Ettinger, now an emerita senior outreach specialist at the Center on Education and Work (CEW) at the University of Wisconsin-Madison, also spoke with others facing this significant transition in their lives and found that many of them had become confused over how they should prepare. The available literature on retirement planning, which focuses mostly on money and medical concerns, doesn’t cover the full range of issues someone approaching retirement should consider, she says. So she hatched the idea of creating a course that helps people address the pressing question “What am I going to do with the rest of my life?”

As result, CEW recently launched “Planning for Retirement: Exploring Your Career and Leisure Options,” an online, independent-study course using the university’s Learn@UW website.

According to the stereotypical view, retirement involves ceasing to work and going off, for example, to travel and visit the grandkids. Today, however, baby boomers reaching that stage in their lives have more options, Ettinger says. And they don’t necessarily stop working.

“People are appreciating the fact that careers go on, sometimes until the very end of their lives,” she says.

As she approached retirement, Ettinger says, “I thought about working in a whole new field, but realized I would be happiest taking the parts I loved of the job that I was already doing and focusing on those aspects.”

While she continues to work at CEW, she adds, “I’m working differently now.”

Ettinger, who has designed and taught career-related courses that are delivered online, created a retirement-planning course that can assist individuals regardless of what type of work they do or where they reside. She says the program is best suited for individuals who are interested in self-study and reflection and are sufficiently comfortable working online.

The structured program, with a series of 18 units, guides individuals through the retirement-planning process and helps them address such issues as:

• How much should you work, or should you work at all?
• What are your interests, values, and skills? Which of these do you want to pursue?
• Do you want to do something different from what you’ve done before? Do more of what you’ve already done? Work in the same field in a different way?
• How will you go about networking, transitioning, and re-balancing?

Course topics include exploring your personality characteristics, work values and skills, decision-making style, marketing yourself, considering external factors and accessing alternative sources of career information. The program includes two personal career-counseling sessions, by phone or in person, with a qualified career facilitator.

“The key is how people take what they love into the future,” Ettinger says. “How do you leave what you’ve been doing and find something that’s equally as satisfying or even more so?”

Participants may join the course at any time, and will have six months to finish. During the pilot study in developing the course, Ettinger found that participants varied in their needs for engagement and guidance, so the course is designed to be flexible.

Each registrant is assigned to an instructor, who responds to assignments and online postings. The Discussion Board on the Learn@UW site provides an online place to interact with the instructor and other participants. Participants also may communicate privately with the instructor via email.

Those who complete the course will be able to continue exchanging thoughts and experiences through an alumni discussion group or blog.

Ettinger hopes that each person who takes the course ultimately discovers that kernel of self-information that proves invaluable heading into this phase of life.

Details about “Planning for Retirement: Exploring Your Career and Leisure Options,” including registration information, is available online.

Several executives are recommending that lawmakers make changes that would ensure income from savings lasts through retirement.

Robert L. Reynolds, the president and chief executive officer of Putnam Investments, said defined contribution plans, specifically 401(k)s, need to be improved so that their income stream does not run out too early. People should be able to put a portion of their 401(k) assets in annuities to ensure lifetime income, he said.

“The industry has done a good job of helping people accumulate money,” Reynolds said. “Now we need to do a better job of helping people manage their 401(k) plans when they reach retirement.”

Robert Clark, a professor of economics and management at North Carolina State’s college of management, said Washington needs to add automatic annuitization to 401(k) plans in lieu of lump-sum payments. However, “we have to be careful about creating a one-size-fits-all solution,” he said.
In addition to annuities, Aimee DeCamillo, the head of personal retirement solutions at Bank of America Merrill Lynch Retirement Services, said other products could help provide a steady income stream in retirement, including laddered bonds.

Putnam has projected that annuity assets will reach $5.5 trillion by 2020. There were $1.7 trillion as of Sept. 30, according to the Insured Retirement Institute.

Beyond traditional annuities, Reynolds said there is a need for a federally insured product for investors to place 401(k) assets to “ensure that they have assets that will last their lifetime.”

“I think this could be in an annuity or an annuitylike structure, but nothing is certain,” he said. “This is where the work has to be done.”

Changes in retirement savings plans over the past three years have proven beneficial, Reynolds said.

The Pension Protection Act of 2006 required employers to enroll all employees in 401(k) plans, though employees may opt out. That drew more assets into the system, as did the growth of target-date funds.

But more attention needs to be paid to what happens once workers retire, industry officials and other say.

A study in June by Bank of America Merrill Lynch found that 45% of retirees and pre-retirees between 55 and 75 years old had not calculated how long their assets will last.

“Most people have unrealistic expectations,” said Katherine Roy, a strategy and innovation executive for Bank of America Merrill Lynch Retirement Services. “It is somewhat of a train wreck. People need to recalibrate and understand what they will face in retirement.”

Other research has netted similar results. According to research by the Employee Benefits Research Institute, over 70% of people entering retirement haven’t done a budget or a calculation about how they will live in retirement.

Dallas Salisbury, the CEO of the Employee Benefits Research Institute, said he expects little retirement reform from Washington before 2012 or 2013, “so that puts the onus on the individual” in the meantime.

Companies have already started offering products that do not require new laws.

SunTrust Banks Inc. announced Thursday it has added an account insured by the Federal Deposit Insurance Corp. as an investment option for companies who choose SunTrust as their institutional 401(k) provider. It is an interest-earning account that offers current income while preserving principal.

In July, Putnam Investments, which had $13.6 billion of defined contribution assets on Sept. 30, launched the RetirementReady Funds, a suite of target-date funds that integrate target absolute return strategies with traditional relative return mutual funds.

The funds are designed to lower volatility during accumulation and pursue a higher level of income for investors in retirement. Reynolds said these funds have “half to a third” of the volatility of typical target-date funds. He said he expects these funds to add assets as retirement plans are augmented.

Analysts said companies like Putnam are looking to create a retirement system that enables them to retain customers — and their assets — after retirement. Burton Greenwald of BJ Greenwald Associates said that a “staggering” percentage of retirees receive their 401(k) assets in “one lump sum” when they retire. “This is bad news for the investment companies and worse news for investors,” he said.

Historically, annuities have not been used the right way for retirement, said Tim Clift, the chief investment officer of FundQuest Inc., a Boston unit of BNP Paribas. He said the products need to become less expensive for plan sponsors to begin considering them as part of a retirement plan. FundQuest plans to roll out a low-cost, fee-based “annuity-type” product, said David Robinson, its managing director of national accounts.

Reynolds is optimistic policymakers will start tackling retirement savings issues sooner rather than later.

“2010 is going to be the year we debate these issues on a national scale,” Reynolds said. “Once the health-care debate is behind us, retirement income security will be the issue for 2010. … Annuities need to become more transparent, less complicated and less costly to become part of the long-term solution.”

Recognition of losses in 529 plans

Liquidation of a 529 plan account by the owner of the account (usually a parent or grandparent) can result in a taxable loss if investment losses have reduced the value of the account below the basis in the account (original contributions less any prior withdrawals of contributions).

A loss can be deducted on Schedule A subject to the 2% of AGI limit and can only be taken if an entire account is liquidated (but the owner can have other 529 plan accounts that do not have to be liquidated).  The owner can reinvest the proceeds in another 529 plan account but has to wait 60 days before doing so.  Note also that losses from one 529 plan account that is liquidated must be netted with any income from any other 529 plans that are liquidated in that tax year before any losses are allowed.

One major drawback is that the losses are subject to 2% of AGI.  Also individuals subject to AMT will not receive any tax benefits from the loss.  If the original contributions were deductible for state tax purposes, then the liquidation may result in a smaller loss for state tax purposes or perhaps trigger a state income tax liability.  Finally, since a transfer to a 529 plan is deemed a completed gift, if an owner wishes to re-invest in another 529 plan after 60 days, this would almost certainly be viewed as another gift. Depending upon the owner’s circumstances and the amounts involved, this may or may not have gift tax consequences that need to be considered.  See IRS ANN. 2008-17.Recognition of losses in IRA accounts

Liquidation of losses in traditional IRA (with non-deductible contributions) or Roth IRA accounts can also result in losses if the basis in the accounts is less than the current value and the accounts are liquidated.  Any losses are deductible on Schedule A subject to 2% of AGI.  A taxpayer cannot just liquidate one IRA account and take losses, rather all amounts in all accounts of the same type (i.e. all traditional IRA accounts or all Roth IRA accounts) must be distributed before any losses are allowed (this differs from 529 plan accounts where each account is treated independently).  Annual contribution limits on IRAs are far less generous than for 529 plans, so their account balances cannot be rebuilt as quickly.