Let’s Talk About Retirement

S M asked:


I have heard of target retirement funds, but do they give the best yield and do we still have to re balance the account every few months and manage the account like one would do if it wasn’t a target retirement fund??

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Jim Scherrer asked:


During the past 15 years, International Living magazine has calculated its Annual Global Retirement Index; a resource intended to assist retirees and future retirees in evaluating and comparing the world’s most popular retirement destinations. It is based on a number of criteria, giving various weights to each, depending on its importance to retirees. Listed below are those criteria considered with their individual weighting:

• Cost of Living—20%

• Health Care—20%

• Special Benefits—20%

• Real Estate—15%

• Entertainment, Recreation, and Culture—10%

• Climate—5%

• Safety and Stability—5%

• Infrastructure—5%

Believe it or not, until this year, Panama had topped the list for the past six years. It still has plenty to offer retirees, however this year, with 30 countries being analyzed and ranked, it fell to fourth position. Ahead of Panama in third position, was Italy with its beautiful cities, its fine weather, and of course, its historic sites. In second position was, of all countries, Ecuador, which moved all the way up from the tenth position last year. Ecuador offers an extremely low cost of living, great weather, beautiful land, a growing economy tied to the US dollar, and a stable political environment. It might be a well kept secret, but Ecuador is becoming a land of opportunity and retirees are taking advantage of it.

Now, for the number one ranked country in the world for retirement; MEXICO! Aside from the fact that Mexico is extremely convenient to the US and Canada, that Mexico’s Senior Citizens´ Benefits Program offers up to 50% discounts on many services to retirees over the age of 60, that the Mexican government has enacted many new laws encouraging foreign investment, Mexico has become an incredible place to enjoy retirement, offering the quality of life that North Americans are accustomed to with numerous extra benefits.

(As a side note, a few years ago when the Canadian dollar was at its weakest, Canada ranked in the top ten. However as the loonie has strengthened, Canada has slipped well out of the top ten this year. For reference sake only, the US ranked 19th this year!)

The major Mexican inland retirement communities are located in San Miguel de Allende, Guanajuato, and the Lake Chapala / Ajijic area. For the most part, these inland retirement communities are located in beautiful colonial cities with moderate temperatures year round. Most of the modern amenities and activities are available to retirees in these retirement cities with a very attractive cost of living. Being located inland, these retirees can purchase and own real estate with title as they would in the US or Canada.

For those desiring magnificent ocean views, the Pacific coastline offers many advantages over the Gulf of Mexico coastline; the major one being protection from storms. The entire Yucatan Peninsula area, including the Cancun and Cozumel areas are great for vacations; but due to its exposure to hurricanes, it is not considered by many to be ideal for retirement. On the other hand, the Pacific Ocean coastline seldom sees troublesome storms and offers more than a thousand miles of incredible Pebble Beach like views with a climate similar to that of Hawaii.

Pacific Ocean coastal cities such as Mazatlan, Manzanillo, and Acapulco are somewhat popular for tourists, but have become quite industrialized and commercialized and therefore not really considered as ideal retirement cities. The most desirable retirement locations from north to south along the Pacific Ocean are La Paz and Todos Santos in Baja, Puerto Vallarta, Ixtapa / Zihuatanejo, and Puerto Escondido.

La Paz and Todos Santos in Baja, Ixtapa / Zihuatanejo, and Puerto Escondido are more exposed to the elements than Puerto Vallarta, which is tucked behind the Sierra Madre Mountains next to Banderas Bay, safely protected from Pacific storms coming out of the south. Also, because Ixtapa / Zihuatanejo is approximately 500 miles south of Vallarta and Puerto Escondido is 300 miles even further south, the “high season”, or the time during the year with perfect weather conditions, is reduced from 7-8 months to perhaps 6-7 months. A month extra per year in Paradise is often considered to be substantial to retirees!

Using the above logic, it’s no wonder why so many retirees have migrated to Puerto Vallarta. This beautiful tourist resort area has become home to thousands of North Americans that have traveled the world, could afford to live anywhere on the planet, and have chosen Vallarta as their winter, if not full time, retirement destination.

Located at the same latitude as Hawaii, Puerto Vallarta has a perfect climate with an average daily temperature of 73°F from November through May with virtually no chance of rain. With a population of approximately 350,000 inhabitants, Vallarta now has a new and growing infrastructure including roads, water treatment plants and distribution systems, power plants and distribution grid, airport, maritime terminal, hospitals, university, etc.

High speed internet, satellite TV, VOIP telecommunications, and US newspapers and magazines are all available in Vallarta. Most of the mega-stores found in the US and Canada have come to Vallarta including Sam’s Club, Wal-Mart, Costco, Home Depot, Office Depot, Staples, and of course, every fast food chain restaurant imaginable! Vallarta now has seven world class golf courses with three more either in the planning stage or currently under construction. There are hundreds of tennis courts, world class deep sea fishing, and every other activity available that you would expect in a city of this size. There are numerous new cinemas, theaters, and hundreds of fine restaurants.

Due to the explosive growth of Vallarta and the influx of North Americans, it is safe to say that its entire economy is based on tourism and the retirement of North Americans, thus creating thousands of new construction and service related jobs for the locals. It has also created an atmosphere where speaking English has become a prerequisite for a decent paying job. Therefore, most of the younger Vallartenses are now becoming quite fluent in English. The inability to speak Spanish is certainly not an obstacle to retiring in Vallarta! Also, because the economy is based on the North American dollar, safety is of prime concern to the locals. You will not find a safer, more hospitable city of this size anywhere. In fact, this was clearly revealed in a survey taken by Conde Nast magazine, where Puerto Vallarta was ranked the friendliest resort destination in the world.

Now, let’s return to our quest for the top retirement haven in the world. If we can accept what the latest surveys, polls, and indices suggest, Mexico is the country and Puerto Vallarta is the city.

We’ve owned property in Vallarta for almost 25 years and have lived here as permanent residents for over ten years and can attest to its magical characteristics resulting in a quality of life that can’t be surpassed anywhere in the world. The growth that we’ve witnessed since 2000, when the PAN administration took power, has been truly amazing; so much so, that the head of the local Chamber of Commerce has projected the population of Vallarta will reach 600,000 by the year 2015. There are currently more than 7,000 new condos currently under construction with well over 20,000 more planned in the future by Fonatur, the Mexican Tourism Board. Because real estate sales in Mexico are generally done on a cash basis, this economy has not been affected by the mortgage related problems seen in the US. Real estate values have tripled since 2000 and continue to appreciate daily. Owning property here has surely been an investment of a lifetime for us.

If you’re a baby boomer, either recently retired or about to retire, you owe it to yourself; make PV your next vacation destination and consider all the qualities it has to offer. You’ll definitely be impressed with this glorious Paradise along the Mexican Riviera and will probably agree, Puerto Vallarta is the best place in the world to retire.



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John M asked:


Retirement within a year and would like suggestions for secure investments that offer a reasonably high yeild.

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Lee Dobbins asked:


Everybody has an idea of what their dream retirement will look like. However, do you have the math to back it? How will you pay for your dream retirement is the big question. Lets talk retirement investing. Estimate yearly expenses at $45,000. On top of that add pension and social security at $25,000. Add $5000 for items you covet, like that Europe trip or the costly home theater system.

Add up everything and you need about 1.2 million dollars. Now that’s a lot of money. Before you reach for the anti-anxiety pills consider this - you now have a lot more tools than before to pull in the money in your retirement investing plan.

This article lays out a three part strategy for getting where you want. It involves more active (aggressive) investing. Also, cutting back on spending when the markets are tough and spending more when the markets are good.

Stocks - You need the growth power of stocks in your investment portfolio. Current wisdom says, subtract your age from 100 and invest that percentage of money in stocks. The growth power of stocks is needed to add to your savings and make sure you have money that lasts a lifetime.

Investment firms are beginning to understand this reality today. It may seem risky to rely too much on stocks but it is more prudent than a timid approach. If the market shows an average performance, your retirement investing income should be a huge stash of money

with a couple of years of income thrown in.

In retirement investing, stocks provide greater protection from inflation than bonds. This helps you maintain your standard of living. However, investments in stocks should not be overdone. Investing over aggressively may lead to far greater losses in stocks than is normal. Be sure to decrease stock investment as you age.

Apart from smart retirement investing you will need to tap other assets. Some people decide on working after retirement. Whether this is a pastime, for fun or for the money, it could prove to be an important source of income. This has other benefits as well. You will not need to tap into your savings to run the house. This lowers the risk of your portfolio running dry.

Your home is another important retirement asset. It is good to know you have a cushion in the form of value of your house. You can use it by buying a less expensive house after selling this one, a reverse mortgage or a home equity line of credit.

Managing your spending is the next most important part of retirement investing. It is important to keep a flexible attitude on spending. Advisors recommend you limit your initial withdrawal after retirement to 4 percent of your portfolio. After this, increase the dollar amount annually for inflation. This four percent is not a random amount. It provides an assurance that your savings will last for 30 years. Spend more when your portfolio performs well and spend less when it performs poorly.

The willingness to make adjustments in spending is an important part of retirement investing. There are no guarantees in retirement, much like life itself. However, with the right saving and disciplined spending, you have a much better chance of living out your dream retirement.



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Eric Bayne asked:


If you are one of the many retired people managing their own self directed accounts, you need to find yourself a good retirement calculator. But even if you’re young and just starting to work, you need to begin planning for your future retirement. How much money will you have to retire on if you continue to save and invest at your current rate? This is what a good retirement planning calculator will help you to figure out.

Very few things are certain in life. Not your current salary. Not your current rate of return on your investments. Not your good health. All of these things are variables that can change in an instant. Nevertheless, the purpose of creating a retirement plan for yourself is to help to give yourself the best odds of being able to live the good life when you retire. A retirement calculator will help you to do this, but you need a few prerequisites to get started.

How old are you now and when do you plan on retiring? The bigger the distance between these two figures, the greater the choices you have in your options and the greater the odds are that you will be successful. On the other hand, if you are age 60 and plan to retire at age 65, a retirement calculator will not help you much. It will be able to tell you what your income will be when you retire, but aside from that, it won’t be of much use. On the other hand, if you are 30 years old and plannig to retire at age 65, a retirement calculator can help you a lot. It can tell you what interest rates you need inn order to meet your desired income targets. It can tell you if you can accomplish your goals with conservative investments or whether you need to take a chance on riskier investments that will normally compound at higher interest rates. An excellent retirement calculator will also let you try out different retirement dates to see how they will impact your future income. You may find that you can retire much sooner than you thought you would.

What is the minimum amount of money you need at retirement? This is a different question than how much money you would like to have. The minimum amount calculation takes into account the cost of basic human needs and services such as - food, shelter, health care, and so on. A good retirement calculator will look at what you’re spending now on these items and extrapolate their costs into the future, taking into account inflation and other cost of living variables such as age. The calculator may alert you that what you thought was necessary to maintain your current standard of living will be, in fact, woefully inadequate 35 years from now. Having this knowledge in hand will let you adjust your savings plan in time to make a difference.

Once you’re retire, how much money can you safely withdraw without significantly impacting your principal? The principal is your retirement lifeblood. If it disappears, so does your monthly income. The best calculators will let you “play” with the principal amounts and desired monthly income amounts until you are satisfied that the periodic amounts you withdraw, will last you for your lifetime.

Everyone, who is not yet retired, should plug these retirement variables into a calculator at least once a year to ensure that their retirement plan is still on track. You do not want to discover any negative financial surprises when you are finally ready to retire. In fact, even if you are retired, it’s always a good idea to periodically take stock of and reassess your financial condition.



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Josh Neumann asked:


Many people forget during their retirement planning to plan for each and every expense that will arise during their retirement. This is exactly the reason the vast majority of Americans get to their retirement years and find they don’t have enough money to retire on.

According to the Social security administration, 95% of people will not be able to retire comfortably. Unfortunately, this stat could have been alleviated by most people from some simple and thorough planning for the costs they will be faced with after retirement.

Of course, food cost is one of the biggies that most people overlook when planning this important stage. Most people get so caught up in planning for their housing, cars, and other larger expenses, they forget about this everyday, seemingly trivial expenses. Obviously, as I’m sure you are aware of now, food costs can really add up if you’re not careful.

In planning for these food costs for retirement, first of all, sit down and figure out exactly what you spend on food every week now. Now figure out how much that figure is per month, and then per year. You should already be doing this process now in keeping track of your expenses, and most people do a very poor job of tracking their expenses before retirement as well. However, that’s another story for another day.

Once you’ve gotten this figured out, now simply multiply that number by about 25 or 30 (usually safe) and you’ve got about how much money you will need for your food expenses when you retire. Of course, this number isn’t perfect, depending on how long you live once you retire. Obviously, you don’t know this, so you have to at least do what you can.

Once you know this, that’s great, but you also have to take into consideration your other expenses as well. In your retirement planning process, every expense must be accounted for; without this clarity, you can never achieve your retirement goals, whatever they may be. Unfortunately, it’s this same lack of clarity that stops most people from having enough money when they retire.

In this process, there is a lot of great retirement planning software that will make this stage much easier. Also, you might try doing a quick internet search for retirement planning calculator, and you will get up literally millions of results. There are many financial companies that will offer you these calculators for free so that you use them and hopefully get hooked on ultimately hiring that company and their services. Whether you do this or not, you can certainly still benefit from the free software available.

Now, once you know this info, you need to figure out how you plan on getting that money to live on. For most people, this will be achieved thought the stock market, whether it be mutual funds, savings bonds, foreign currency exchange, futures, or regular stock investing.

Of course, you can also invest in real estate and other assets as well. If you aren’t financially educated and don’t know how to tell a good investment from a bad one, you’ll either want to read books and educate yourself, or hire a financial advisor to tell you the best investments to put your money into. Obviously, becoming financially educated yourself is certainly preferably, because you will have the opportunity to spot investment opportunities on your own.

Remember, nobody else will ever care as much about your financial situation as you, so being able to do this is invaluable. However, the most important part at this state is to either use your own or somebody else’s expertise to help you find the top investment vehicle to help you achieve your goals.

Once you’ve done these planning food cost for retirement and other expenses steps, and decided on the right investment vehicle to get you there, you are well on your way to achieving your goals. Now it’s simply time to take action.



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John McRae asked:


With the recent losses on Wall Street many investors are wondering if the goal of achieving a higher rate of return than can be attained with a traditional risk free savings plan is worth the sleepless nights that many are now facing.

While market fluctuations are a normal part of investing the huge losses suffered in retirement plans have made it clear that diversifying your retirement portfolio is now more important than ever. By choosing high quality investment securities, having a cash reserve, and seeking ways to earn a supplemental retirement income you will be able to secure your retirement future.

Many people become intimidated when it comes to their retirement planning. They believe that they will need a professional investment manager to oversee their retirement portfolio. By using the K.I.S.S. principal of investing by using common sense, patience, reasonable expectations, patience and discipline you will be able to take control of your retirement future. Keep it simple should be the basis of any investment decision you make.

While planning for retirement you should focus on multiple income streams. Having only one source of income in retirement is the biggest mistake many investors make. Many people have seen their retirement savings plummet and have no extra source of income. A successful retirement strategy will include income from multiple sources.

Hopefully by the time of your retirement Social Security will still be available. However, it would be wise to not plan on it as a income source and if it is still around than it will be extra retirement income. Even with the losses recently suffered in all likelihood your 401k will still be your main source of income but you should begin to seek additional sources now.

As the housing market has dropped and home foreclosures have increased this has opened the door for supplemental retirement income. If you have the available funds than purchasing real estate and renting it out has always been one of the best sources of income.

If you do not have much in available cash than starting a home business is another excellent source of supplemental retirement income. You can start a Internet home business with very little money and over time begin to earn substantial income from it. Depending on the type of home business you choose you may even earn residual income for many years after you retire.

It is important to remember that your retirement is your responsibility. The decisions you make now, regardless of your age will effect how you are able to live in the future. If you use the K.I.S.S. principal for investing you will be able to enjoy your golden years with plenty of supplemental retirement income.



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Amanda asked:


I am 25 and just started my new professional job, and the company I am with offers matching up to 10% of my annual salary. I went ahead and decided for them to deduct 10% out of my pay for this purpose (so I’ll get 20% annually), but with student loans to pay, and tons of taxes being taken out, I am wondering if this much is really necessary. What is the normal percentage someone at my age should save per year in order to have a secure retirement plan?

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Sam Williams asked:


The final quarter of the 20th century (especially the second part of this period) has seen the US economy being hit by one of worst phases of recession since the period of Great Depression (in the 1930s). Stock markets have crashed during this period, with an implosion of housing values and rates of returns from bonds being drastically lowered. All these have adversely affected the retirement plans of individuals (those who are planning for retirement and those who have already retired). Hiring a competent financial planner who is also an expert retirement advisor is, hence, of utmost importance to keep the retirement plans stable. A financial advisor can help his/her clients assess the effect of the economic downturn on retirement plans, and take steps accordingly.

A retirement planner generally recommends conservative measures to help clients survive the hostile impact of recession on retirement plans. Generally, individuals have pre-determined retirement plans that they plan to follow. However, once a depression sets in the economy, they need to re-evaluate their retirement plans, and modify them according to the market conditions. Finding a financial planner comes in handy during this period, for expert assessment and advice on retirement planning. With numerous financial planners offering their services, individuals need to wonder about how to find a financial planner either.

Recessionary market conditions have several adverse effects on retirement planning. Some of such effects, as would be pointed out by any expert retirement advisor, are:

a) Returns on stocks and bonds: The rates of return as well as the yields from them go down by significant amounts during a recession. During these periods, investment in high-risk financial instruments, hence, should be avoided. In order to keep plans for retirement stable, the contributions to retirement funds should be increased during a phase of depression,

b) Timing one’s retirement: Faced with recessionary conditions, individuals may tend to push back their dates of retirement. This may not be a sensible decision, particularly if the recession lasts for a lengthy time-period. Instead, transferring funds and assets to fixed, secure investments, selling off housing property makes more financial sense. Retirement dates should not be pushed back either,

c) Reduction in spending levels: Faced with acute recessionary forces, the US Federal Reserve has been forced to significantly cut down on the key interest rates. This has resulted in an upward spiral in prices of almost all products, denting any pre-determined retirement budgets one might have had. In such a situation, the only prudent option seems to be a significant reduction in consumption and spending levels. This would help to keep the retirement budgets more or less intact. Inflationary conditions, which are on the rise during these periods, can also be tackled in an effective manner in this way.

Retirement plans are, broadly speaking, significantly affected by a recession in the market. However, it is possible to minimize, if not totally eliminate, the impacts of depression on one’s retirement plan. For this, one needs to hire a top retirement planner, and follow the above-mentioned tips. A retirement advisor can surely help his/her client maintain a well-designed a prudent retirement budget.



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Srini asked:


I feel a retirement age (may be 35) can be fixed for players.
Most of the international players above 35 is not fully fit and could not give their 100% for their team. They should make way for youngsters.

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