Let’s Talk About Retirement

anonymous asked:


Financial planning can be a difficult task especially if you are planning for retirement. Looking into the future and making assumptions on your lifestyle and the amount of income that is ideal for you is something that cannot be assumed correctly. Remember, the future cost of living or economic factors are unknown. The best thing you can do is have a plan based on worst case scenario with high inflation (cost of living) and work upon this factor. Many people realize how advantageous financial planning for retirement can be so they start immediately towards retirement income investing.

From statistics the people that do plan there retirement are usually the top 5% who are able to retire comfortably. This is not because they have more money in the first place, its how they set up there retirement income investing and what they do with there money. The financial plan assists you with financial goals and helps you achieve them. All you need along with a financial plan is a coach to guide you. We can help you with this but you need to determine your financial goals.

Surveys show that almost 75% of the population earn enough money to pay their monthly bills only. This means that they do not have any extra money to put in a bank or in any financial institution that could provide them enough profit after their retirement. Is it time to look at alternatives to building on this retirement income?

What’s more Social Security is not enough guaranteed income for retired people to live on. Actually, it is still a big question if social security will still exist when the retirement day comes. This is a good reason to set-up your own retirement income investing.

Hence, it is extremely important to generate some methods that will provide an individual a reasonable amount of money in the future. This should be done regardless of how much an individual earns, the important thing is to start saving today.

1. Calculate and Analyze

It is important for a person to visualize his or her own situation after retirement. Then, you can calculate how much money is needed to live on after retirement. Furthermore, people need earnings which equate to 70% of the present income.

2. It is important to seek the help of a financial planner or good stock broker who can assist with building your retirement income investing vehicle.

By asking for advice from the experts, you will be able to gain more knowledge know how to proceed for you situation. These people are proficient and knowledgeable in all kinds of financial planning and they can provide the most feasible and workable approach for your individual needs.

3. Get rid of loans, debts, and other financial obligations in as little time as possible.

By simply paying off all debts, loans, and other financial obligations in a shorter period of time, you can realize a substantial amount to invest for that retirement. A good financial planner will know exactly how to direct you so you can meet your retirement income investing goals.

If planning your future is something you have always wanted to do and have never got around to doing it, now is the time. You can take advantage of the time you have to learn all about investing. Stock Market investing has changed many the lives of many people close or nearing retirement have turned there lives around. Learning how to profit from the stock market and building a retirement income investing vehicle can be easy.



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Elijah James asked:


Most people don’t think about how much money they need to save for retirement until they really need it. After all, with the pressures of daily life taking up most of our awareness, who has time to think about it?

The truth is most people drastically underestimate just how much they’ll need to keep themselves going once they do retire from the workforce. What many people seem to forget when they try to work out the amount of money they might require is that the value of money changes over time.

This means that what looks like a really large sum of money to you now sitting in your retirement fund probably won’t buy the same amount of things once you do retire. If you’re close to retirement age already, then this argument won’t hold true for you. However for anyone that still has more than a decade left in the work force, you should consider the change in the value of the dollar as time goes by.

How Much Do I Need To Save For Retirement

Some financial advice firms estimate that you should consider perhaps 50% of your current income per year as a healthy start to give you an annual income figure after retirement. If you think about how much you earn right now, could you imagine living on half this amount for the entire duration of your retirement years?

Of course, you should figure that you won’t have the same types of expenses to pay for once you leave the work force, so your expenses in this area may be reduced. Unfortunately, you may also find that some of your medical bills may be increased as time goes on. This shift in the cost of living after retirement is often where people go wrong in their calculations.

The other issue you should consider is how long you expect to live once you have retired. Most people stop working at 65 but the average life expectancy is well over 80. That’s 15 years you’ll need to survive on only what you have in your retirement savings.

How Do I Increase The Amount of Retirement Savings I Have?

No matter how old you are or how close to retirement you are, there is always plenty of opportunity to increase the amount of savings you have. If you’re still working and earning income, then you can voluntarily increase the amount you contribute to your plan each pay period.

Compounding interest can have a dramatic effect in increasing your savings, so any amount you can put in will increase over time well past the amount you spent simply because interest accumulates on top of interest already paid.

If your retirement is still a long way off, then consider some very carefully chosen investment options to help increase the amount you have available for later years. As you get closer to retirement age the extent of your investment activity should be more conservative to maximize and retain the amount you already have.

So if you’re trying to calculate how much money you need to save for retirement, perhaps consider using an online retirement calculator to give you an estimate of how much you need so you can begin making plans now.



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Lurkain asked:


Now that the stock market has crashed 450 points how will this fair for his whole invest style of retirement planning he got from Bush?

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Jeffrey Stoffer CFA, CFP asked:


What is retirement? The definition has evolved over the last half century. How you view retirement can affect how you plan and invest. The current economic situation also comes into play. By viewing retirement as a process, by starting early and planning, it is possible to reconcile your values and priorities with the available resources to create your own definition.

The notion of retirement is actually a fairly recent phenomenon. In the early 20th century people worked until they were no longer able. By mid century there were too many older workers and high unemployment among younger people. Pensions and Social Security were seen as a way to ease older adults out of the workforce, making way for the young.

The early version of “retirement” was not pleasant for many people. They were relegated to a view of life from the porch. Suddenly no longer needed, their self-identity was called into question. The event called retirement was not necessarily something people looked forward to.

It was not until the 80’s that people started to look upon retirement as something more than idleness without purpose. The notion of the “golden years” came into being. Retirement was to be a time when people could count on Social Security and a pension for a life of travel, sunsets in faraway lands, and cocktails with umbrellas on a tropical beach. This view seems the equivalent of going out to eat with nothing but desserts on the menu. How could life get any better than that?

Have you fallen into the trap of seeing retirement as an event, where suddenly your life will transform for the better? Retirement beckons as a time of change and new opportunity, particularly if you have been unhappy in your job. You may find yourself working too hard and, without realizing it, sacrificing joy in the present for some imagined future that you hope will be better (I confess, I fell for this one.)

The idyllic, golden years view of retirement, may not be your ideal retirement; and pensions are becoming a thing of the past. Not to mention changes that may occur with Social Security in the coming years. If we have not spent considerable time thinking about and planning for the transition to retirement, it could be an event filled with disillusionment. Our idealistic and fanciful expectations may clash with a very different set of economic realities.

So how do we begin to figure out what retirement is, or should be? I found the following exercise enlightening, and I suggest you try it: write down your ideal day, from start to finish. What is really important to you? Look to those activities that bring you joy and satisfaction. What are the things you want to do more of or could not see yourself living without? Your menu for the future starts here, with what you value most.

I want to emphasize the focus on what you actually see yourself doing - what you want to be doing - in retirement, because we are a nation of “doers.” We don’t just sit around on a beach. We multi-task, we get stuff done. We are also concerned that we will have to work longer than the previous generation. But we are good at it. And how we define ourselves is tightly interwoven with what we do.

The menu of choices available to us is wide. I am willing to bet there are a number of you who have dreamed of starting a small business. Or you have a hobby that you would like to share with young people. There are so many ways to contribute to our communities that can provide a sense of meaning and purpose, as well as potential income. We have the opportunity to make choices about what we do in ways our forefathers never did. Few of us will inhabit a rocking chair on the front porch, unless it is by choice.

And what about economic reality? Now is a bad time to ask that question, but if you have been investing for a number of years you know that markets have their ups and downs. The present time is our cold, slap-in-the-face reminder that we need to pay attention to our investments. It is a reminder that our retirement funds are important and we should be careful stewards of these nest eggs. The bottom line is that by starting early with planning and investing there will be more time for your vision and your economic situation to converge, more time to make decisions that bring you closer to your definition of a well-lived retirement.

The definition of retirement is changing. Clinging to past assumptions or pre-conceived ideas will only hinder us from creating a future that reflects our values. If we see retirement as a process, it becomes clear we need to focus our attention on that process now. This does not mean that we sacrifice the joy and meaning of the here and now. Our futures may unfold in wonderful ways we haven’t even thought of. We can take charge of the future by creating our own unique vision. We can accomplish this by taking steps now, and consistently along the way. The result will be a sense of comfort that we are creating a retirement based upon our choices and values.



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Robert Valentine asked:


Will most baby boomers truly retire? The old mainstays of golf, grandkids and travel haven’t been enough to satisfy many retirees from previous generations. With the great amounts of energy and success that exist within the baby boomer generation, retirement isn’t likely to sustain their attention much longer than it did their parents’.

If the current generation of retirees is any indication, baby boomers and younger workers alike have a thing or two to learn from their older counterparts. In August 2005, Putnam Investments performed a retirement survey called “Working in Retirement.” Most of the retirees surveyed returned to work after an average of only 18 months of retirement. Of those who returned, 32% cited financial need, while 68% did so voluntarily.

The return to work may signal a problem that most retirees don’t anticipate: having something fulfilling to do. The keyword is fulfilling, and it’s the driving force behind a return to work. Of course, the added income and the potential health insurance benefits don”t hurt either. The phenomenon has become so recognized that In areas with large and increasing populations of retirees, like Arizona, many employers are catering to the retired crowd. Certain companies offer specific work opportunities crafted for retired people. In Tempe, Ariz., Wells Fargo has a special processing center that hires mostly retirees, whom they have nicknamed “Silver Bullets.”

The Putnam study didn’t focus just on work after retirement. It also emphasized several key reminders for younger workers. Even though the current generation of retirees is relatively financially stable, they still have concerns about running out of money, and they’re worried younger people will do the same. They emphasized starting retirement savings early, developing a retirement plan and saving as much as you can both through your workplace program and on your own.

Retirement could be the beginning of many great years. Working with a financial professional and having the proper plan in place is a key part of retirement. You should also keep an eye on healthcare costs and stay informed on issues that will effect your retirement. You should always be focused on your plan and be aware of some common pitfalls. That way, you can be prepared to make the best years of your life as good as they can possibly be.

No one expects the baby boomer generation to be content with life in retirement, which is why planning post-retirement activities, both work and play, is so important. And it’s just as important for younger workers to plan for such activities too. No matter your age, informing your financial professional of your desire to work and your hobbies and interests will make your retirement plan that much more complete.



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Robert Valentine asked:


It’s hard to call Lee Iacocca a failure. In fact, it’s nearly impossible.

The man who led Chrysler back from the brink of failure, and later helped raise millions of dollars to revitalize the Statue of Liberty, admitted years ago he had failed at something: retirement.

In a Fortune article in 1996, Iacocca shocked the nation by saying, “You plan everything in life, and then the roof caves in on you because you haven’t done enough thinking about who you are and what you should do with the rest of your life.”

If this sounds familiar, you aren’t alone. Most Americans are avoiding the talk of life after retirement, and even more are putting off the financial aspects of retirement planning. Even of those who realize having a plan is essential, many don’t bother to decide what they’ll devote their precious time to later in life. This is becoming a common problem that could be prevented with a little help.

Most financial professionals are interested in your life’s details a great deal. They want to help you retire in comfort, and in order to formulate a complete retirement plan, they need to know what your plans, goals, and aspirations are during your golden years. In short, they need to know exactly what Lee Iacocca didn’t. They’re just as committed to helping you reach your goals, both personal and financial, as you are.

When workers were asked about the most helpful tool for saving for retirement in the 2005 Retirement Confidence Survey, the largest percentage of workers surveyed (27%), said they believed advice from a financial professional was the most helpful. If those surveyed felt confident in their retirement plan, it was probably because they have a much more realistic outlook on the task of planning.

According to Investment News, Roper Public Affairs recently conducted an in-depth survey of future retirees for American Express Financial Advisors, Inc. The results were not only somewhat disturbing, but also very telling of the benefits of the help a financial professional can add to someone’s life.

Of the almost 1,400 adults surveyed, those who currently had help from a financial professional were not only more realistic in the amount they believed they needed to save for retirement, but had more saved, than those without help.

The survey asked men and women between the ages of 40 and 64, who made at least $75,000 a year, a series of questions. People who didn’t use the help of a financial professional, were 63% more likely to say they were “uncertain” about retirement. Their financial estimates of post-retirement income were also off the mark.

On average, those who didn’t have the help of a professional, overestimated the amount they’d need later in life, and also had a great deal less saved up. It’s not hard to see how the combination of those two factors can lead to a great deal of stress in an already stressful world.

One of the more serious results of the study came from the responses of those surveyed regarding working during retirement. No one expects the baby boomer generation to go quietly into the night. In fact, more baby boomers are expected to continue working than any other previous generation. But working while you are retired should be a choice, not a necessity.

Of those without professional advice, 22% said they expected they would be forced to work after retirement, rather than choose to work. Only 9% of those with professional help said they would be forced into work.

It’s no secret why people trust financial professionals when it comes time to figure out the future. Planning for retirement is more than just crunching numbers. To be certain you’ll achieve your goals during your golden years, you need more than just financial help. That’s why more and more people are turning to financial professionals for advice on both life and retirement planning. A professional will help you decide your financial and lifestyle priorities and find a plan that will help you live out your retirement in comfort. Working after retirement should be a choice, not a necessity, and a financial professional can make it possible.



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Yvonne Finn asked:


What is retirement planning?

A simple definition is: The setting aside of enough money during one’s income earning years to provide an income during retirement.

Seems simple enough, doesn’t it?

In years gone by it was possible for the money set aside in this manner and supplemented by Government assistance such as the Canada Pension Plan and Old Age Security, to provide for a comfortable and dignified retirement lifestyle.

Canadians have a Registered Education Savings Plan (RESP) for their child’s higher education; however, I believe we also need a Retirement Education Savings Plan, for everyone else.

Neither age nor income level should prevent us from taking an active and proactive interest in our retirement planning.

We have been alerted to the possibility that those of us newly retired or soon to retire will not be able to count on the Government support that our parents did.

We are on our own!

If we are to achieve and maintain a financially secure retirement we must become knowledgeable, informed and involved in creating the income that will support our retirement financial needs.

Fortunately, technology has made it increasingly easy for anyone with the desire and initiative to get as much information as is needed to begin to take an active role in their own financial planning and welfare.

Because we are living such longer and more active lives many of us will need almost as much income as we needed before we retired.

Then too, health issues can place a bigger financial strain on our retirement income.

So, if we do not want to live a limiting and financially restricted lifestyle when we retire, we must take steps today that will ensure we have the financial means to enjoy a secure retirement.

So, how will you handle retirement?

Burying your head in the sand is not an effective plan. If you plan to retire, you can and should learn about the many effective and efficient financial strategies and vehicles that will ensure that your “golden” years really are “golden”.

There are those in the financial industry who present a doom and gloom attitude about what they perceive will be the lack of sufficient retirement funds for a majority of future retirees.

I do not agree with this outcome as a foregone conclusion.

Achieving your retirement financial goals means understanding what you have today and how to use it to effectively plan for and create the security you will need in the future!



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Martin Lukac asked:


The IRS understands that you need to save for retirement. Often your nest egg builds faster if you don’t have to pay taxes on retirement savings until you are ready to retire and withdraw your money. The idea is that you will be in a lower tax bracket once you retire. The money is taxed as it is withdrawn.

Retirement accounts through your employer, such as 401(k)s and company sponsored IRAs, give you added benefits. Your contributions to your account are made in pretax dollars, which means that you are saving more than if you only contributed after-tax dollars. Because you deduct your contributions from your gross income, you are paying less in taxes.

There are other accounts, such as Roth IRAs, that allow you to contribute after-tax dollars. Your earnings grow tax free because you’ve already paid the taxes on your contribution. When you withdraw the money, you don’t have to pay any taxes.

There are several tax-advantaged retirement plans to help you save for your future.

Individual Retirement Accounts

Individual Retirement Accounts (IRAs) give you a great way to build tax-deferred savings for your retirement. An IRA is not an investment, it is an account. Within the account is a mixture of the investments that you want - stocks, CDs, mutual funds, cash and bonds. You can have any mixture of investments you want, and everything except options and other derivatives.

Employees can no longer plan for their future based on the promise of Social Security and pension plans. As corporate America has switched to “defined contribution” retirement plans, the American worker is on his own for saving for retirement.

“Defined contribution” plans specify the maximum amount an employee can contribute to a plan, but they do not guarantee any amount of payout. A “defined benefit” means that the company’s plan guarantees a specific payout. In general, the burden of funding your retirement is no longer with an employer, but with you.

The Traditional IRA

The traditional IRA is the most popular form of an IRA. Anyone under the age of 70 ½, with earned income, can open and invest in a traditional IRA. There are limits to how much you can contribute to your IRA each year.

If you don’t have a retirement plan at work, you will be rewarded for making contributions to an IRA. You can deduct your IRA contributions from your gross income for tax purposes. It lowers your Adjusted Gross Income, which means you are taxed at a lower amount of income. You earnings in an IRA will grow tax-deferred until you withdraw them at retirement.

Even if you are covered by a retirement plan at work, you can contribute to an IRA. The contributions are not tax deductible, but the earnings still grow tax-deferred.

You can begin withdrawing money, called taking distributions, beginning at age 59 ½ if the account has been open for at least five years. If you opened the account at age 55, you will have to wait until you are 60 to take distributions. You are required to begin taking minimum distributions by April 1 of the year after you turn 70 ½.

The disadvantage of IRAs falls here. The distributions are taxed as ordinary income.

Since IRAs are set up for your retirement and withdrawals before the age 59 ½ are taxed as ordinary income and charged with an IRS penalty of 10%. There are some exceptions. You may be able to withdraw money penalty-free before the age of 59 ½ to buy your first home, pay for higher education or extraordinary medical costs, or because of disability or death.

You can take a penalty-free loan from your IRA, but you have to start to repay the money within 60 days or pay taxes and a 10 % IRS penalty.

Roth IRA

Contributions to a Roth IRA are not tax deductible, you use after-tax money. The earnings will still grow tax free. Unlike a traditional IRA, you may withdraw your contributions at any time without penalty. You aren’t required to take distributions until you want to.

The limits of how much you can contribute to your Roth IRA are similar to traditional IRAs. As long as you have earned income that is equal to the amount of your contribution and you meet the income restrictions, you can open a Roth IRA. You are allowed to have a Roth IRA even if you already have a traditional IRA and a 401(k).

The biggest advantage to the Roth IRA is that your withdrawals are tax free. If you are a smart investor and manage your account successfully, this could really pay off for you. You can open either a traditional IRA or a Roth IRA through any brokerage firm, bank, credit union or mutual fund company.

You can either start a Roth IRA by opening a new account and funding it with new money or convert assets from a traditional IRA to a Roth. If you convert a traditional IRA to a Roth you will have to pay the taxes on the money before it goes into the Roth. You have to know how you will pay the tax on the earnings from the IRA. The money is taxed as ordinary income. You don’t necessarily want to use money from within the IRA to pay the taxes; you will sacrifice your investment potential by doing so. You can convert your IRA to a Roth IRA a piece at a time, giving you the ability to pay the taxes gradually.

Self-directed IRA

If you set an IRA with a brokerage it is considered a “self-directed” IRA. You decide how the money will be invested, in stocks, bonds, mutual funds, certificates of deposit or even in real estate.

Any brokerage can help you open a self-directed IRA. Brokerage websites have plenty of information on the necessary steps. You can either fund your IRA with new money or roll over a company-sponsored retirement plan into it. Make sure if you roll over your retirement plan that they send the check directly to the brokerage. If you receive the money in your name, you could be taxed and penalized by the IRS. The brokerage will give you all of the necessary details.

SEP-IRA (Simplified Employee Pension)

A SEP-IRA is a company sponsored IRA that can be opened by the smallest of businesses and the sole proprietor. With this plan, an employer can contribute to his or her own retirement plus to an employee’s existing IRA. The employee IRAs are owned and controlled by the employee. The employer is simply making contributions to the financial institution that maintains the IRA.

SEP-IRAs are subject to the same taxes and withdrawals penalties as are traditional IRAs. The employer receives a tax deduction for all contributions made. These IRAs are flexible. The employer doesn’t have to contribute on a regular schedule, every year.

SIMPLE IRA (Savings Incentive Match Plan for Employees)

Small businesses up to 100 or fewer employees who make at least $5,000 each can set up this company sponsored plan. This can be set up at a company designated financial institution or at any institution chosen by the employee. The SIMPLE is a savings incentive match plan. The employer matches or non-elective contributions to the employees plan.



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Subhash asked:


Knowing the average age at retirement for a given population provides important information for administering and analyzing public and private pension programs. The average age at exit from the labor force provides a reasonable indication of the age at which older workers retire. As such, it has provided a more precise measure of the trend in the average age at retirement in recent decades in the United States than, with the exception of the Social Security Administration’s time series, has been previously available.

Benefits of measuring the Retirement Age:

The cohort method of measuring the average age at exit from the labor force also provides a more accurate description of the trend in the average age at retirement for Women than did earlier studies, many of which relied on a crosssectional analysis of changes in elderly women’s labor force participation rates.

Constructing a time series of the average age at exit from the labor force permits one to see not only the direction of the trend in retirement age, but also the magnitude and pace of its change.

Doing so also enables one to estimate changes in the average duration of retirement. The ratio of the average number of years of work to the average duration of retirement has considerable relevance for financial planning in funded pension plans and systems, partly determining pension accumulation and disbursement.

In pay-as-you-go systems, the support ratio partly determines the balance between system receipts and expenditures, and the average age at exit from the labor force is a determinant of the support ratio. Thus, measuring the trend in the average age at exit from the labor force has considerable value for pension planning for individuals as well as organizations, public and private.

An important point that is not fully appreciated is that the retirement ages assumed in studies of retirement preparedness strongly affect their estimates of preparedness. Most studies estimate how financially well prepared households will be for retirement when their primary workers retire at a fixed age–typically 62 or 65. However, barring disabling injury or illness, workers can choose when to retire, just as they choose how much to save. The longer they work, all else being equal, the more prepared for retirement they are likely to be. Because most studies of retirement preparedness do not treat retirement age as a matter of choice, they tend to overstate the gravity of potential shortfalls in retirement assets.



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Bomapo asked:


I have to write a essay and I am clueless about this topic. I’m supposed to tell why its important to invest money for retirement and why its important to diversify invesments among different asset classes. Can anyone clear things up for me?

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