Let’s Talk About Retirement

Allen Bohart asked:


Since the days of FDR and the beginning of Social Security, people have been conditioned to believe that retirement comes at age 65. In more recent years, however, more and more people are yearning to retire at an age where they can more fully enjoy their golden years. Here are some tips for making early retirement a reality for you.

The most important thing to consider for early retirement is your ability to live frugally. If you spend every penny you make now, it’s not likely that you will be able to do any better when you retire. Teaching yourself to live below your means now will take you a long way toward realizing that dream of early retirement.

One area that many people can improve upon is the choice of vehicle they drive. After all, do you really need a new car every 5 years? If you want to retire early, then choosing a good used car is probably a much wiser, not to mention cheaper, alternative. Not only will the car payments be much cheaper (perhaps non-existent if you pay cash for the car), but your insurance premiums are likely to be much cheaper as well.

Another area to concentrate on is your home mortgage. By paying at least one extra mortgage payment per year, you will considerably shorten the term of your loan. The goal here is to pay off your home loan before you retire, so that you have one less payment to worry about when that happy day comes. Not only that, but you will literally save thousands of dollars in extra interest payments over the life of that loan!

Aside from living within your means, you will also want to start some kind of retirement savings account. You should put as much of your disposable income as you can into this account, and you should start that account at as young an age as possible. In this manner you put the magic of compounding interest to work for you. For example, if you were to put 20% of your income into an index fund starting at age 20, chances are you would be able to retire by age 40. Of course, the more you can afford to put into the fund, the earlier you will be able to retire.

The best possible away to approach the retirement savings account is to make it as automatic as possible. One way to do this is to have the money withdrawn from your paycheck each pay period, so that you never see or miss the money. If this kind of thing is not available through your employer, see a financial counselor to help you set this up.

If your employer offers one, then you will definitely want to participate in the 401(k) plan. For most plans, the employer contributes either a matching amount or a one-time yearly payment to your retirement account. That’s free money, and nobody in their right mind would pass that up!

Aside from the 401(k) and the retirement account mentioned above, another possibility to consider is a Roth Individual Retirement Account. There are limits to how much you can contribute to the Roth IRA and you will have to pay a 10% early withdrawal penalty if you take an money out of the account before age 59 1/2. On the flip side, though, any money earned through the Roth IRA is tax-free forever, which is why this type of account is so attractive.

While none of these steps can guarantee you an early retirement, they are all steps in the right direction. If you really want to retire early, then these steps and more will be required for you to do so. After all, what have you got to lose by trying? At worst, you will retire with more money than you would have had without a savings plan. At best, you may retire much earlier than your co-workers!



KATHRINE

George White asked:


There are few times in life worth looking forward to that are better than retirement, unless it is retiring knowing you will have financial security for you and your family. Most people will spend years working, knowing retirement is going to sneak up on them and for most people proper planning will enable them to enjoy their years doing things with their spouse and family that they did not have time to do while working.

The first few months may be difficult when entering into retirement as bad as many see the habit of working it was something they did every day for many years. They woke up, got ready and left for work and came home in the evening, based on the shift they were working, usually five or six days a week. The first few days may feel like a break, similar to being on vacation and it may take some time before it sinks in that the time for retirement has arrived and there will be no going back to the job.

Retirement is not an acceptable alternative to going to work every day for some people. If they retired after reaching the age for full retirement, there is no problem with finding another job. However, if they took an early retirement at age 62, and began receiving Social Security benefits, they will be penalized for earning the extra money until they reach full retirement age. In most cases, for every two dollars they earn, they will lose one dollar in benefits.

Retiree’s Time Used For Getting Re-acquainted

If couples plan to travel they usually begin almost immediately after their retirement party, and have already set a goal of where they want to go and how long they want to be gone, but most retain their home as a roosting point for the times between travel. Whether it is to go on a second honeymoon or a celebration cruise, they will want time for themselves to celebrate the fact that they will not have to share their time with a job.

For others retirement is a time to participate in hobbies they enjoy but lacked the time due to a hectic work schedule. Outdoor activities are now possible on days other than the weekend when crowds were a problem and prices were higher. Typically, amusement parks have significantly more traffic on weekends and many golf courses have reduced rates on weekdays. Hitting the hot spots with the spouse is a great way to get to know each other after being separated for about a third of the day, everyday.

Retirement also gives people the time to offer their time and talents for charity work or for mentoring others entering the field from which they recently retired. For those who took an early retirement they may be willing to offer their services on a voluntary basis to keep their minds sharp and to offer their experience in various industries to keep busy without risking the loss of their retirement income.

For the most part, retirement is to be the time when people can leave the hassle of work and spend time doing the things they have always wanted to do, but lacked the time. However, if they failed to plan their finances, they find they have the time, but not the money and will go back to work to help pay for extras that they cannot afford on their retirement income.

When it comes time to retire, whether it is early, late or right on time most view retirement with a feeling of relief mixed with anxiety, as they may not be sure of what they will do with themselves. However, whatever they decide to do once they retire, they will likely have the time to do it.



ELVIS

Cindy Heller asked:


Let us look at how nationwide retirement solutions can help you retire. As we all know, we spend all our lives working hard. All we hope is when we retire, we can enjoy the golden years without a worry in the world.

Most people’s desire is to enjoy old age free of worries and responsibilities; that is why they work for long years to achieve it, a task that becomes much easier with the help of Nationwide Retirement Solutions. In the past, people work for just one employer in their entire life. As a result, their retirement is taken care of by the company. Nowadays, the times of people working for the same company and getting a great retirement plan are over because people move from company to company looking for better jobs. Therefore, they often lose the retirement plan in process as they get a new job in a different company. But today, you can get the help of Nationwide Retirement Solutions.

How Does Nationwide Retirement Solutions Help You?

With the purpose of assuring and enjoyable and relaxed retirement, Nationwide Retirement Solutions gives you the opportunity to choose an adequate plan and keep it along your working years, no matter how many different places you work in. There are many changes as old age approaches, especially in health and finances. It may sound pessimistic to you, but it is better to prepare for the hardest situations that could come, in order to avoid unpleasant unexpected events without being ready to face them.

If you take the services of Nationwide Retirement Solutions, you will be able to increase your money through your investments, and have a considerable amount to spend when you simply do not feel like working any longer.

Easy To Get

The only thing you have to do is visit the website, sign in, and get the guidance to get the retirement plan you desire, and the possible investments you could make to increase the amount even more. You will be able to see the answer to the frequently asked questions concerning retirement plans, n o matter where you are as long as you are 18 to 56+. Be sure to avoid becoming a burden for your family, with the freedom to do whatever you want, and whenever you want it. The Nationwide Retirement Solutions website can be of great help to learn how to save for your retirement. Log on now!



ADOLFO

J Z asked:


Yes, I saw the article about his throat cancer, but I want to know what he did in the years after leaving football.

FREDERIC

Shelby Smith asked:


Taking too much risk with your investment: We all want the highest interest rate possible and the lowest risk possible - unfortunately these are competing objectives. High rates always spell high risk BUT high risk does not always spell high rates. You should know that risk and reward are traveling companions: if you want low risk you’ve got to settle for low rates and if you want the chance of making high rates you’ve got to accept high risk.

Most people work a lifetime to save enough so they can have a comfortable retirement - the last thing in the world they want is to lose their retirement nest egg in bad investments. So why is it that most retirees have all their money in mutual funds, stock, bonds, a diversified portfolio of securities, variable annuities, etc.? All these things carry the risk of loss - yeah I know that “in the long run” you’ll do a lot better than with a safe money alternative. BUT, in retirement you don’t have a long run. A great economist once said, “in the long run we’re all dead”.

In the closing years of the 1900’s and up until 2002 the stock market was roaring upward - would-be-retirees were making loads of paper profits and looking forward to retirement next year. Out of the blue came the dot.com bust and a market meltdown - over the next two years the S&P lost half its value, the DJIA sank like a rock and the poor NASDAQ stocks lost 80% of their value (that’s where most of the dot.coms were traded). Instead of retiring, or continuing to be retired, many “risk taker” had to change plans or go back to work as Walmart greeters, taxi drivers or whatever they could get in the depressed employment environment. Can this ever happen again?

Look around you: sub-prime problems, foreclosures shore to shore, the dollar losing ground at an alarming rate, inflation picking up, real estate activity grinding to a halt, economic recession being mentioned often, bank stocks losing half their value, major corporation turning to China and the UAE for capital infusion to stay solvent, record federal deficits, commodity prices shooting upward and lots more of gloom and doom. I don’t want to be negative…but there are storm clouds gathering and you don’t have an risk umbrella if you’ve put your retirement money in the market.

The first big mistake retirees (or would-be-retirees in the red zone before retirement) make is they have taken too much risk with them retirement money.

What can you do? Find a financial adviser quick if you don’t know how to lower your risk without one. Examine every retirement investment you have and make sure the money you’ll be using in the next 10-15 years is in rock solid saving places like bank CDs (for use in years 1 - 5) or fixed annuities (for use in years 6 - 15). If you don’t like either for-the-first-half-of-your-retirement money, you can continue to keep your money at risk and hope for the best.

Putting your money only in short-term bank CDs: Many of you have all your retirement money in 6-months CDs because you want safety and are afraid you’ll need it all very soon. The good news is that you’ve got safety and ready access…the bad news is that this is costing you a king’s ransom.

Generally, the longer you commit you money the higher the rate of interest you’ll earn - that’s why 5-year CDs pay more than 3-months CDs. You should space, or ladder, your money so that it comes due at about the same time you think you’ll need it. Yes, you may guess wrong sometime but the penalty will be a lot less than if you always keep your money short and liquid.

Let’s say you now have $150,000 in short-term bank CDs that you’ve earmarked for retirement. You think you’ll need about $15,000 a year of this money to cover expenses above your Social Security, pension (if you have one) and other income. Here how a CD ladder could work. Put $15,000 in a money market account (can get anytime you want without penalty), $15,000 in a one, two, three and four year bank CD. You now set so that every year for the next five you’ll have access to $15,000 (plus interest which will keep you up with inflation) to cover your needs.

What do you do with the other $75,000? Why not look into a five year tax-deferred fixed annuity? You’ll pay no taxes on the interest you earn in the annuity until you withdraw it (that means triple compounding: interest on principal, interest on interest and interest on money you would have paid in taxes) and you’ll have rock solid safety because your principal and interest is guaranteed by a major insurance company. The same insurance company that insures you home, life, health, business, car and everything else of value. Oh yes, you’ll probably get a much better earnings rate than if you put the money in a bank CD.

Yes, you will lose the opportunity to hit it out of the park with a high flying stock your brother-in-law told you about but you’ll also avoid the risk that goes with that high flying stock. When you annuity matures in five years you an annuitize (take an income) over the next five years or do another 5-year bank CD ladder.

Retirement is a time to keep what you’ve got rather than trying to double or triple your money in a short period of time. But, you can err by being too safe and too liquid with everything in short-term bank CDs. Retirement is also a time to reassess your risk and make sure you can afford the worse case outcome. That’s why money in the market don’t make sense unless you’ve got a lot more money than you’ll need for retirement.

If you think the market can’t turn around and bite you, check out the following links:

www.fool.com/investing/dividends-income/2007/03/21/a-market-crash-is-coming.aspx

mutualfunds.about.com/cs/history/a/marketcrash.htm

finance.yahoo.com/expert/article/richricher/26878

For more info on Retirement Planning go to the Retirement Pros at http://www.theretirementpros.com/. Learn more from topics such as “Managing Your Retirement Money”, “Guide to Social Security - How to Pay Fewer Taxes”, “Risk and Reward are Traveling Companions”, “Retirement: Your Greatest Financial Challenges” and more. Free Calculators, eReports and online video seminars each month.



MARYLOU

Paul Hata asked:


There are a few things you should keep in mind when planning for your retirement. First of all, you probably shouldn’t hold your breath when it comes to social security being able to cover even a small portion of your retirement if the service even exists in any form of its former self by the time you are facing retirement.

The second thing you need to keep in mind is that your needs upon retirement depend greatly on how you live your life now and how you plan to live once you retire.

There are many who live very conservatively now in an effort to save up their money for retirement and really live it up at that point. The problem is that they are basing their retirement living on their current lifestyle, which is not a good comparison.

The problem is that the vast majority of Americans are earning just enough money through their jobs in order to make ends meet. The idea of finding any money to sock away for retirement for most Americans is difficult at best and absolutely impossible in some situations.

The first step when it comes to successful financial retirement planning is to map out how much money you are going to need in order to maintain your current lifestyle upon retirement and go from there.

Most estimates are that you will need to bring home on average 75% of your current take home salary in order to maintain your current lifestyle. The understanding is that you will eliminate many monthly expenses by no longer working however some find that this simply isn’t enough so you should be careful when relying on this figure.

You should also plan for inflation when planning your retirement as well. It will take more money in the future in order to have the same standard of living. You should also consider that our expectations tend to increase over time and you need to be able to live within the limits of your budget when the time comes.

It will be difficult to take out additional funds once you’ve reached retirement age. For this reason it is in your best interest to plan ahead and plan carefully. The more modestly you live today in an effort to invest more money for your retirement the better chances you will have to enjoy a better lifestyle upon retirement.

You should also be careful that you do not sacrifice the moment in search of a better retirement. You need to be able to take vacations, save money for the things you want and need, in addition to covering the necessities of today. We aren’t guaranteed that we will be here for retirement though that is hardly a reason not to invest and save for that day.

However, we should never sacrifice the moment and the childhood of our children for the sake of an eventual retirement. As long as you are making significant progress you are doing better than a large section of the population and you can opportunities later to invest greater amounts of money towards you retirement.

The problem is that most people do not begin growing concerned over their retirement picture until it is too late to make significant progress. Begin early making plans for your financial retirement in order to insure the greatest possible success.

Pay off your major debts such as student loans, home loans, doctors’ bills, car notes, and credit cards whenever possible. These are constant drains on your income that you do not need once you’ve limited or ‘fixed’ your income.

In addition to your 401 (k) or IRA funds you can start your own investment account by having the bank automatically draft a portion of your check each pay period.

You can also ‘pay yourself’ an extra bonus by depositing extra funds anytime you get extra money like a bonus check at work or payment for services outside of work. Take every opportunity you have to boost your retirement account.



GEORGINA

Dr. Cynthia Barnett asked:


There are many myths abroad about retirement, and many people who continue to believe them are being held back from fully enjoying the second phase of their lives. To help you avoid holding on to these detrimental myths, I’d like to offer my take on five more of the most widely held retirement myths.

Myth #6: Once I retire, I’ll never work again. For the baby boomer generation, and for many of the previous generation, this will not be true. Retirees work for one of three main reasons: (1) they need the income; (2) working gives them purpose and meaningful activity; and (3) working is a way to be out with other people. A growing portion of the middle class is discovering the need to work to supplement retirement income. Many of the baby boomer generation might work both for a sense of purpose and connection with others and because they need the income.

Myth #7: If I save enough money, retirement will be wonderful. This is a very popular myth; and it is not true. Happiness in retirement has far less to do with having money than with having a new lifestyle plan. The old saying is as true for retirees as for anyone else: money doesn’t buy happiness. We humans need relationship with others; we need purpose; we need meaning; we need to leave some kind of legacy. Money doesn’t create or sustain the most essential human needs in retirement.

Myth #8: Life after retirement is a time when you watch your physical and mental capabilities decline. This is only true if you make it true. By taking care of yourself and getting proper diet, exercise and rest, you can keep both your body and your mind in excellent condition. Remaining active and engaged can keep you sharp. Every retiree should talk and work with their physician to create the best diet and the right exercise program for optimal physical health. Every retiree should also keep his or her mind active with reading, learning new things, social engagement, even playing stimulating games.

Myth #9: Everyone ends up in a nursing home. Increasingly, people are choosing to “age in place” – to remain in their homes as they grow older. To be sure, the more independent of us will find it easiest to do this. But insurance companies, social security, and society are learning that it is both better for the individual and cost-effective to provide services and treatments to people over 55 in their homes. Even people with disabilities or degenerative illnesses are able to find the equipment and support they need to remain in their homes.

Myth #10: The best time to think about a retirement lifestyle is after I retire. While I do not want to imply that you can’t plan a retirement lifestyle after you retire, your transition and sense of direction at the time you retire from your job will be more focused if you plan earlier. Just as you recognize the need to start planning early for your financial needs in the second phase of life it is equally helpful to plan your lifestyle early. By planning early you can have the training, support systems, and sense of direction that will make the transition easier and your retirement lifestyle happier and more fulfilling.

If you have been holding on to any of these myths, I encourage you to shift your thinking and do a little bit of research. Moving beyond the myths allows us to step boldly into a future that is fulfilling, meaningful and happy in retirement.



ADALBERTO

Pacificriders asked:


Im planning to retire in the Phillipines and was wondering whether 300,000 is enough to last me the rest of my life. Its will be in a savings account, so there will be some sort of income. Im 23, but planning my retirement when Im 45,50ist. Also do i need a US adress if my bank is the bank of america?

CLEO

Ramsay Mameesh asked:


Recent losses in the stock and housing markets, and gloomy predictions of a prolonged recession, have caused many Americans to delay or cancel their retirements.   If the recession lasts several years, as most economists are now predicting, then delaying your retirement, may not financially make any difference and might actually leave you worse off then if you retire right now

The following is an example of two co-workers, with equal salaries and net worths, one decides to retire while his cubicle mate decides to keep working. Which person has the most savings, after a long and bitter recession, may surprise you.

Bob and Ed’s Semi-Excellent Retirement Adventure!

Both Bob and Ed, have taken recent losses because of the recession, and their net worth’s are now $300,000 each.

Bob says “I’m done! I’m taking my losses. Investing what’s left of my money in crappy government bonds. When the recession ends, I’ll move some of my money back into stocks and housing, but I’m not delaying my retirement because of a stupid recession!

Bob retires and begins taking out a safe 4% of his $300,000 in savings every year in retirement. The recession lasts three years. What happened to Bob? At the end of the recession, Bob’s net worth has declined to $281,403, a loss of 6 percent.

After the recession has ended, and the stock market finally begins rising again, Bob re-allocates his assets back into a standard retirement asset allocation model. He earns 9% a year on his investments. The expansion cycle lasts 5 years. Eight years after retiring, Bob has a net worth of $364,000 a 21% increase, even after taking out $1,000 every month

Meanwhile, on the other side of the cubicle wall….

Ed is freaking out! “I can’t retire now, not after my losses in the stock and housing markets, I have to keep working and increase my savings.” Ed had been saving $1,000 a month, towards his retirement, and increases it to $1,250. He reads personal finance magazines, watches financial t.v. shows, listens to financial radio gurus, subscribes to newsletters, chases high return stocks, mutual funds, global hedge funds, considers trading in options. And none of it works.

It’s a recession, a world-wide slow down in growth, foreign stock markets get hit even harder than the U.S. markets. And Ed, no matter how hard he tries, still loses 15% a year during the recession. Starting with $300,000 and adding $1,250 per month, at the end of 3 years, Ed has a net worth of $226,709. Ed has lost 25% of his net worth.

Ed is more than stung, he is despondent, finally weary and bleary eyed from reading stock symbols in the Wall Street Journal. Ed pulls his retirement savings out of stocks, and puts his money and $1250 a months savings into a CD paying 3%, and enters the commute lane for yet another day. Five years later…

Eight years after Bob retired, Ed finally gets back his original $300,000, and decides to retire. Bob has been laying in a hammock for eight years, happily retired, and now has $364,000.  So, what seemed like the common sense approach, of continuing to work and increasing savings, actually left Ed in a worse position than if he retired.



JUSTINE

Albert William asked:


As high numbers of people reach retirement age, long term financial security is becoming a major concern.  With the view of plummeting social security advantages, pension plans and volatile 410K retirement plans getting non-existent, most of the people are looking for other retirement options. Now, they believe that they are left with only one viable option retirement investment.

With modern day economic recession and rising food, and fuel prices, it has become almost impeccable to save for the future years. Individuals expecting their retirement within 10 to 15 years go for high return retirement investment, but at the same time are skeptical whether it would be safe and secure or not. In most of the cases, average people do not have enough cash required to earn high rate of interest, which on the other hand wealthy people enjoy.

Both long-term and short-term retirement clubs have emerged over the internet, which helps quite a lot in removing the road blocks for numerous entrepreneurs. These programs are very efficient and present their member with the chance to understand dividends, which at times is well beyond the average investor’s reach. Besides, they provide you with a viable retirement income option, which you need the most after retirement.

The profit incurred, here, is distributed and divided amongst the members. At the same time, profits are also spread across different long-term ventures and projects, so that the club could stay stable for a longer period of time. Though there are some risks involved with this type of funds but you do not have to worry. The risks are minimized by spreading investments and pooling funds across a diverse array of opportunities.

Contrary to the illegal and unauthentic HYIP or High Yield Investment, which uses the contribution of one investor to pay the commission of other; the long term retirement clubs are clean and legal. Here, the investments from the member are combined with private and personal portfolios, which in turn pays high rate of return. While different country has different view on private retirement investment forums or clubs and foreign investments, most of them operate just according to law and norms laid by their respective government.

Moreover, certain programs would also offer you substantial amount on referrals, referred to as referral commission. But, generally you would be able to achieve financial independence and retirement income without any third party’s help.

However, there is always a dark side of a bright picture. We have shown you the bright side of the picture but you should also be well aware of the dark side of this, while you are planning to have your retirement investment done. The mushrooming of these clubs and forums has lead to growth of some of the fraud long term investment clubs. They would try to fool you out with hidden clauses and some other tricks and traps.

Hence, it is better recommended that before going for any such type of retirement investment policy ask someone who knows about them. Also, make sure that you do not invest anywhere without proper retirement planning. No doubt, after retirement you need some funds for the smooth functioning of your life but why take risk.



BOBBIE