Archive for July, 2011
At its heart, the idea of planning for retirement is very straightforward. Like squirrels in the autumn, hopeful future retirees stash away some of the nuts they gather each day so they’ll be able to eat when the gathering season is past. Unfortunately, the problem is more complicated for us humans. Squirrels only need their stash to last for a few cold months of winter, while retirees depend on their stash for thirty, forty, or even fifty years. This difference can make the problem seem overwhelming, and can leave people frozen with indecision.
To make matters worse, we’re inundated with conflicting advice about how we should invest our savings to best accomplish our retirement goals. Should we hire an investment advisor? Should we use index funds or actively managed funds? What funds should we buy? How do we build the very best portfolio to get the highest returns?
While these questions are valid, they become inconsequential if the apprehension they produce causes us to do nothing. What matters most is whether we save enough money for a long enough period of time and whether we make reasonably good investment choices. Notice I said reasonably good investment choices. Too many people feel that successful financial planning is about scoring frequent Jim Cramer style “booya” home-runs on brilliant stock picks. The facts just don’t support this oft repeated lore. What really matters is that you have a good plan and stick to it. As a result, the focus of this guide is not on investing, but rather, it’s about how to get started in building a solid retirement plan.
When can I get off the treadmill?
To determine how much you need to retire, you must first decide how much you want to spend in retirement. What standard of living do you desire in retirement and how much will it cost to fund that lifestyle? This is by far the most important question in retirement planning.
Fundamentally, this is a question about tradeoffs. How much should we sacrifice during our working years, and for how long, so we can be happy during those golden retirement years. The tradeoffs get even more complicated when you consider other competing factors such as children’s education, the care of elderly parents, and concerns about one’s own health. Once again, it’s easy to get bogged down in the complexity of it all, but like any decision involving trade-offs, it becomes much simpler if we can understand what the costs and benefits of our various options are.
This is where a retirement planning tool can help. A retirement calculator can help you experiment with different levels of savings, different retirement ages, and different levels of retirement spending. By using a retirement calculator to run retirement “experiments”, you’ll be able to see the costs and benefits of choosing among the various paths. Retirement planning is deeply personal, and only you can decide what tradeoffs make sense for you and your family.
I’m ready to calculate. Now what?
Retirement calculators can provide you with information to help you make choices about various retirement options. But remember, these tools are not “smart” and they can’t weigh the options for you. Their role is to assist you by arming you with the information you need to make good choices.
Most retirement planning tools ask you to provide information about expected savings, desired retirement age, and the annual expenses you plan to incur during retirement. The tools use this information, along with assumptions about inflation, taxes, and portfolio performance, to estimate the likelihood that you’ll be able to fund your expenses for the duration of your retirement.
This likelihood of success is the tool’s way of indicating how solid of a plan you’ve constructed. If the likelihood (or probability) of success is low, say below 50%, then you have a less than 50/50 chance of having enough money in retirement. On the other hand, if the probability of success is above 90%, then your plan has a very high likelihood of being able to provide income you’re seeking during retirement.
Wait a minute you say, I simply want to know if my plan works. Why can’t the tool just tell me that?
Most advanced retirement planning tools use the concept of probability to report their results. This is because most tools work by running thousands “simulations” of your retirement. In each of these simulation runs, the software plugs through all of the calculations of your retirement year-by-year to see what happens. In the runs where the simulation reaches the end of the plan and still has money to spare, the run is called a success. Runs where the money is gone before the end of the plan are called failures. The ratio of successes over failures is your plan’s overall probability of success.
Still you say, why does the planner need to make thousands of simulation runs? Why doesn’t it just do it right the first time and give me the right answer? Well, it turns out that long-range planning, such as retirement planning is not an exact science. No one knows for sure how investments are likely to perform in the future, so the best anyone can do is try to make estimates of the future. The problem with making an estimate is that it could be wrong. So instead of making just one estimate, several thousand estimates are made. Most planners do this by considering how investments have performed in the past and then using this information to make guesses at what might happen in the future as your retirement plan unfolds. They do this over and over again and record the results of each “run”. Then they summarize the results by showing the overall probability of success for the plan.
Ok, I got it, let’s start simulating my retirement
Once you have a basic understanding of what a retirement planning tool does and how to interpret its output, you’re well on the way to being able to make use of this powerful helper. Although there are several good tools in this space, for the rest of this article, we’re going to focus on one particular tool that’s freely available on the Internet and runs inside your web browser.
The tool is called the flexibleRetirementPlanner. I created this tool for myself as I was evaluating my own retirement plan. I found that the other tools out there were either too simple, or didn’t shed enough light on how they worked for me to trust them. For this reason, I also published the source-code of this tool (see the website) so anyone can look at how the planner really computes its results. You’ll be glad to know that the tool is free to use and you don’t need to sign up for anything or give out any personal information to use it. Also, all the information that you enter into the planner stays on your own computer and nothing is transmitted back out onto the Internet, so you can be sure your information will stay private.
Follow the steps below to set up the retirement planner to evaluate your retirement plan’s chances for success.
1) Current Age - Enter your current age
2) Retirement Age - Enter your planned retirement age. This is the age when contributions will stop and you’ll begin withdrawing from your savings.
3) For now, leave the Life Expectancy, Inflation, and Tax rate info at their default values.
4) Current Taxable Investments - Enter the current total value of all invested assets that are NOT in a retirement account.
5) Current Tax Deferred Investments - Enter the current total value of all tax deferred investment accounts such as those in 401k or IRA accounts.
6) Current Tax Free Investments - Enter the total value of all tax free investment accounts such as Roth IRAs or Roth 401ks.
7) Leave the Min IRA Withdrawal age at its default value
The next three fields are where you enter your expected annual savings. If you’re not sure what to put here, start out by entering 15% of your annual household income in the “Tax Deferred Annual Savings” field. You can tweak this later. Also, please note that like most other values used in the calculator, the amounts you enter for annual retirement savings are automatically increased each year to keep up with inflation.
Taxable Annual Savings - Enter the amount that you plan to save each year in taxable accounts (not IRAs or 401ks).
9) Tax Deferred Annual Savings - Enter the amount that you plan to save each year in traditional IRAs and 401k accounts.
10) Tax Free Annual Savings - Enter the amount that you plan to save each year in Roth IRAs and Roth 401ks
11) Investing Style - Leave this input at its default value for now. Later you might want to experiment with other values for this field. After you’re done evaluating your plan, the next step will be to learn about investing to see how you can create an investment portfolio that will help you meet the goals of your plan.
12) Annual Retirement Income - Enter the amount of income you expect to receive each year while you’re retired. This should include social security and any pension income that you expect to receive. Please note that the value you enter in this field is assumed to increase each year to keep up with inflation. If you have a pension with fixed payments, use the “additional inputs” tab to enter it as a pension with “no cola” or no cost of living adjustment.
13) Retirement Income Start Age - Enter the age you expect to start receiving the income amount that you entered in item 12 above.
14) Annual Retirement Spending - Enter an estimate of how much you plan to spend in each year of your retirement. The amount you enter should be in today’s dollars. It will be automatically adjusted each year to keep up with inflation. If you don’t have any idea of what to put here, some suggest using 85% of your pre-retirement spending as a rough guide. This is one input that deserves a lot of thought in order to make as realistic of a guess as possible.
15) Spending Policy - Leave this value at its default setting for now. After you’ve experimented with the planner for a while, you may want to read the planner documentation about spending policies to learn more about what this means.
Alright already, now I’m really ready. Show me the money!
Once you’ve completed the steps above, you’re ready to run the planner. Click on the “Run Simulation” button and the software will run through your retirement 10,000 times to estimate the likelihood that you’ll have enough money to fund your retirement.
Once the computations are complete, the first thing to notice is the “Probability of Success”. If this value is above 90%, a green light is shown next to the value. If you’ve estimated all the inputs correctly and your plan has a probability of success greater than 90%, your plan is in great shape. If your probability of success is between 75% and 90%, the stoplight will show yellow. This is also a good probability of success, though this also means that your plan may have a 10-25% chance of failing. Finally, if your plan’s probability of success is less than 75%, that means you have at least a one in four chance of running out of money during your retirement.
Next, you may want to look at some of the other simulation outputs to further evaluate your plan. The ending portfolio balance shows how much money (in today’s dollars) you’ll have in savings at the end of your plan. Finally, you can select the “Detailed Output” tab to see the year-by-year information for your plan.
Once you get an idea of how to run the planner and how to interpret the results, you can try different scenarios to see what the results are. For example, try increasing your annual savings a bit to see how that affects your plan’s chances for success. Also, if you have a very high probability of success, try decreasing your retirement age little-by-little to see how that affects the results. The possibilities for experimentation are endless, but don’t get discouraged by this. You’re in command of the decision-making process, and now you’re armed with a tool that can help you make better choices.
After experimenting with the planner for a while, you should start to feel more in control of your personal retirement destiny. You’ll have a better understanding of the trade-offs in front of you, and you should be in a better position to make good choices about how much to save and how long you’ll need to keep working. If you’re new to financial planning and investing, this is a great time to dive in and learn more. Just don’t delay. The one thing this adventure in retirement planning should have shown you is that time is your most precious resource.
http://peachtreesettlements.org/
July 27 2011 | financial | No Comments »
One of the most important contributing factors for any business to find success is an organized and streamlined budgeting and planning process. CFOs and Senior Financial Executives need to be on top of the company finances at all times. This can include everything from expense budgeting, consolidation, cash flow reporting, and revenue planning. If a business wants to be successful in today's competitive atmosphere, it needs to implement a modern budgeting and planning solution. Using cumbersome, error-prone Excel spreadsheets for budgeting and forecasting is a thing of the past. It's important to recognize if your tools and technologies are slowing you down or are impediments to moving your company ahead.
It's time to consider a budgeting and planning method change when you find the time and effort to produce your reports exceed the time you spend analyzing the numbers. Your financial planning solution should provide you with easy answers to any type of question that you may have regarding revenue planning, expense budgeting and reporting. You should never be left worrying if you have the right numbers since the vital information that you need should be at your fingertips. If it takes too much work to get the answers that you need or you are at all skeptical about the answer and don't trust it, it's time to upgrade to a new methodology.
It's also time to make a change if your financial planning solution doesn't allow for you to foresee and plan for any changes to sales, expenses or headcount. Your planning solution should never limit your business options. A good budgeting software solution should easily outline a company's growth trajectory and allow for its users to easily see what would happen if you added some new hires, whether they were full-time, part-time, seasonal, salaried, or hourly, launched a new program or wanted to acquire or divest a business unit. The process should be simple and easy.
Financial planning solutions should make the lives of the finance team easier, not harder. Consider the amount of time that you and your co-workers spend using your planning tool. If the time it takes to figure the system out and make it work for your needs exceeds the time spent looking at and analyzing the numbers, there is clearly a problem. It can be extremely cumbersome to write mathematical formulations and lay out report presentations. After all, there are technology solutions to do that for you. You are being paid to analyze the numbers, and there are much simpler solutions that allow for you to spend more time doing the work that should be done, instead of worrying about setting up a spreadsheet.
Today's budgeting and planning solutions are much simpler and easier to use, and it's time to take advantage of everything that they have to offer. It's easy to get stuck in the budgeting with spreadsheets dark ages, since that might be where you are most comfortable. However, it's imperative to incorporate modern technology into your budgeting strategy. It's the only way to remain relevant and competitive.
About the Author - John Orlando
Centage Corporation provides companies with powerful yet easy-to-use budgeting and forecasting software to enable the most confident, informed decision-making. John Orlando is the Executive Vice President & CFO, John has over 25 years experience in finance, accounting and administration. He has extensive experience working with both high growth Fortune 500 companies and start-up business. Prior to Centage, John served as Group Director of Planning & Analysis at WearGuard (subsidiary of ARAMARK) where he was instrumental in driving profitability via restructuring, cost containment and margin improvement initiatives. For more information about Centage Corporation, please visit: http://centage.com/.
http://structuredsettlementexpert.net/
July 27 2011 | finances | No Comments »
I fully realize if it sounds too good to be true, it probably is and There Ain’t No Such Thing As A Free Lunch (TANSTAAFL) immediately jumped into your head when you read the title of this article. However, if you are 62 or over, you may have just found the goose that laid the golden egg.
A reverse mortgage is exactly what the name implies. Rather than you paying a monthly sum of money to a mortgage company, a mortgage company pays you. There are three types of reverse mortgages and all have the same eligibility requirements.
You must be at least 62, live in, and own, your home and sign a contract. You must also have equity in your home and the inherent interest rate is based on what the lender is currently charging (more about this later) on non-reverse mortgages. The lender, by the way, will also have your property appraised for which you may or may not be charged.
There are no income restrictions such as those imposed by Social Security and most are tax free since they do not involve additional features such as an attached annuity. They also do not affect your social security benefits nor your Medicare entitlements.
This article discusses only those mortgages without additional features. Should you wish to know more about reverse mortgages with additional features, consult with a competent tax professional to reduce the chances of running afoul of tax laws.
The FTC’s website, http://www.ftc.gov/bcp/online/pubs/homes/rms.htm has an excellent article on reverse mortgages but it also does not discuss mortgages with additional features. Another reason to consult with a tax professional.
This tool called reverse mortgage is actually a loan, hence an interest rate, which allows senior citizens, or as some say, the elderly, to convert part of their equity into cash without having to sell their home. Because it is a loan “in reverse” you are receiving a monthly sum and not paying a monthly amount while you live in your home.
However, this loan must be repaid and repaid with interest should you sell, die, no longer live their as your principal residence or reach the end of the pre-selected loan period. You remain responsible to pay real estate taxes, insurance and all attendant maintenance expenses which, of course, you would have to pay with, or without, a reverse mortgage.
With this explanation, the picture becomes more focused, right? You enjoy a monthly sum, tax free and non-repayable until a date sometime in the future, while remaining in your home. As close to a win-win situation as one can get in this day and age.
It doesn’t take a rocket scientist to realize anyone who is cash poor but house rich should at least investigate this tool. However, like any other instrument involving your signature on the dotted line involving financial obligation, you must have some preliminary information.
I mentioned there are three types of reverse mortgages. The first is the single purpose reverse mortgage. These are offered by some sate and local government agencies and nonprofit organizations.
They may not be available in your area. Call your county’s Department of Senior Services. Their phone number is in the white pages under the listing for your county.
Single purpose means exactly that. The proceeds may be used for only the purpose specified by the lender and generally are only made to people with low or moderate incomes. If you call your county, be sure to ask if their reverse mortgage is a single purpose and what are the limits.
The second type of reverse mortgage is called a Home Equity Conversion Mortgage (HECM). The federal government insures these mortgages and they are backed by the Department of Housing and Urban Development (HUD). The up front costs are generally high especially if you plan on staying in your home for a short period of time but they carry no income or medical restrictions and can be used for any purpose.
HECMs also require all applicants to meet with a counselor from an independent government approved housing counseling agency. The FTC says, “The counselor must explain the loan’s costs, financial implications, and alternatives. For example, counselors should tell you about government or nonprofit programs for which you may qualify, and any single-purpose or proprietary reverse mortgages available in your area.”
An additional benefit of an HECM mortgage is the nursing home clause. Should a borrower have to move out of her home and into a nursing home or other medical facility, she has up to 12 months before the loan becomes due. This enhances financial planning.
The third type is called a proprietary reverse mortgage. These are private loans backed by the companies offering them. In other words, they are NOT government insured. Like HECMs, the upfront cost could be high for a proprietary reverse mortgage.
A reverse mortgage, cost wise, is like a non-reverse mortgage. The lender usually charges loan origination fees, closing costs, insurance premiums (for insured loans) and service fees which are all set by the lender.
Fortunately, like non-reverse mortgages, the federal Truth In Lending Act (TILA) applies to reverse mortgages. This means the lender MUST disclose the costs and terms of the reverse mortgage you are considering.
The annual percentage rate (APR) and payment terms must be prominently displayed and not in the fine print. If you choose a credit line as your loan, lenders must tell you the charges related to not only opening but using this credit account.
Another word about the interest rate since it too mirrors the non-reverse mortgage. Just as with a non-reverse mortgage, an interest rate can be fixed or variable with variable rates tied to a financial index. This means the rate will change as the index changes.
TILA forces the lender to disclose this information. TILA does not force the lender to tell you the reverse mortgage may, or may not, use up all of your equity. If a “non-recourse” clause is included in the contract, and most have them, you must be told you will not owe more than the value of your home when the loan is repaid. This is a good thing.
Of the three, the HECM is the most flexible. It lets you select the way you receive your money. For example, you can receive fixed monthly cash advances for a specified period or for as long as you live in your home. Or, if you choose, you can receive a line of credit.
A line of credit allows you to draw on the loan proceeds when you want and how much you want. The HECM allows a combination of the two choices. You can receive a monthly payment plus a line of credit.
The key is to read and understand every clause in the contract before signing and do not be afraid to ask questions about what you don’t understand. Don’t let a huge monthly payment cloud your judgment and decision making ability.
Both HUD and the FTC have toll free numbers and websites to help you in making an informed decision. HUD can be called at 1-888-466-3487 with their web address at:
http://www.hud.gov/offices/hsg/sfh/hecm/rmtopen.cfm while the FTC can be called at 1-877-382-4357 with their web address at: http://www.ftc.gov/credit
After reading the above information you may have decided the goose with the golden eggs is really a vulture waiting to pounce on your carcass. Or, you may have decided the goose’s eggs are worth your time and attention. Either way, you are now a more informed consumer.
http://lifeinsurancesettlementreport.org/
July 27 2011 | financial | No Comments »
Many folks who plan ahead for their elder years have probably considered purchasing nursing home insurance. They wish to protect their assets from the high cost of nursing home care as they choose a facility that meets their needs and demands.
But many do not realize that the first step to managed care will likely involve moving into an assisted living facility. Assisted living facilities provide a valuable service of managed care that allow the elderly person to reside in a pleasant environment surrounded with a social atmosphere of fellow residents. Will your nursing home insurance pay for care at such a facility, and how much will they pay?
Most policies do provide benefits for folks who need to enter an assisted living facility, but the payments will be much less than if residing in a skilled nursing home. The amounts can be as low as fifty to sixty percent of the amount normally paid compared to residing in a nursing home. Also, because the person does not reside in a skilled nursing facility, the policyholder may have to continue insurance payments at the same time to keep the policy active.
Note that most insurance companies will very reluctantly begin paying on your nursing home insurance policy once you move into the assisted living facility. They will require doctor’s statements that the elderly person needs the services provided by the assisted living facility. They may also require personal inspection by their own nurses to confirm the need to enter such a facility, and statements that the person has no intention of leaving for home care.
If the policyholder ever requires more intense or specialized care, and needs to move into a facility that provides such care, the policy may still only pay at the assisted living level. This means that the checks you receive will not increase even though your own costs do, and you may still need to continue making payments to keep your nursing home insurance policy active.
These intermediate care facilities are quite common in most states, and many residents may never transfer to a full-fledged skilled nursing home. Unfortunately for the layman, while the policyholder may believe from reading the policy definitions that intermediate care facilities will benefit from full activation, in practice they may not.
If the insurance company decides against your claim, you will have little choice but to continue to pay the policy, or move into a full-fledged skilled nursing facility. The state will likely not side with you, and while you can obtain legal representation, you may not come out ahead financially even if you win.
So study the policy well before purchase, and try to understand all the ramifications. Look at the different types of facilities in your particular state, and understand how each applies to the policy that you are considering purchasing. You might even ask to get in writing which facilities will be covered, using the specific descriptions as used in your state. Of course, if you retire in another state and take the policy with you, you will again be back to using general definitions of how the policy pays.
Planning ahead for your high care years represents a wise course of action, and if you decide to purchase nursing home insurance, be sure to fully understand the policy and how it will benefit you.
http://oceansweepers.com/
July 27 2011 | financial | No Comments »
If you are in your forties and you have no financial plan for your future, this article is for you. Maybe circumstances of life have kept you living paycheck to paycheck and you haven't given any thought to the future. Now is the time to make plans.
Divorce, illness, job loss and other unforeseen life events can throw you off a good financial path. When you were in your twenties maybe you didn't give too much thought to how you were going to survive once you got “old”. Your thirties went by as you married and raised a family and now, with the passing of time you realize that you do not have a financial plan for the future.
Many people still ignorantly think that they will have Social Security benefits as an income to count on. Most baby boomers who are now in their 50's know that living off of Social Security is living in poverty. You are going to need more than that to survive.
Ignorantly some people might think that they will just plan to never retire. This is not realistic. As we age there is no guarantee that your health will allow you to work the way you can now. When a serious health crisis strikes and you are not financially prepared to deal with it, you can lose all your assets.
Having health insurance isn't enough for the coverage of serious illnesses such as cancer. If you were to lose your job, you may lose your health insurance also. Not planning for these life challenges could leave you at risk for financial ruin.
No one wants to be a burden to their children when they become unable to take care of themselves, whether it is physically or financially. Someone who has worked their entire lives shouldn't find themselves at the brink of homelessness once they become unable to support themselves financially. Here are some tips on what you need to do right now in order to set a plan for your future.
Sit down and determine your net worth.
If you own a home or other property, what is the true value of it? How much of a mortgage do you still have on it? If your children are grown and out of the house, do you really need to be making payments on a home that is too big for your needs?
Consider the idea of downsizing in order to be able to have cash to use for planning for your retirement. If your home is paid off, you still need to pay for the upkeep and taxes. How long will you have an income to support living in your home?
Health issues
Look at your health and the health of your partner (if you have one). If one or both of you have struggled with health issues, expect these issues to possibly worsen as you age. Do not take for granted that you will be able to work into your 70's or 80's.
Wills
Do you have a will? If you do not, both you and your spouse need to write one. Having a will is more than deciding who will inherit your fortune. Just because you have no significant amount of an estate doesn't mean that you shouldn't have a will. A will spells out your instructions for your burial plan and division of any property you may have.
Blended families
Especially if you and your spouse have been married previously and have children from a different spouse you need to have a will to spell out your individual wishes. Protecting your spouse and your children can only be done if you make your wishes known legally.
Professional help
Find a financial planner who charges a fee for his/her services but is not selling anything to you except for advice on investment planning. Be wary of anyone who is pushing you into making an investment that sounds too good to be true. If you cannot get references from a friend, go to your bank where you hold an account and get retirement investment advice from them. Do your own research. This is about your financial future so don't jump into opportunities without checking them out fully.
Life insurance
While you are thinking about how you will support yourself during your golden years, check out how much life insurance you have. If your spouse should die before you, will there be enough money to cover funeral expenses, bills and help to support you until you die?
People who depend on their spouse for financial support can be devastated when they are left on their own before they expected to be. Although couples should plan for their financial future together, they should also plan that when one of them dies that the other one is not destitute.
It is never too late
Taking care of making a plan when you are younger is easier. You will have more time to set aside money every month without it being a burden. When you have ignored the impending future, you will need to scramble in order to come up with a workable plan.
It is necessary to do. You have ignored it for long enough. Life offers no guarantees and the ones who plan for the future are the ones who can enjoy aging without worry about finances.
http://refinancelifeinsurance.com/
July 27 2011 | investing | No Comments »
September 1, 2006, was my first day of retirement. After sixty-four and a half years I was able to retire from the working world. Over forty-five years of employment and I am able to enjoy the leisure life of not having to work. The road was long and sometimes bumpy. My road may be entirely different than the road young workers will have to take to reach the age when they can retire. This is an article about my road. My experience may help some young person avoid the pitfalls and mistakes I made on my road to retirement.
To begin with I graduated from high school in June of 1960. I thought high school was enough and elected to search for employment after graduation instead of continuing with education. This was my first mistake. Back in 1960 just a high school education was the minimum amount of education you needed. Today the minimum education is much higher. You will have many years to be able to work so get as much education as possible. Higher education opens many doors that are slammed shut with just a high school diploma.
One thing I did right was get the credit situation resolved. As soon as I started to work I applied for a credit account with a major department store and a gas company. They both awarded me a small account. This was before Visa and Master Card. To date I still have a stellar credit rating. One must remember to stay way below the allowed credit limit. Also, a monthly payment is very important. The preferred amount is the balance due, not the minimum amount allowed. Credit card interest is a gigantic black hole and too many young credit card holders fall into it and spend years climbing out. My credit rating has allowed me to purchase houses, cars, and many toys the American consumer enjoys.
I should have done more planning. It is difficult to think about retirement when you are young. I did not set money aside for retirement. I was planning on retiring with a company pension program, Social Security and a savings account. Many young people I talk to state that they have not made any retirement plans. They are concerned about paying daily bills and setting nothing aside. The forty years of working goes faster than you think. And before you know it your planning years are over and one must accept the conditions of the time.
I am sixty-eight and it will be four years in September since I retired. I have lived and worked in Denver Colorado most of my life. Many my age was under the dream that they could work for an employer and they would have a large retirement fund. Today that is usually a dream. Many companies are eliminating this benefit. My last employer froze their pension program in 2001. This means it is just a matter of time when the company can be free of all obligations from this pension program. My pension payment is very small from this company, much less than I anticipated when I was young. I must say I did not realize I was saving for retirement. I was fortunate to have real estate investment appreciate substantially. Selling this property allowed me to retire. I guess I was investing for retirement and didn’t realize it.
Since my wife and I retired our budget has basically stayed the same. The biggest lifestyle change we made was paying off all of our credit obligations. We do not intend to buy anything on credit again. Credit worked fine when working, however, credit does not have a place in our retired lifestyle. All credit cards are paid in full each month.
Retirement finances haven’t gone exactly as planned. When I retired I expected to enjoy income from interest, dividends and capital gains. With the recession these sources have basically dried up. Fortunately I did not have all my eggs in one basket. We didn’t plan on losing a substantial amount in investments and the home value decrease. We are still able to enjoy retirement but not as much as anticipated.
http://investmentarbitrationreporter.org/
July 11 2011 | retirement | No Comments »
Let’s say you are getting a bit older in your years, you’ve been saving some money in retirement, but haven’t been paying too much attention to it. The big day finally comes around and you get the gold watch, a retirement party, and the like. You get to go home and spend more time with your family, and do all of the fund grandparent things such as spoiling your children’s children. Soon after you retire you take a look at your finances, and begin to realize that you won’t entirely have enough money to make it the rest of your life without some cutbacks. What do you do?
One thing you should consider is looking for a different job. Find one that’s not as strenuous as the one you had, even if it doesn’t pay quite as much. If you can find something that pays comparative to your previous job, you can prevent dipping into your IRA for a few years. This will also enable you to save more money while you still have the ability to work. If you can find a job that gives you health insurance, this is definitely a plus for the job, and you can postpone taking social security, so that when you do take it in a couple of years, you can get bigger payments from them.
If for whatever reason you can’t work a full time job or it would be very difficult to do so, try to at least work on a part-time basis. It might reduce your social security income if you work while retirement, but it’s still better than not working at all. In essence, if you cannot afford to retire fully, you need to find a way to keep working, even if it is on a part time basis.
Fortunately, there are a lot of advantages to working after you retire. You have the ability to get out of your home more and have a reason to get up in the morning. Most people retire without having something to retire to, and find themselves bored rather quickly. If you keep moving and working, you are more likely to live longer and have better health because you get more exercise.
If for whatever reason you are unable to work past your retirement (this does not mean unwilling) you will have to find a way to reduce your expenses. Perhaps sell your home and move to an affordable apartment, cut out any vacations you have planning. Just cut anywhere you can.
http://governmentretirement.com/
July 11 2011 | financial | No Comments »
America is getting older. People over age sixty-five represented 12.9% of the U.S. population in 2009 according to the Administration on Aging, and that number is expected to increase dramatically. Seniors will make up nineteen percent of the population by 2030. While these dramatic changes are coming, they don’t tell the whole story. An increase in the senior portion of our population affects the lives of many. At some point in their lives, most adults will need to care for an elderly member of their family. Planning ahead is becoming even more important as people live longer and the rates of Alzheimer’s and Dementia go up. Although it is a difficult topic to broach, what to do when parents aren’t able to make important health, financial, or day-to-day decisions for themselves is a topic that every adult should consider.
The New York Times recently published an article about financial problems caused by Alzheimer’s. According to the article, one of the first things that a senior with a progressing case of Alzheimer’s can lose control over is managing financial affairs. As a result, an Alzheimer’s patient can face financial ruin due to simple mismanagement of financial affairs, or even worse, be victimized by a con artist who takes their hard-earned money and runs. The adult child may live in another city or state, further complicating matters. In addition, it makes take some time before the parent’s mental decline is uncovered from the initial onset of the disease. Many of these negative scenarios can be avoided if the senior has a trusted advisor to consult with.
The key is to get involved as early as possible. Even if your parent has always been an expert at financial planning, diseases like Alzheimer’s and Dementia can quickly change things. Here are some tips on preventing a bad situation:
1. Talk to your parent(s). Find out if any plans have been made for how to manage their affairs if they become disabled or mentally incompetent. If not, help them set up a plan (see items #2 and #3 below).
2. Ask your parent(s) to prepare the legal documents required to communicate their end of life wishes. First of all, each parent should have a will. A will helps survivors distribute the parent’s assets after death. In addition, each parent should have a living will, which specifies end of life health care wishes. Getting these directions in writing allows a parent to communicate and detail their preferences which can reduce the stress of decision making for family members.
3. Discuss who can help with the creation of a power of attorney and financial decision making. A power of attorney is a document where the principal (the aging parent) authorizes an agent (another person) to act on their behalf in a variety of financial situations. A power of attorney document will remain in effect even if the agent becomes incompetent if it is made durable. Make certain that the appointed agent is trustworthy and has the parent’s best interests at heart. If the agent is not trustworthy, it’s like “a license to steal” according to Mark Lachs, MD (from his article about cognitive problems and elder abuse).
4. Of critical importance, stay in touch with your parents. You should treat them like children, but if their general well-being and financial health are important to you, stay involved so you can assist if things start to go wrong. The sooner you know about an issue, the sooner you can help fix it.
5. You can create legal documents for your parents, such as a living will or power of attorney, online at companies like Rocket Lawyer. The sooner you create important estate planning documents for your loved ones, the better.
http://climaat.net/
July 11 2011 | family | No Comments »
You start investing for retirement the first time you buy shares in a mutual fund, stock, a real estate property or other investment regardless of how old you are. Investing for retirement simply means investing your money in such a way so that you get the best return possible over the long term, so that when you do retire, the money that you need to live on will be there.
Government programs such as Social Security, (as well as many company pension and retirement plans), simply will not provide enough money for you (and your spouse, if married) to live on once retired. It’s important to start now to make plans and set in motion those investment strategies that will provide the means for you to live comfortably and without financial fear and anxiety once you have retired.
Retirement Goal: To have enough passive income from all sources, including social security, employer and retirement pensions, as well as your own investments, so that you do not have to keep working, (unless, of course, you want to!)
When you retire, you want to have the financial means to enjoy those things you have always wanted to do, but did not have the time for while working. What would those things be for you? Painting? Travel? Restoring old cars? Learning a musical instrument? Continuing your education? Or perhaps even starting a second or new career or business? Live your life fully, now, each day, but also plan ahead and invest wisely so that when you do retire, financial worries and concerns will not be an unwelcome part of your life experience.
Retirement Planning
Retirement planning is an essential part of personal financial planning. The sooner you take the time to think through and implement your best investment strategy for retirement, the better off you will be, and the more time you will have to allow your retirement funds to grow. In order for you to plan effectively for your retirement, and invest accordingly, you will need to make the following determinations:
1. How long will it be before I plan on retiring?
2. How much money will I need to live on (how much money will my spouse and I need), in order to maintain my (our) current standard-of-living once I retire? (As a general rule of thumb, you will need approximately 70% of your current annual working salary in order to live at, or reasonably close to, your current standard-of-living, when you retire. 70% is not written in stone, but it will give you a number to work with. Some people can live comfortably on less, some need more.)
3. How much money will I need to save and invest, starting now, and at what interest rate, so that the accumulated funds will generate the necessary income I need once I retire? (For help in determining the specific amounts you need, see my article, Your Investment Money: The Value of Compound Interest, Associated Content.)
Sources of retirement income to consider when making your determinations would include: social security, employer-based pension and retirement plans, and also personal savings and individual retirement accounts that you have set up. In order to supplement your income once you retire, you will need to find those investments that will provide the needed additional income. Such investments would include fixed-income securities, such as bonds, or bond mutual funds, annuities, and/or other investments specifically designed for retirement income. However, before you retire, invest in those financial products that are going to build your assets.
Prior to actually retiring, the types of investments you should be considering would include such things as stocks and stock mutual funds - growth-oriented investments. Again, the sooner you start your retirement investing program, the more time you will have to allow your funds to grow. That’s why it’s so important to start investing now for retirement, regardless of age, or the current career stage or position you find yourself in.
Make use of auto-savings and investment plans, either at your place of employment, or from your own financial savings and investment accounts. Better yet, use both! You can arrange to have money deducted from your payroll check and deposited to a tax-deferred account such as an IRA or 401k plan at your place of work, and you can set up an auto-savings or investment account through your bank, savings, or brokerage account. (See my article, Starting a Savings and Investment Program, Associated Content, for help and information in setting up your own auto-savings or auto-investment plan.)
IRA’s and 401k Plans
Individual retirement accounts (IRA’s) and 401k plans are traditional retirement plan accounts whereby earned income can be set aside, tax-deferred, and this is the primary benefit and attraction of such accounts. As with other types of investments, the point to remember is to invest, and then leave the funds alone. (If you withdraw early from these types of accounts, you will have to pay a penalty to the IRS.)
IRA accounts can be set up through banks, savings and loans, credit unions, mutual funds, and numerous investment/brokerage firms. The types of investments that will build a retirement fund most effectively, providing you invest early enough, are growth-oriented stocks and stock mutual funds, and you can invest in these types of products through an IRA.
A 401k plan is a savings plan offered through your employer whereby a portion of your salary is automatically deducted and deposited or set aside for your retirement. Earnings from your 401k plan, such as interest, dividends, and capital gains, accrue on a tax-deferred basis, as with an IRA.
Take advantage of both of these types of plans. They can play an integral part in the success of your retirement planning strategy.
For your own peace of mind, start your retirement planning and investing now, regardless of your age, stage of life, or current income level, so that you can provide for yourself and those who depend on you, and then, enjoy yourself, enjoy your family and friends. Enjoy and live life to the fullest.
http://healthywealth.us/
July 11 2011 | investing | No Comments »
Whether you are in your 20s, 30s, 40s or 50s, you need to think about how you want to live when you retire. If you don’t plan soon enough, you’ll find yourself working well into your 70s. Start now - no matter what your age - to ensure your future will be filled with a well-deserved, relaxed lifestyle, not punching a time clock.
Individual Retirement Account. Yes, you need one of these whether it’s a traditional IRA or a Roth IRA, you must have some system of regularly setting aside money each month. Set up an automatic payment with your bank so that a set amount - even $25 - is taken from your account each month and deposited in your IRA. You may not notice the funds each month, but they will add up over time and if you’re young enough, time is your friend when it comes to retirement planning.
Employer Sponsored Retirement Plan
Maybe your employer offers a plan that you can join after a year or more with the company. If this is an option, you will be wise to join. Many employers will match your contribution or even contribute a greater matching amount than you contribute. This is free money toward your retirement - don’t pass it up. Your contributions to your retirement plan could even be taken out of your paycheck before your taxes are calculated, which is another bonus.
Meet with a Financial Advisor
You don’t have to be a millionaire to benefit from the advice of a financial advisor. Find someone you can trust who will show you how to develop a diversified portfolio of investments so that you will get the best returns given the time you have to invest.
Make the Best Use of Time
If you’re young and just starting out in your career, you have the benefit of time. Compounding interest will be your best friend as you establish your retirement accounts and watch them grow. The older you are and the less time you have, the more you’ll have to contribute.
An Employer Sponsored Plan May Not Be Enough
Just because you’ve set up a retirement account through your employer and are benefiting from the generous matching contributions, you’ll need to make sure this account will be enough for you and your family when you’re ready to retire. It is likely that you will need to maintain an IRA in addition to any employer sponsored account you or your spouse may have. You can find a retirement calculator online to help estimate your future needs.
A Non-Working Spouse Needs an IRA
If you are a woman who is not employed outside the home, you can be eligible to open your own IRA. Talk to your financial advisor about your future needs and look at your combined retirement accounts to see if this is a prudent option for you.
Other Investments
You can save for retirement in other ways by learning to invest in stocks, for example. With discount online stock purchase plans, it is easy for nearly anyone to participate in the stock market. Do your research and buy stocks in companies you can hold for the long-term and reinvest all your dividends. Many of these plans can also be set up for automatic stock purchases once you are in the program.
Retirement should be a time of leisure after a life-time of hard work and diligent efforts to earn money and support the family. Don’t get caught in the trap of having to work well into your 70s because you didn’t do any retirement planning. You’ll sleep better at night knowing that you and your family will be comfortable and able to travel, enjoy your grandchildren and pay for healthcare expenses.
http://governmentretirement.com/
July 11 2011 | investing | No Comments »