Why now is the time to plan your retirement

On August 19, 2011, In Retirement

When you are young, old age seems a long way off. The need to begin to plan for retirement when you are in your early twenties is a difficult concept for most young people to grasp. But rest assured, those that are able to get past that psychological barrier, take the long view and start planning and saving early, are far more likely to enjoy personal and financial peace of mind during their retirement years.

Those who put off retirement planning for too long may find themselves old and nearly destitute, struggling to survive. The quality of life you face in the future depends to a large degree on how well you plan for retirement.

What is retirement planning

The ultimate goal of retirement planning is to ensure that you have enough income to live comfortably and enjoy your interests once you stop working. It’s important to be able to envision your retirement. How do you want to spend your time? Do you want to travel, go back to school, move to Spain, devote yourself to volunteer work, start a part-time business or spend your time pursuing all the hobbies and activities you didn’t have time for when you were working?

How to get started

When you have a clear idea of your objectives and what type of retirement lifestyle you will need to maintain, you can begin to develop a retirement planning strategy that strikes a balance between your objectives and the expenses they are likely to incur.

The next step is to evaluate your current financial situation. Do you have any investments, including pensions and what is their present value? How much money do you, or could you, save each month for investment purposes?

Are you passing up any free-money opportunities? If you are working for a company that offers a pension scheme were the employer matches employee contributions, you should be participating in it; it’s free money. Better yet, if you are lucky enough to work for one of the few employers that still offers a final salary or defined benefit pension scheme make sure you don’t miss out on it.

What else?

You also need to attempt to forecast what your situation will be in the future. At what age do you hope to retire? How long will your retirement funds have to last? Many retirement planning experts suggest that you should plan to fund your retirement for thirty years if you retire in good health at age sixty-five. You can use a pension calculator and an annuity calculator to figure out how much you will actually need to accumulate to achieve these goals.

Summary

The biggest threat to a comfortable retirement is procrastination. One day of not planning, saving and investing will turn into another and before you know it the years fly by. If you don’t already have a retirement plan, the time to start is now.

 
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Best Cities To Retire in the USA

On March 10, 2011, In Retirement

There has been a lot of talk over the past twenty or thirty years about living abroad – finding a nice quiet, cheap spot to soak up some sun and enjoy the retirement years. Most of the Best Places to Retire lists end up ranking and rating small countries all over the world and its pretty rare that the United States or Canada get on any of those lists.

Retire in the USA

Sure there are some pretty interesting countries out there and a lot of them  are quite cheap but after spending your entire life learning, living, growing and investing in your home country it’s a pretty onerous task to even think about moving and retiring abroad, let alone doing it! It’s true a life in the tropics sounds sexy, alluring, exotic and full of everything most people dream about but the reality is that romantic vision eventually comes to and end. Before long you find yourself frustrated that you can’t find a favorite product in the grocery store – frustrated that you never really feel at home – frustrated with the language barrier – yes the frustration of reality eventually sets in. Now I’m not trying to be a nay sayer. I am suggesting that choosing the best place to retire is about a lot more than fantasy. For most Americans the Best Place to retire is right here. Retire in the USA – where you’ll always feel at home .

Best Cities to Retire in the USA

I recently read a little article about a new survey that ranked the best cities to retire in the USA. Asheville in North Carolina came in top spot. I remember a number of years ago working through the south east states and how charmed I was with North Carolina. It does bring back memories of a place that would be lovely for retirement. Sarasota Florida came in second spot. Well, not a lot to say about that – hasn’t Sarasota been a perennial favorite for retirees since it joined the union? And in third place we find Prescott, Arizona.

Those are just a few considered to be the Best Cities to Retire in the USA. So next time you’re dreaming of that far away exotic retirement, take pause. Think about the good old USA and consider staying at home.

 
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Where your 401k Retirement Savings Plan May Trip You Up.

On November 2, 2010, In Retirement

This article will take you through the common pitfalls that we all come across when we guess where our money should be invested in our 401k retirement savings plan. Most are simply advise we have gotten from people who did not know any better.

So how are your fortune telling skills? Unless you can know where interest rates are going to be year in and year out, you would do well to avoid the Target Date Funds in your 401k plan. You may recall that this product will increase the bond fund portion of the underlying portfolio year after year. If interest rates go up the value of the bond fund will go down.

Why is that? if you own a bond that pays 5% and prevailing rates are 10% no one is going to give you 100 cents on the dollar if you want to sell it. This is referred to as interest rate risk. A bond owner manages this risk by waiting until maturity when he will get all his investment back.

What about the self directed brokerage account? More plans are allowing their plan participants this option. Yet, be aware there may be annual fees attached. While the appeal of having access to lower cost and better performing Exchange Traded Funds may be tempting be sure the fees for the privilege does not get close to one percent.

What about the mutual funds on the main menu? Here again the discussion about the Target Date Funds apply to asset allocation funds and balanced funds as well as straight bond funds.

With all these things to keep track of you may feel more comfortable turning this over to a professional. With the passage of the Pension Protection Act of 2006 which cam into effect in January of 2008, your plan may now have the feature that will allow you to hire an independent personal investment adviser who you can pay with pre-tax dollars directly from your plan. This is serious money ~ be serious about it.

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Why Taxes Are Important to Your Retirement Planning

On August 28, 2010, In Retirement

Which of the below options sounds best to you?

  1. You invest $750 for 30 years, then pay taxes on the profit
  2. You invest $750 for 30 years and pay no taxes on the profit
  3. You invest $1000 for 30 years and pay taxes on the profit

Numbers two and three both sound a lot better than number one, don’t they? If you’ve spent much time on investment matters, you probably know exactly what I’m talking about here: option three is a 401(k), option two is a Roth IRA, and option one is just investing your money outside of any tax-preferred vehicle. We assume that you set aside $1000 to invest, but in the first two cases you first pay $250 of it in taxes. In case three, you’re investing with pre-tax dollars, so at the end you pay taxes both on the profit and on the original $1000.

So how does that work out? Let’s suppose you’re making a modest 6% return on your investment, and just for simplicity we’ll say you’re still in the 25% bracket when you retire. (We’re ignoring the difference between regular income and capital gains, etc, largely because nobody knows what the tax code will say in 30 years, and to make it easier).  In the first case, your investment will grow to $4307.62, but then you’ll pay 25% on the profits, which brings this down to $3418.22.  With the Roth, you get to keep the whole $4307.62. With the 401(k), it grows to $5,743.49, which drops to $4307.62 after taxes – exactly the same as you got with the Roth!

Does this mean that it doesn’t matter whether you use a Roth IRA or a 401(k) to invest? Of course not. Above we made the assumption that you’ll be in the same tax bracket when you retire as you are now, which most likely won’t be the case. Of course, it’s a great idea to max out both investments, as they’re both far superior to investing outside of a retirement account, or (even worse) not investing at all.

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401k Plans for Dummies

On July 3, 2010, In Retirement

When you get your first real job, you may notice the term 401k in your benefits package. If you are in an employment situation where your employer offers a 401k plan, you need to be taking advantage of it. This opportunity is so easy to take invest in, it would be stupid not to. A 401k is a plan that is set up by your employer that allows you to put an amount of your salary, before taxes, into an account where it’s saved until retirement, or a few other exceptions. These exceptions being age, death, and job termination. This money can be withdraw on these occasions fee free.

Most companies will have a maximum amount of money that you are allowed to contribute into your plan each year. It is very wise to take full advantage of this, and put as much money in the bank as possible. Your employer will also match either all, or a certain amount of money that you invest. This is free money that you need to make sure that you are getting. After it is placed into this plan, it can be invested into many different things. Stocks, mutual funds, and other brokerage accounts are just a few of the options that are available to you.

These plans are so easy to follow, they could call it “401k plans for dummies“. Any dummy could figure it out, you just place the money into the account, and have your company match it. Talk with your financial ad visor or financial institution if you want to get more information about money market opportunities. Make sure that you get professional help before investing your money into anything, you don’t want to risk losing it. This is the money you are going to use to live after your done working, and you want to make sure its protected.

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Roth IRA Qualifications – how it works

On July 2, 2010, In Retirement

Time passes very quickly.  One year you are in high school, the next you are in college, and before you know it you are working hard to support a family and build a future.  It is important to look ahead to the future and see how you can better it by working smart today.  Retirement plans are one way you can ensure that you and your wife will have a peaceful and secure environment in your old age.  The sooner you begin contributing to your retirement fund, the more you will have available for use when you get there.

One smart way to handle your retirement funds is by opening an account with Roth IRA.  Roth IRA is one of the best places to invest your money for a two main reasons.  One, you get tax benefits.  Two, you get to contribute as long as you want, with no cut off time or age limit.  As opposed to regular IRA retirement accounts, where you were prohibited from contributing after 59 and a half, you can now contribute for as long as you are working.  There are some Roth IRA qualifications, however, that you will have to meet in order to become a part of their program.

The government has made it possible for the average American to capitalize on the Roth IRA program while restricting the ultra wealthy from gaining the benefits.  If you are a single and earning more than 105,000 dollars a year you will not be eligible for a Roth IRA account.  Also if you are filing together with your husband or wife and together  make more than 160,000 dollars a year you also will not be eligible.  The system is protected from the rich taking advantage of the tax benefits.

An advantage to the Roth IRA accounts is that you can do a Roth IRA withdrawal all that you have ever contributed absolutely tax free with no penalty whenever you need it.  So, if you have an emergency you always have something to lean back on.  However, if you have been earning interest on the money you have been investing, it will be taxed.

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Use Stock Market Strategies To Take Charge Of Your 401K

On June 21, 2010, In Retirement

With the way the economy is going and the way the United States government is handling the situation, who knows how anyone will be ready to retire when it’s time. Our government is spending way too much and the current social security program is already bankrupt. Most people will find themselves with less money than they need to enjoy their golden years.

In my opinion, the American people need to take matters into their own hands. To do that is to take control of your 401k plans. It’s very easy to have your current 401k plan rolled over into a IRA retirement account. If you’re one of those people who feel that they don’t have what it takes to run their own account, think again.

There are online brokers like TD Ameritrade, Zecco, and Scottrade that can help you get to your goals for when you retire. These websites can help you more than you know. Their customer service can help you with setting your goals as well as some stock investing tips. Most of these sites also offer great investment tools to assist you figure out which one of the stock market strategies you can use to reach your goal.

Learning about the stock market is not a hard thing to do. Yes, it’s going to take effort on your part to make it happen, but isn’t that better than leaving in the hands of someone who doesn’t have your best interest at heart. Besides the fact that you will increase your portfolio by the mere fact of you won’t have to pay these brokers any fees.

Give it some consideration before you just say no to the idea. I took over my 401k account a few years ago and have done better than they (brokers) did and they have all this knowledge and experience to make your portfolio grow. You never know, you just might make more money than you expected and retire early.

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Free Roth IRA Advice

On May 27, 2010, In Retirement

If you are not familiar with individual retirement account offered by Roth, be educated first. There are lots of experienced or professionals that are willing to provide the education that you need. They have more proposals and suggestions than you could ever imagine. Obviously, what you need in this case is the Roth IRA advice. Aside from that, you also need to learn about the rules. Get companies that can give you advance education because right information is always considered as the key to success.

To ensure long term financial security for you and your family is the best way to live a comfort life. But the hairy thing with regard to some retirement savings plan is the tax  Now, if you are unsure about using a Roth IRA plan, read and discover how a Roth Retirement plan works. Take note of the following rules and condition:

In Roth IRA, owners are not required to begin taking minimum distributions at age 701/2.Your Roth IRA returns can continue to grow tax-free for as long as you or your family owns it. Unlike in traditional IRA, you’re growing seed without tax but when the right time comes your harvest will be taxed. Roth IRA offers outstanding retirement opportunities to most qualified individuals. The chance to benefit from the Roth IRA account does not end when employment ends, as Roth IRA conversions are favorable for many retirees. It enables savers who remain in the same income tax bracket at retirement to accumulate more money than what tax-deductible IRAs do.

It’s not hard at all to get going, once you find the right decision, good thing overflows. You do however, want to take time to look at the bottom line and make sure you’re not being taken advantage by the company that you have chosen.

Hopefully, these few suggestions will help you with your retirement savings, if you want to learn more though, look for Roth IRA advice and find professionals today that can get you all the answers that you need. To get the most out of what you have always wanted, Roth IRA is the answer.

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