Business and Finance

Planning for retirement has never been as complicated — or as important — as it is now.

Last year’s financial meltdown was the second stock market disaster of the decade. Millions of baby boomers saw their savings wither just when they were eyeing retirement.

The collapse of the stock market had much less impact on people in their 20s and 30s. They had less to lose and have plenty of time to recover. For many others, though, the decline in 401(k)s and other investment accounts will force them to make difficult choices. Many will work longer than they expected. Others will forget about buying a second home in retirement or traveling as much as they had planned.

The crash and its effect on baby boomers highlight the risks that came with the revolution in how people finance their retirement.

For decades, a company pension was the key to the good life. With a defined-benefit pension, workers contribute nothing and receive a guaranteed monthly payment, or a lump sum at the start of retirement. Since 1980, pensions have been gradually replaced by 401(k)s. These are tax-deferred savings plans in which workers, and sometimes employers, make contributions, and the retirement payoff depends on how well the money was invested.

The number of families with only a company-provided pension fell from 40 percent to 17 percent from 1992 to 2007, according to one study. Those with a 401(k)-type plan reached nearly 80 percent from 32 percent.

"We’ve moved so much of the burden of saving onto the individual worker," says Blaine Aikin, CEO of Fiduciary360, which offers advice on retirement plans. "We also expect them to be able to manage it in a situation where even the professionals were baffled."

For years, personal finance experts have urged people to take a more active role in managing investments. The meltdown has made it even more critical. Financial planners say the rules haven’t changed. They just need to be applied.

The ultimate question is how much do you need to save? For starters, think about how you plan to live. Do you want to enjoy time with family, or dart around the globe? Either way, you’ll need to budget for it.

A general rule is that you need at least 75 percent of your gross income in the years just before retirement. There are several reasons why you need less than 100 percent:

— Income taxes are lower after retirement. There are extra deductions for those over age 65, some retirement income may be tax-free and, with less income, you’ll probably be in a lower tax bracket.

— Saving for retirement is no longer necessary.

— Social Security taxes disappear.

— Clothing and commuting costs will drop. Often, a person’s mortgage is paid off by retirement. But health care costs will climb. People over age 65 spend roughly 30 percent of their income on health care, said AARP Public Policy Institute.

One way to look at retirement spending is to separate necessities from nonessentials and save for them separately, says Jean Setzfand, AARP director of financial security.

Make sure the necessities are paid for through a guaranteed income stream, such as Social Security or a pension, if you have one, she says.

The optional expenses should be paid out of invested savings, the value of which may fluctuate. This method gives you much more security meeting your basic needs. If your investments do well, you can spend more on nonessentials.

When the market falls, however, it cuts to the bottom line for retirees and those close to retiring.

People between the ages of 55 and 64 saw 20 percent of their retirement savings evaporate during the meltdown, though a six-month market rally and continued contributions have restored much of that. Still, the average 401(k) balance for this group was down 2.6 percent on Sept. 1 from a year ago.

The volatile stock market has forced many people to pay more attention to what’s in their 401(k). In February, five months into the meltdown and a month before the market hit bottom, nearly a quarter of 401(k) participants ages 56-65 had at least 90 percent of their money in stocks, according to Employee Benefits Research Institute.

The good news is that 75 percent had less. But the first group and many in the second had ignored a basic rule: Adjust your investments the closer you get to retirement.

The question for many is how to restore some of the losses. A study by asset management firm T.Rowe Price indicates that a person with a salary of $100,000 can increase retirement income from investments by as much as 28 percent by postponing retirement from 62 to 65.

Another option to increase retirement income is to delay claiming Social Security. Each year you keep working, the monthly check would increase by about 8 percent.

Still, research suggests that you have to be prepared in case your plans get derailed. Various life situations, including an aging parent, health problems or a job loss, might prevent you from working as long as you want. Although the median retirement age was 62 in the EBRI study, nearly half said they left work sooner than they had planned.

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The seductive message from the marketing campaigns, particularly those aimed at young people, is that credit cards are a way to freedom. But to the people at FoolProofMe.com, credit cards are a way to destruction if you’re not careful.

"We advise young people to tear up credit card ‘convenience checks’ and not to owe anything on their cards" by not charging anything unless they can pay the bill in full, said Will deHoo, 29-year-old founder and president of FoolProofMe.com, a website that features consumer videos designed primarily for young people.

Using credit unions as Web hosts, the advertising-free www.FoolProofMe.com site dispenses what it calls "tough consumer messages" for high schools and community groups, parents, college-age students and adults.

"Many companies send you credit cards designed to make sure you pay obscene penalties," says a young man in a video introducing a segment on credit cards for college students. A young woman adds, "They target us because they think we’re too young, dumb and naive."

To be fair, credit cards can help young people establish credit and they offer everyone a convenient way to pay for purchases and possibly earn rewards. I use my credit card for just about everything I buy, including groceries. But I always pay my bill in full and use my card only for items I actually intended to buy.

Studies, however, consistently show that most people spend more when using credit cards than when shopping with cash, said Remar Sutton, a longtime consumer advocate who volunteers as "unpaid but enthusiastic" chairman of the board of FoolProofMe.com. His advice to college students: It’s OK to use a credit card for textbooks if you are sure you’ll pay the bill in full, but don’t use it for eating out, clothes or other items that could tempt you to splurge.

"Credit card companies spend billions of dollars telling you to finance purchases," a young man says in another video at FoolProofMe.com. "They make it easy to borrow so much that you have to finance purchases."

Clearly, no credit card company can force you to overspend, and credit card companies often offer useful advice to manage credit responsibly. But the folks at FoolProofMe.com argue that their advice delivers "real consumer education," not "infomercials" tainted by conflicts of interest.

"This site contains hard-hitting and realistic messages in an attractive format about the risks of credit cards and debt," said Stephen Brobeck, executive director of the Consumer Federation of America. A survey commissioned by the federation and FoolProofMe.com found only 53 percent of parents with children under 18 at home were "very confident" the children would leave home knowing how to manage money.

According to deHoo, the "Top 10" financial myths held by 14- to 21-year-olds who helped test FoolProofMe.com videos are:

1. I don’t have to worry about credit at my age.

2. Bad credit can’t keep me from getting a job.

3. All loan companies have the same rates.

4. All credit cards are alike.

5. The job of financial advertising is to tell the truth.

6. It’s OK to bounce a few checks.

7. It’s OK to make minimum payments on a credit card.

8. Paying late occasionally can’t hurt my credit.

9. Fine print isn’t important.

10. Young people don’t have credit scores.

To help dispel those myths, "FoolProofMe.com represents an important new financial tool to help parents educate their children," Brobeck said.

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Last month, Missouri gambling regulators essentially put the President Casino’s license up for grabs.

Now the company that owns the casino is crying foul.

Pinnacle Entertainment has asked a state appeals court in Kansas City to overturn a ruling by the Missouri Gaming Commission that said Pinnacle must reapply for a license if it hopes to move the President or replace or repair the aging Admiral Riverboat on which it sits.

That ruling, Pinnacle argues in an appeal filed Thursday, essentially revokes the President’s license — one of just 13 allowed in the state — because it ties the casino to the Admiral, which is widely expected to fail its next Coast Guard inspection in July. Pinnacle would like the court to overturn the decision and give it time to fix the President.

It is the latest step in a long discussion over what to do with the casino, which Las Vegas-based Pinnacle bought for $45 million in 2006 as part of its development of Lumi

U.S. bedmaker Simmons Co is expected to file for Chapter 11 bankruptcy protection under a plan where it will be sold to Ares Management LLC, a private-equity fund, and the Ontario Teachers’ Pension Plan, the Wall Street Journal said, citing people familiar with the matter.

Atlanta-based Simmons, which is owned by buyout firm Thomas H. Lee Partners, will likely announce the plans later on Friday, according to the paper.

Simmons, Ares Management and Ontario Teachers’ could not be immediately reached for comment by Reuters.

(Reporting by Ajay Kamalakaran in Bangalore; editing by Simon Jessop)

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Gordon Pape blames Jim Flaherty for spoiling his retirement from book writing.

He had already rattled off an average of a couple of books a year for 20 years. Sleep-Easy Investing was to be his last. Then a year later, Flaherty announced tax-free savings accounts. Pape immediately foresaw these new accounts could fill a need for every Canadian adult.

They would be the only logical choice to store emergency funds or save for major purchases in an age of rock-bottom interest rates.

For anyone expecting to have a low income in retirement, or for some expecting a higher income as a result of a move to a high-tax province, these accounts could be a better choice than registered retirement savings plans.

While they could produce the biggest results for savers decades away from retirement, they could help working couples split income, retirees stretch their savings out longer, top-up education savings and limit the tax hit on investments at the time of death.

As obvious as this was to financial experts and the economists who first pushed the idea of these accounts, Pape detected widespread ignorance.

Few among the young and old he encountered knew about the accounts in the months before they became available at the start of the year. So he vowed to change all of that.

He tackled a new book with all the rigor a man can muster in a month of writing. He explored the history of the tax-planning innovation, and every advantage and disadvantage in, what would seem to be, every possible financial circumstance.

He called the outlook for stocks right in his Tax-Free Savings Accounts, the book he published at the start of the year in the midst of a stock market meltdown. While he generally preached conservatism, he suggested it was at least feasible it would make sense to use the $5,000 annual contribution limit to invest in stocks.

"What is not unrealistic is the possibility – indeed the probability – that high-quality stocks will double in value in the two to three years following the end of a deep bear market," he wrote.

Pape made no specific recommendations, but National Bank of Canada stock has indeed nearly doubled since his book came out, and debt-laden miner Teck Resources Ltd. stock has quintupled.

He said yesterday his book attracted hundreds of questions. So he has written yet another book to answer many of them, and provide details about the different accounts and their fees at various financial institutions.

You can ask your own questions about the original book as well as his soon-to-be-published book, The Ultimate Guide to Tax-Free Savings Accounts, this Sunday. Pape will appear in the Money Matters Tent at the Word On The Street book festival at 1:30 p.m. at Queen’s Park.

A half-hour before he takes the stage, you will be able to ask wisecracking business author John Lawrence Reynolds about his latest, Bubbles, Bankers & Bailouts.

jdaw@thestar.ca

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Kraft and Cadbury CEOs are meeting their investors to seek support in a bid battle after the British confectioner asked the UK Takeover Panel to set a time limit to Kraft’s 9.8 billion pound ($16 billion) offer.

Cadbury’s Todd Stitzer and Kraft’s Irene Rosenfeld are attending the two-day Bank of America/Merrill Lynch Global Consumer and Retail Conference on Tuesday and Wednesday and meeting with investors individually or in small groups.

“Both are speaking to their investors today, but they are not expected to meet each other,” one source with knowledge of the situation said.

Kraft is keen to talk to Cadbury’s management about the cash and shares bid it launched two weeks ago, but Cadbury’s has dismissed the offer as undervaluing the world’s second-largest confectionary group.

Cadbury shares closed up 0.1 percent at 788-1/2 pence on Tuesday compared with Kraft’s bid, which currently values Cadbury at 718p. Kraft shares were off 1.3 percent at $26.41 by 1540 GMT.

On Monday, Cadbury contacted the UK Takeover Panel to send a “put up or shut up” request to Kraft, under which the U.S. food group will be asked to make a formal bid within a set timetable or walk away for six months, sources close to the matter said.

The sources said the Takeover Panel was likely to give a ruling this week and expected it to give Kraft some four to eight weeks to make its formal offer. They added that this was likely to be toward the longer timeframe as the bid has only been made public for two weeks.

Bidders normally wait for as long as possible before making a formal bid. When Heineken and Carlsberg won a joint bid for Britain’s last big brewer Scottish & Newcastle in 2008, the Takeover Panel gave the bidders five weeks to come up with a formal offer after a battle that had already lasted two months.

The speed of the “put up or shut up” request surprised the market, but the sources said it reflected the lack of a white knight bidder to deflect Kraft’s approach. It also reflects Cadbury’s desire to pressure Kraft on its financing for the bid.

“Kraft does not have unlimited firepower but can probably manage 850-860p, but it would come under pressure if Kraft shares start to fall,” said one banking source.

Analysts say Kraft will need a bid of 850-900p to win Cadbury and not lose investment grade rating on its debt, and could increase its annual cost saving target of $625 million to help make the deal work financially.

Kraft needs to secure financing for an offer before presenting it to Cadbury, but the sources say Kraft should have little problem in doing so. Kraft is offering 40 percent of the bid price, or 300p, in cash and the rest in new Kraft shares.

($1=.6121 Pound)

(Reporting by David Jones; Editing by Hans Peters and Lin Noueihed)

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Every time Paul McKee stands up to pitch his big plan for north St. Louis, he points to another project 35 miles out west: WingHaven.

It is the prettiest feather in McEagle Properties’ cap. A Forest Park-sized complex of new homes, stores and office buildings. Exhibit A that he can do what he’s promising.

"I am very, very proud of WingHaven," McKee says.

What was once a poultry research farm on the fringe of St. Charles County today holds about 2,400 houses. It is home to the headquarters of MasterCard’s Global Technology Division. There’s a Jack Nicklaus-designed golf course. Walking trails. A new school.

But 10 years in, WingHaven has had its challenges, too.

While homes sold quickly and MasterCard gave a spark, there’s still a lot of land for commercial development — at least 80 acres for office buildings sit empty. And many small stores have struggled, pointing to some of the challenges that come with the kind of transformative development McEagle is proposing for north St. Louis.

The $750 million development in O’Fallon, Mo., is almost as large as NorthSide in acreage but dwarfed by the new proposal’s vision for jobs and new homes. WingHaven has become McEagle’s banner project, and launched McKee, the co-founder of Paric Corp., into the elite of local developers.

Since WingHaven began, he has become renowned for his political connections, helped win a hard-fought competition to build NorthPark in St. Louis County and been a key player in the region’s air cargo talks with China.

QUICK SUCCESS

Nestled in a fast-growing corridor along Highway 40 (Interstate 64), new homes at WingHaven sold fast. When they went on sale in 1999, 550 were snapped up in a week, McKee has said, and the residential land was pretty much built out in five years.

Those homes came in a wide range of prices — from $100,000 town houses to million-dollar mansions — part of a conscious decision by McEagle and the home builders it partnered with to create a mix of neighborhoods and make them, at least by outer-suburban standards, fairly walkable.

"It blends well that way," said Tom Shepherd, who bought early and is now president of the homeowners association. "You’ve got everything here, and that makes us a little different."

No one would confuse WingHaven with a city neighborhood. It has cul-de-sacs and golf course views. People leave their garage doors open all day and jog along streets lined with white fencing and swaths of crisply mown grass.

McKee has said repeatedly he does not want to re-create WingHaven in north St. Louis. His plan there is more urban, denser, and it will incorporate existing buildings instead of wholesale new construction.

But he also talks up job creation in WingHaven. And on that front, the record is a bit more mixed.

In 1997, when O’Fallon officials approved WingHaven, the projections were for 15,000 new jobs.

No one’s sure exactly how many people work there today. Estimates run between 6,000 and 9,000. After MasterCard, which O’Fallon officials say has 1,700 people, the next biggest employers are Paric and Nordyne Inc., a heating-and-cooling equipment maker with about 160 workers. There are lots of banks and medical offices and a branch of St. Luke’s Hospital, but relatively few midsize businesses.

That’s a challenge, said Greg Prestemon, president of the Economic Development Center of St. Charles County.

"A vibrant local economy is going to have the five- and 10- and 20-person businesses that start growing at a fast pace," he said. "That’s the tricky piece for any development — getting those business that grow."

To be sure, MasterCard was a big win. McKee — with the help of at least $40 million in state subsidies — lured the credit card firm to WingHaven from Maryland Heights allstate insurance company. And it has grown since.

But MasterCard-sized projects are rare. And McEagle lost out on one in 2002, when CitiMortgage chose a site elsewhere in O’Fallon for its new headquarters.

Indeed, McEagle may have been early in to southern O’Fallon, but lots of other developers are there now, too, erecting office parks and shopping centers along Highway 40 out to Lake Saint Louis. There’s plenty of competition.

"A lot of stuff has happened around WingHaven to make it, from a retail standpoint, much more challenging than you would have thought 10 years ago," Prestemon said.

A 77-acre site McEagle owns just south of Highway 40 has seen several shopping center plans fall through; now the plan is to build a hockey arena there. And a market study commissioned this spring by O’Fallon found that WingHaven lacks any strong anchors to draw shoppers in.

That has hurt some of the small retailers who did move to WingHaven.

STRUGGLES OF RETAIL

Lakeside Shoppes, a plaza next to MasterCard, holds a lot of empty storefronts. A sign in one window declares that a children’s store has "Moved to the Meadows," a big new shopping center in Lake Saint Louis. A pet supply store is set to close this weekend.

"It’s just really hard for businesses to make it there," said Janine Rieger, who co-owned a backyard bird equipment store at Lakeside for three years before moving to Chesterfield. "We’d have days when zero customers would come in."

Other retailers say business is OK, and McKee points to the rough economy, which is hurting stores everywhere.

"Retail’s the worst part of our economy right now," he said.

Some stores have formed a merchants association to remind WingHaven residents of what they have in the neighborhood.

"We’re trying to remind people that there’s a lot of independently owned businesses here, and they’re good for the community," said Jan Stanczak, who moved her travel agency from Westport five years ago. "This is what it’s all about."

Nowhere was that sense of community supposed to be stronger than the Boardwalk, a two-block shopping district patterned on an older town center.

At one time, it had a grocery, a dry cleaner, a pizza shop and a hair salon. They’re all gone now. "For Lease" signs hang in empty windows.

"I probably wouldn’t do another Boardwalk like that," McKee said.

There are still two restaurants, a dentist and an Edward Jones office. A St. Charles County Library branch holds down one corner. But the Boardwalk is quiet. And getting quieter.

One Sunday afternoon last month, a few young kids rode their bikes to Deter’s Frozen Custard. They went in, ordered from the teenagers working the counter and ate at tables in the store. It was like an advertisement for the live-work-play community McKee talks about building.

Last week, Deter’s closed. It’s moving.

There just wasn’t enough foot traffic to support the place, especially after the grocery closed, said Doug DelGrosso, Deter’s owner for six years.

DelGrosso lives in WingHaven. So do his parents and his sisters. He loves the sense of community. And you can’t ask for a shorter commute. But as a place to run a small business, he says, it’s just too fragile.

"It sounds great," DelGrosso said. "But really most people just stop at the strip mall on their way home from work."

So that’s where he’s moving. Into an old Starbucks off Highway 94 in Weldon Spring. It has parking and a drive-through. It’ll open in March.

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SINGAPORE — The global economic crisis may have damped the appetite for most high-end goods, but one small daily luxury —gourmet tea — has been posting surprisingly strong sales, prompting some brands to consider expanding around the world.

With names such as Silver Moon, Emperor’s White Garden, Gout Russe Douchka and Sakura, Sakura, the teas reflect a wide range of exotic flavors, attracting an almost religious following among tea lovers.

While the rarest teas, such as yellow teas, can cost $2,120 for 2 no teletrack payday loan.2 pounds, gourmet teas cost 30 percent more than standard teas on average, making them an affordable luxury for many.

"There is definitely no crisis when it comes down to gourmet tea; our sales have been increasing every year by 15 to 25 percent ever since we started in 1987," said Francois-Xavier Delmas, founder and chief executive of Le Palais des Thes in Paris.

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CALGARY–The Conference Board of Canada estimates profits for the country's natural gas producers will hit a 10-year low this year.

The Ottawa-based economics think-tank said Friday the gas industry's overall profit will total just $2.3 billion this year, down 60 per cent from last year and the lowest since 1999.

It also says output by Canadian gas producers will be down five per cent in 2009 from last year's level, which was 5.2 per cent below 2007 output.

"So much has changed for the natural gas industry in just one year," said Todd Crawford, an economist with the board. "Last year, revenues more than doubled over the first six months as gas prices skyrocketed. Now, low prices and the tough credit conditions have created a perfect storm that sent drilling activity in Canada tumbling this year. "

While lower natural gas prices are a benefit to consumers who will heat their homes this winter or rely on electricity produced from gas-fired generation stations, it's not certain whether all the benefits of lower prices will be passed on to gas users.

That's because many utilities and distributors have long-term supply contracts that lock them in to paying higher prices than the current spot price.

The other fallout from lower prices is that it weakens the financial state of the country's gas producers, which account for a big chunk of drilling activity in Alberta, in particular.

In its report, the Conference Board said it expects gas-sector profits will begin to grow again in 2010.

The report comes a day after the National Energy Board said it's expecting Canada's natural gas market to tighten over the next two years.

In a report Thursday, the federal energy regulator said the current downturn in Canadian natural gas drilling will put a “significant dent" in supplies between this year and 2011.

Natural gas prices have tumbled from a high of US$13 per 1,000 cubic feet in July 2008 to below US$2 per 1,000 cubic feet earlier this month, prompting many energy companies to rein in their drilling.

Prices have since rebounded somewhat, but still languish well below the levels many companies need to make their activities economically viable.

Less than half the number of rigs were working in Canada this week compared to a year go.

According to the Canadian Association of Oilwell Drilling Contractors, there were 193 rigs active the week of Sept. 15, compared to 410 at the same time of 2008.

Production from new and existing conventional natural gas wells, which represent a big portion of North American supply, is expected to decline.

But unconventional activity in tough-to-access tight gas and shale gas reservoirs is expected to continue at modest levels into next year, as the industry hones its drilling and fracturing technology.

Overall deliverability – the ability to produce gas from new and existing wells – is expected to decline by 17 per cent by 2011.

The recession has eaten away at demand from natural gas, namely from industrial users who use the commodity for electrical generation.

However, Canadian demand is expected to rise six per cent between now and 2011, with the biggest increase coming from Alberta oilsands developers.

Natural gas is used to generate power and create steam for many oilsands projects.

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DETROIT — Chrysler Group LLC is getting back into the leasing business in an effort to boost sales, but don’t expect a return to the inexpensive lease deals of the past.

The automaker announced in a statement Wednesday that it will resume leasing for all 2010 Chrysler, Dodge and Jeep models starting today, and it will offer some special deals on selected vehicles through Sept. 30.

Chrysler brand CEO Peter Fong said in the statement that leases will give more options to consumers and will be competitive with the U.S. auto market personal loans for people with bad credit. The leases will be underwritten by Chrysler’s new preferred lender, GMAC Financial Services.

But the market isn’t as competitive as it once was. As recently as last summer, automakers were using cheap lease deals to clear dealer lots of unwanted cars and trucks.

But now most automakers have cut factory production to match lower sales, and most have record low inventories.

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