Category: Retirement

Retiring without Worry

If you’re like most people, the recent market decline has done more than cause your investments to decrease substantially. It’s probably also caused you to rethink your retirement plans. After all, the only thing worse than retiring later than you planned is to retire and quickly run out of money.

But how can you ensure you’ll have sufficient funds to last your entire retirement? So many of the variables used to calculate how much you need for retirement seem uncertain. What is a reasonable rate of return for your investments over the long term? How long will you live, knowing life expectancies are increasing? How much can you count on from Social Security and pension plans? If you’re concerned about running out of money during retirement, then you need to be very conservative with your retirement assumptions. Some tips to consider include:

Assume your retirement expenses will be at least 100% of your current expenses.

Most rules of thumb indicate you need between 70% and 100%, but figure on 100% to be safe. Nowadays, retirees want to travel, pursue hobbies, and live an active lifestyle. That generally means you’ll need the higher end of these estimates.

Add a few years to your life expectancy.

You should probably plan on living until at least age 85 or 90. If your family has a history of longevity, add a few more years to these figures. While you may find it hard to believe you’ll live this long, you don’t want to reach age 75 or 80 and find out you’ve run out of money. At that point, you might not have the option of returning to work.

Reduce your estimates of Social Security benefits.

The Social Security Administration sends benefit statements every year around your birthday, telling you how much to expect in benefits. While the Social Security system is currently in sound financial condition, that is expected to change after all the baby boomers retire. To be safe, count on benefits that are somewhat less than the Social Security Administration is estimating and don’t plan on adjustments for inflation.

Cut back on your living expenses now.

This has a two-fold impact on your retirement. First, it frees up money to set aside for your retirement. Second, you get used to a lower standard of living, which should also reduce your expected lifestyle for retirement.

Reach retirement with no debts.

Mortgage and consumer debt payments consume a significant portion of most people’s income. Pay off all those debts by retirement and you significantly reduce your cost of living.

Forget about early retirement.

Saving enough to last from age 65 to 85 or 90 is daunting. Trying to retire at age 55 or 60 is just not practical for most individuals unless they’re willing to reduce their lifestyle significantly. Working a few more years can go a long way in helping fund your retirement. Those years are typically your highest earning years, so hopefully, you’ll save significant sums during that period. Also, every year you work is one year you don’t have to support yourself with your retirement savings.

Consider working during retirement.

Especially during the early years of retirement, you should consider working on at least a part-time basis. Even modest earnings can help significantly with retirement expenses.

Plan on making conservative withdrawals from your retirement assets.

Don’t plan on taking out more than 3% to 4% of your balance annually. With that level of withdrawal, your funds should last for decades.

Investing In Gold As Part Of Retirement Plan

It has been hundreds of years since people have realized the importance, and value of gold around the world. As it is a component in several industries, the demand for gold has actually increased with the passage of time. Now it is also considered a good store of value with more, and more investors opting for gold. This option is worth considering for anyone who is retiring.

The recession and economic downturn have de-motivated the investors; everyone is doubtful about making any investment. However, gold has maintained and even increased its value during this recession period. It is the least affected, and recession-proof investment for retired people, who can maintain a stable, and wealthy living conditions in their old age.

The stock market did collapse, and many big investors dropped from billions to pennies. Any person, near to retirement, is now frightened to make any investment in the stock market. On the other hand, the prices of commodities are rising day by day, and inflation rates are likely to go higher.

Gold is the wisest investment now for the people, especially for retired people who do not have many options to try. Any quantity of gold can contribute to a good saving at the end of the year. Gold bullion value rarely depreciates and makes it an ideal choice for the masses.

All precious metals, including gold, are very smart choices of investment, as they bring a measure of stability to the investment of an individual, or retirement plan. It brings a degree of security to the plan. Other avenues of investment like mutual funds, stocks, and bank deposits are not recommended, as they may deteriorate in value with the changing rates of interest. This is the reason why gold is considered valuable by all as it only increases in its worth with time.

The security, protection, stability, and profitable value of gold cannot be challenged by anyone, even today when prices are increasing. Currencies such as the US Dollar and Pound Sterling may depreciate, but gold never does. Investment into gold is a part of the contingency plan of many investors, and especially those looking forward to retirement.

Different ways by which, you can add gold to your retirement investments are as follows; Gold coins and bullion can be bought from a dealer, but for this, you must have an arrangement of a safe place. You can buy shares of an exchange-traded fund, or you can own individual gold mining stocks. Investing in precious metals mutual or exchange-traded funds is also an option for investing gold. Finally, you can invest in commodities funds, as part of your overall asset allocation strategy.

Those people who invest in gold do not turn all of their wealth or life savings into gold stocks; they simply do it as part of their plan to safeguard their assets to have a lucrative income in the future. This can only be accomplished if a sensible retirement plan has been designed. The fluctuations in the market can never be predicted. Whenever the market looks to be in a position where the demand would increase, the smart investors start to invest. In simple terms, investment in gold is a secure move that is likely to get for you a steady flow of profits in the future.

College Savings vs. Retirement Savings

If you’re like most families and have limited financial resources, should you put your money toward your child’s college education or your retirement savings?

Although it can be nerve-racking to make that choice, while you can borrow money for college, you’re on your own when it comes to retirement. Here are a few reasons why parents should consider saving for retirement before saving for their children’s college costs:

  • Parents have to think of college and retirement as two competing needs for their money. You can’t think about one without the other.
  • Saving for college is optional, but saving for retirement is not. There is no such thing as a college loan for retirement. You can borrow for college—your kid can borrow for college—and they have a whole life to pay it off.
  • Talk to your kids early on so they know what their responsibilities are. No one likes surprises.
  • If you’ve already promised your child a college education, revisit the conversation. Explain the things they can do to help out, including earning scholarship-worthy grades or going to a state school instead of a private one. Also, young adults would probably prefer to finance their college education themselves rather than having to support you during your retirement.
  • People value things more when they pay for them — so you’re doing your children a favor by giving them the responsibility of paying for college. You are teaching them responsibility and the value of that education and a dollar.
  • If you still can’t wrap your mind around it or feel too guilty not paying for college, save for retirement while your children are young. Then, when they reach college age, put the brakes on for a bit and start giving them some money.

Now, we are not saying that you should not give your kids any money. Grades are important, and you want them to worry more about reaching for a high GPA then making minimum wage at Burger Barn. If you have a good retirement savings plan, then you can probably help them out during college years without sacrificing your golden years. Just use some common sense.

Retirement Savings Planning

Most people look forward to retirement. After years of hard work, you’ll finally have time to take that cruise or those golf lessons. You can travel across the country or volunteer for a cause that interests you. Of course, these things cost money.

Here are some vital steps you need to take to secure your financial future:

  • Invest in tax-deferred vehicles, like a Roth IRA, traditional IRA, or 401k. Keep in mind that this is just an account—you then have to take that money and invest it in the market.
  • We recommend something we call the 15 percent solution. You ought to be saving at least 15 percent of your salary every year. Don’t let that scare you, though, as the 15 percent includes employer matches. Depending on how much your employer contributes to your 401k, you could be pulling as little as 7 percent out of your pocket.
  • Take into consideration when you started saving. If you start saving when you’re ten years away from retirement and can put in more than 15 percent of your salary, do so to play catch-up.
  • Look into life-cycle funds, which will take your money and make investments based on how much time you have left before retirement. The closer you get to that date, the less risky your investments will be.
  • Look at online calculators to help you come up with your magic numbers.
  • The key to making your money last is the amount you withdraw the first year. Set yourself up so that in the year you start withdrawing, you take out 4 percent. Then, every year after, multiply the previous year’s withdrawal by 1.03 to keep up with inflation.

When Should You Start Social Security Benefits?

When should you elect to receive Social Security benefits – at age 62, full retirement age (which is gradually increasing from age 65 to age 67), or age 70? The decision will permanently affect your Social Security benefits. Start at age 62, and your benefits will be permanently reduced by 20.8% to 30%, depending on your year of birth. Wait until age 70, and your benefits will increase by 3.5% to 8% annually, depending on your year of birth.

Since Social Security benefits probably won’t be sufficient to maintain your current standard of living, first decide whether you have sufficient retirement resources even to consider retiring at age 62. If that is not an issue, keep in mind that it will take approximately 12 years for someone electing benefits at age 65 to receive the same total benefits as someone electing reduced benefits at age 62. It takes approximately 11 to 14 years for someone electing increased benefits at age 70 to receive the same total benefits as someone electing benefits at full retirement age. You may want to calculate precise numbers for your situation since your full retirement age and the percentage reduction in benefits at age 62 will impact your answer.

For most individuals, the long payback period may make it worthwhile to start benefits at age 62. And in fact, more than 60% of retirees elect for benefits before age 65, while less than 2% wait until age 70 (Source: U.S. News & World Report, June 3, 2002). But there are a couple of situations where you might want to wait until full retirement age.

If you plan to continue working, consider delaying benefits. Individuals who have attained full retirement age can earn any amount of wages without losing any Social Security benefits. However, between the ages of 62 and 65, you lose $1 of benefits for every $2 of earnings over $11,520 in 2003. Between the ages of 65 and your full retirement age, you lose $1 in benefits for every $3 of earnings over $30,720 in 2003. Individuals earning substantially more than these limits will probably want to wait to start Social Security benefits.

If your spouse is significantly younger and is counting on your benefits, you may also want to delay benefits. While you are alive, your spouse is entitled to the larger of 100% of his/her benefit based on his/her earnings or 50% of your benefit at full retirement age. However, if you elect benefits before the full retirement age, your spouse’s benefits will be reduced by a higher percentage than your benefits were reduced, provided he/she obtains benefits based on your earnings. If you delay benefits past full retirement age, you receive increased benefits, but your spouse’s benefits remain the same, provided he/she obtains benefits based on your earnings.

After your death, your spouse’s benefits are based on your benefits and the age he/she elects to receive benefits. He/she receives 100% of your benefit, provided your spouse is over the full retirement age. If he/she is younger than full retirement age, your spouse receives between 71.5% and 100% of those benefits. Thus, the larger your benefit is, the larger your spouse’s benefit will be after your death.