.74

–14.9 –13.3 –12.5 –13.5 –12.1

–1.7 –1.3 0.9 0.2 0.5

0.22 0.75 0.83 0.34 0.83

–15.7 –21.3 –23.7 –19.2 –23.7

–3.5 –7.6 –8.9 –4.8 –9.4

1.04 1.24 0.15 1.05 1.51

2.5 3.0 2.0 2.0 2.6

2.0 1.7 1.5 0.8 1.6

0.45 0.65 0.88 0.80 0.75

1.6 1.5 –1.7 1.2 0.4

2.1 2.0 1.6 1.5 1.6

0.07 0.10 0.44 0.10 0.59

–5.5 –12.4 –8.3 –8.5 –10.2

1.6 –1.9 2.6 0.0 –0.8

0.13 0.67 0.72 0.81 0.72

4.2 0.0 2.0 0.0 0.0

3.2 0.0 1.5 0.0 0.0

0.12 0.40 0.12 0.16 0.62

LARGE-CAP STOCKS Fidelity Contrafund (FCNTX) American Funds Growth Fund of America (AGTHX) American Funds Investment Co. of America (AIVSX) Dodge & Cox Stock (DODGX) American Funds Wash. Mutual Investors (AWSHX)

Commodities Bounce Back

0.64% 0.65 0.59 0.52 0.58

MIDCAP

AFTER A MONTHS-LONG SLIDE, oil prices ﬁnally began to recover in the four weeks ended Feb. 17, a hopeful sign that the global economy might not be doomed after all. As a result, long-sufering energy stocks surged 6.4%, while the basic-materials sector gained more than 8%.

S&P 500 RATIOS

Fidelity Low-Priced Stock (FLPSX) Vanguard Mid-Cap Index (VIMAX) Vanguard Extended Market Index (VEXAX) Fidelity Spartan Extended Market Index (FSEVX) Vanguard Strategic Equity Fund (VSEQX)

SMALL-CAP Vanguard Small-Cap Index (VSMAX) Vanguard Explorer (VEXRX) Vanguard Small-Cap Value Index Fund (VSIAX) T. Rowe Price Small-Cap Value (PRSVX) Vanguard Small-Cap Growth Index (VSGAX)

BALANCED P/E

American Funds American Balanced (ABALX) Fidelity Balanced (FBALX) Fidelity Puritan Fund (FPURX) Vanguard Star Fund (VGSTX) Oakmark Equity and Income Fund (OAKBX)

DIVIDEND YIELD

2.4%

21.0

CURRENT

2.3

20.0

ONEYEAR RANGE

2.2 ONEYEAR RANGE

19.0 CURRENT

18.0

INTERNATIONAL

2.32

2.1

18.4

EMERGING MARKETS

2.0

17.0

American Funds New World (NEWFX) T. Rowe Price Emerging Markets Stock (PRMSX) Vanguard Emerging Markets Stock Index (VEMAX) Fidelity Emerging Markets (FEMKX) Russell Emerging Markets (REMSX)

1.9

BENCHMARKS INDEX

S&P 500 Nasdaq2 Russell 2000 Morgan Stanley EAFE Dow Jones industrial average Barclays U.S. aggregate bond index

U.S. GOVERNMENT BONDS

TOTAL RETURN ONE MONTH

ONE YEAR

2.7% 1.0 0.5 –0.3 3.3 0.6

–6.3% –7.5 –16.3 –13.1 –6.5 1.8

10.5% 12.4 4.5 0.5 8.2 2.2

10.6 8.1 6.4 5.6 5.5 5.4 2.8 2.1 –0.7 –1.4

6.1 –17.7 –26.1 –6.8 5.4 5.3 –3.7 –0.8 –5.3 –12.3

7.6 3.8 –6.6 10.3 13.4 11.8 14.1 14.5 17.1 7.9

THREE YEARS1

SECTOR

Telecom services Basic materials Energy Industrials Consumer staples Utilities Information technology Consumer discretionary Health care Financials

NOTES AND SOURCES: Stock index data as of Feb. 17 from Lipper, New York; 877-955-4773.

Sector returns from Bloomberg. Bond index data from Barclays. Monthly S&P 500 ratios are from Standard & Poor’s. P/E ratios are based on previous four quarters of operating earnings. Biggest funds ranked by total net assets. 1Annualized. 2Price change only.

m o n e y. c o m

APRIL 2016

Vanguard Total International Stock Index (VGTSX) Harbor International (HAINX) American Funds EuroPacific Growth (AEPGX) Vanguard International Growth Fund (VWILX) T. Rowe Price International Stock Fund (PRITX)

Fidelity Government Income (FGOVX) American Funds U.S. Government Securities (AMUSX) MFS Government Securities (MFGSX) Sit U.S. Government Securities (SNGVX) J.P. Morgan Government Bond (OGGAX)

INVESTMENT-GRADE Vanguard Total Bond Market Index (VBTLX) Vanguard Total Bond Market II Index (VTBIX) Dodge & Cox Income (DODIX) Vanguard Short-Term Investment-Grade (VFSUX) T. Rowe Price New Income (PRCIX)

HIGH YIELD Vanguard High-Yield Corporate (VWEAX) American Funds American High-Income Trust (AHITX) Fidelity Capital & Income (FAGIX) Northern High Yield Fixed Income (NHFIX) Fidelity High Income (SPHIX)

TAX-EXEMPT Vanguard Intermediate-Term Tax-Exempt (VWIUX) Fidelity Municipal Money Market (FTEXX) Vanguard Limited-Term Tax-Exempt (VMLUX) Vanguard Tax-Exempt Money Market (VMSXX) Schwab Municipal Money Fund (SWXXX)

99 Tips to Make Your Retirement More Comfortable If You Are Approaching Retirement or Already Retired, Call 1-888-887-9884 for Your FREE Copy! While it’s easy to imagine retirement as a time of relaxation, enjoyment and fun, the fact of the matter is that a successful retirement doesn’t just happen. It takes thought, planning and action. To help Money readers get ready for retirement or make your retirement even better, we’ve assembled 99 retirement tips. Importantly, Ken Fisher has gleaned these tips from Fisher Investments’ clients, people who have or are successfully navigating the transition from work to retirement.

Here Are Just a Few of the hings You’ll Learn Why selecting a benchmark, something few people do, can help you maintain and grow your portfolio over time in bull and bear markets. (Tip #19)

Determine how much you can take from your investment portfolio without risking running out of money. (Tip #10) Why, if you are close to retirement or already retired, you’ll probably live longer than you think. (Tip #12)

Why paying down your mortgage before you retire might not be a good idea. (Tip #26)

How not to get caught in the inflation trap and the fallacy of most asset-allocation advice. (Tip #13)

How to estimate what your taxes are going to be and look for ways to reduce them in retirement. (Tip #40)

What you should tell your adult children about your inances. (Tip #23)

Why retirement can be a strain for marriages. (Tip #87)

And many more inancial, lifestyle and health suggestions!

Retirement Is More Complicated than Just Money Management 99 Retirement Tips will help you better understand the concerns and issues that retired people face. Please claim your copy today, at no cost or obligation, and take a step toward a better retirement.

About Fisher Investments and Ken Fisher Fisher Investments is a money management irm serving successful individuals as well as large institutional investors. Fisher Investments and its subsidiaries use proprietary research to manage over $63 billion* in client assets and have a 35-year performance history in bull and bear markets. Ken Fisher, Founder, CEO and Co-Chief Investment Officer, has been Forbes’ “Portfolio Strategy” columnist for over 30 years and is the author of more than 10 inancial books, including 4 New York Times bestsellers.

Call today for your FREE copy! Toll-free 1-888-887-9884 Reference code AV23 when calling. ©2016 Fisher Investments. 5525 NW Fisher Creek Drive, Camas, WA 98607. Investments in securities involve the risk of loss. Past performance is no guarantee of future returns. *As of 12/31/2015.

THE NUMBERS

MONEY 50

TOTAL RETURN

Stocks Finally Catch a Break

FUND (TICKER) Vanguard Short-Term Bond (VBISX) Vanguard Inflation-Protected (VIPSX) Vanguard Short-Term Infl.-Prot. (VTIP) Vanguard Total Intl. Bond Index (VTIBX)

STRENGTHENING OIL PRICES AND A WEAKER DOLLAR SPUR A RALLY AMONG MONEY 50 FUNDS. IN RECENT MONTHS stocks have been plagued by two major headwinds: sliding oil prices that raised concerns about a recession ahead, and the strong dollar, which has cut into corporate profit growth among U.S. firms. In the four weeks ended Feb. 17, however, both trends reversed course, fueling a rebound in the broad market. Sectors and regions that are dependent on energy production did particularly well. That explains why Vanguard Emerging Markets and iShares North American Natural Resources soared about 6% and 8%, respectively. Meanwhile, the weaker dollar provided a boost to the returns of Americans investing abroad. PowerShares International Dividend Achievers, for instance, was up 6.7% in dollar terms last month. —TAYLOR TEPPER

HOW TO USE OUR RECOMMENDED LIST Building-block funds: For broad exposure to core asset classes Custom funds: Specialized investments that can tilt your strategy One-decision funds: If you want stocks and bonds in one portfolio

TOTAL RETURN ONE MONTH

FUND (TICKER)

ONE YEAR

THREE YEARS 1

EXPENSES (AS % OF ASSETS)

PHONE NUMBER (800)

0.09 0.09

435-4000 435-4000

BUILDING-BLOCK FUNDS Large-Cap Schwab S&P 500 Index (SWPPX) Schwab Total Stock Market Index (SWTSX) Midcap/Small-Cap iShares Core S&P Mid-Cap (IJH) iShares Core S&P Small Cap (IJR) Foreign Fidelity Spartan International (FSIIX) Vanguard Total Intl. Stock (VGTSX) Vanguard FTSE A/W ex-U.S. Small (VFSVX) Vanguard Emerging Markets (VEIEX) Specialty Vanguard REIT Index Investor (VGSIX) Bond Vanguard Total Bond Market (VBMFX)

m o n e y. c o m

2.7% –6.4% 10.4% 2.3 –8.2 9.5 3.2 1.8

–11.5 –11.0

7.0 7.6

0.12 0.12

474-2737 474-2737

1.2 2.6 2.0 5.9

–12.9 –14.9 –11.3 –23.8

0.6 –1.7 –0.4 –9.1

0.20 0.22 0.37 0.33

544-8544 662-7447 662-7447 662-7447

–1.7

–9.0

6.4

0.26

662-7447

0.6

1.5

2.0

0.20

662-7447

APRIL 2016

ONE MONTH

ONE YEAR

THREE YEARS 1

0.4% 1.5% 1.0% 0.7 –0.5 –1.6 0.0 –0.1 –1.0 1.1 1.9 N.A.

EXPENSES (AS % OF ASSETS)

PHONE NUMBER (800)

0.20 0.20 0.10 0.23

662-7447 662-7447 662-7447 662-7447

CUSTOM FUNDS Large-Cap Dodge & Cox Stock (DODGX) PowerShares FTSE RAFI U.S. 1000 (PRF) Sound Shore (SSHFX) PowerShares S&P High Quality Port.(SPHQ) Primecap Odyssey Growth (POGRX) T. Rowe Price Blue Chip Growth (TRBCX) Midcap Ariel Appreciation (CAAPX) WisdomTree MidCap Dividend (DON) T. Rowe Price Div. Mid Cap Gro. (PRDMX) Small-Cap Royce Opportunity (RYPNX) Vanguard Small-Cap Value (VBR) WisdomTree SmallCap Dividend (DES) Wasatch Small Cap Growth (WAAEX) Specialty PowerShares Intl. Div. Achievers (PID) SPDR S&P Dividend (SDY) Cohen & Steers Realty Shares (CSRSX) SPDR Dow Jones Intl. Real Estate (RWX) iShares N. American Nat. Resources (IGE) Foreign Oakmark International (OAKIX) Vanguard International Growth (VWIGX) T. Rowe Price Emerging Markets (PRMSX) Bond Dodge & Cox Income (DODIX) Fidelity Total Bond (FTBFX) Vanguard Short-Term Inv. Grade (VFSTX) iShares iBoxx $ Inv. Grade Corp. Bond (LQD) Loomis Sayles Bond (LSBRX) Fidelity High Income (SPHIX) Vanguard Intm.-Term Tax-Ex. (VWITX) Vanguard Limited-Term Tax-Ex. (VMLTX) Templeton Global Bond (TPINX)3 Fidelity New Markets Income (FNMIX)

1.6 3.0 1.9 5.8 –1.5 –0.5

–13.2 –9.6 –14.0 –0.4 –8.1 –5.2

8.0 8.8 8.7 13.2 11.4 13.1

0.52 0.39 0.92 0.29 0.63 0.72

621-3979 843-2639 551-1980 983-0903 729-2307 638-5660

0.9 3.9 0.6

–18.0 –7.9 –11.6

6.3 10.4 8.7

1.12 0.38 0.89

292-7435 909-94732 638-5660

2.4 2.8 5.0 –3.4

–22.3 –13.0 –11.9 –17.3

0.1 6.8 6.5 3.0

1.15 0.09 0.38 1.21

221-4268 662-7447 909-94732 551-1700

6.7 7.1 –3.5 3.9 8.3

–28.4 –0.7 –8.6 –11.5 –31.1

–5.6 10.7 7.1 0.9 –11.1

0.55 0.35 0.97 0.59 0.47

983-0903 787-22572 437-9912 787-22572 474-2737

0.2 1.2 3.5

–18.0 –13.6 –21.3

–0.4 0.1 –7.6

0.95 0.47 1.24

625-6275 662-7447 638-5660

–0.5 0.0 0.0 –0.9 0.4 –0.9 0.6 0.6 –0.5 1.9

–1.7 –1.0 1.1 –2.6 –10.1 –10.2 4.1 1.9 –9.0 –1.5

1.6 1.5 1.4 1.7 –0.8 –0.8 3.2 1.5 –2.2 –0.9

0.44 0.45 0.20 0.15 0.91 0.72 0.20 0.20 0.89 0.90

621-3979 544-8544 662-7447 474-2737 633-3330 544-8544 662-7447 662-7447 632-2301 544-8544

6.8 2.3 7.0

0.56 1.02 0.26

544-8544 544-8544 662-7447

3.0 4.7

0.58 0.66

638-5660 638-5660

5.1 5.5

0.15 0.15

662-7447 662-7447

ONE-DECISION FUNDS Balanced Fidelity Balanced (FBALX) 1.0 –6.7 Fidelity Global Balanced (FGBLX) 1.7 –6.2 Vanguard Wellington (VWELX) 2.1 –4.2 Target Date T. Rowe Price Retirement series (STOCK/BOND ALLOCATION) Example: 2005 Fund (45%/55%) (TRRFX) 1.3 –4.3 Example: 2020 Fund (68%/32%) (TRRBX) 1.6 –6.6 Vanguard Target Retirement series Example: 2025 Fund (70%/30%) (VTTVX) 1.8 –6.8 Example: 2035 Fund (84%/16%) (VTTHX) 2.1 –8.7

NOTES: As of Feb. 17, 2016. N.A.: Not available. Load funds are included for those who prefer to use a broker. 1Annualized. 2Phone numbers are 866. 34.25% sales load. SOURCES: Lipper, New York, 877-955-4773; the fund companies

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Grandma’s Second Home by Marlys Harris

ALWAYS THOUGHT that people who bought second homes were idiots—or gluttons for complication. Two dwellings to pay for, insure, clean, and protect against burglars. Sure, there are warmer climates to consider. I live in Minneapolis, where the windchill hits –20° F in winter. But, folks, that’s why God invented beach resorts. Now, thanks to my new (and only) grandchild, Maggie Rose—who lives with my son and daughter-in-law in Orlando—I have become one of those second-home-owning idiots. So besotted with her were my husband and I that we blithely plunked down a $330,000 chunk of our savings for a place in Florida just to be near her for half the year. Buying a second home in the Orlando suburbs seemed easy-peasy. Condos there average $70,000, and we’d only planned on a one-bedroom—

m o n e y. c o m

APRIL 2016

how much room could two old fartsters need? But things quickly got out of hand. I wanted to live in a walkable area, so we focused on Celebration, a Disney-built town that looks like the set from It’s a Wonderful Life. One-bedroom condos there cost $150,000. Then we upped the search to two bedrooms. After all, where would our other son stay when he visited? Add $100,000—enough, upon reflection, to put him up for two years in a nice hotel. Then we learned that most condos wouldn’t allow our large dogs, which meant stepping up to a (yet more expensive) townhouse. The one we chose had us removing $330,000 in cash from our savings. And that was just the first financial cut. There are the homeowners association stuf, about $6,400 plus utilities, and $5,000 in annual property taxes. We had to replace the washer, dryer, and fridge ($2,000) and install two new toilets ($1,000). Don’t mention the air conditioner, which I expect to fail at any second. Furnishings? Don’t ask. Now comes the tear-in-the-eye part where I say it’s all worthwhile because Maggie is utterly adorable. It’s true—but. During the week, she’s at her babysitter’s while her parents work. Weekends are when the kids have time alone, so we try not to break in—too often. Then again, last week Maggie created a word just for me—Meema. Joy! And in August, my return on investment will double when the baby we’ve dubbed TBD is due. Marlys Harris is a former editor-at-large at MONEY and a columnist at MinnPost.com.

Illustration by

dav e u r b a n

U.S. BONDS

AGG

U.S. STOCKS

IVV

INTâ&#x20AC;&#x2122;L STOCKS

IEFA

TO BUILD A PORTFOLIO FOR THE LONG HAUL, YOU NEED A STRONG FOUNDATION.

iShares Core funds. The essential building blocks for the heart of your portfolio. Simple to invest in. Only 1/10th the cost of typical mutual funds.1

Built on the expertise of BlackRock, trusted to manage more money than any RWKHU LQYHVWPHQW Ć&#x201C; UP LQ WKH ZRUOG 2

Start building at iShares.com/build

INSPIRED TO BUILD.

1. Morningstar, as of 9/30/15. Comparison is between the Prospectus Net Expense Ratio for the average iShares Core Series ETFs (0.12%) and the average Open-End Mutual Fund (1.27%) available in the U.S. (excluding municipal bond and money market funds). 2. Based on $4.506T in AUM as of 9/30/15. Visit www.iShares.com or www.BlackRock.com to view a prospectus, which includes investment

objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Risk includes principal loss. 7KH )XQGV DUH GLVWULEXWHG E\ %ODFN5RFN ,QYHVWPHQWV //& WRJHWKHU ZLWK LWV DIĆ&#x201C; OLDWHV â&#x20AC;&#x153;BlackRockâ&#x20AC;?). ÂŠ2016 BlackRock. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock. iS-17226-0116