Financial Planning, Retirement Issues


Retirement or Independence

February 7th, 2017 ernie Posted in Financial Independence | No Comments »

Retirement or IndependenceGone are the days when consumers expected to retire at age 65! Many are working far past this age to make ends meet. Many are forced to retire due to health issues or layoffs at work. They are all struggling to live their lives and have enough money to even put food on the table.If you are 55 to 70 and reading this post it is probably too late to benefit from the concepts expressed further in this post. You will need to keep working and learn to live on what you can earn and what you have managed to save. Younger consumers still have time to reach financial Retirement or Independence and make their own decisions regarding when or if they retire.

Retirement or Independence

Fundamentally, consumers should aim for financial independence by the time they are 45 or 50. This means they have sufficient funds  to live on comfortably for the rest of their lives. It does not mean they need to retire or will retire.

They might be perfectly happy doing the jobs they are doing. They may decide to pursue their dreams whatever that might be. The point is that they have the freedom to make these decisions and not worry about saving enough money for the time when they stop working. How do they do that?

Start saving and investing as soon as you begin working. Invest a minimum of 10% of your income, manage it and reinvest the dividend and interest income. Let it grow and if you do a good job at saving and managing you will reach financial independence by the time you are 45 or 50.

By all means keep working if that is what you need to do. The important thing is you can decide what your next career or life style will be without worrying about earning money.

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How do I know if I have enough Money to Retire

January 21st, 2017 ernie Posted in Financial Planning | No Comments »

how do i know if i have enough money to retireHow do i know if i have enough money to retire? This is the big question that many people ask themselves as they near retirement. Should I work a few more years? Or can I retire now? What quality of life will I have in retirement with the money I have? There are so many questions that we all have and it all comes down to money for many people. But there is much more to it than just money. Sure you need to have sufficient savings to allow you to live comfortably. You also need to have friends, family and things to do. Your activities will need to be interesting, perhaps challenging and give you something to look forward to every day. But let’s get back to the main question, how do I know if I have enough money to retire?

How do I know if I have enough Money to Retire

Start with developing a budget. You will need to know how much savings you will have when you retire and how much income that it will generate from interest, dividend and mutual fund payments. Next you need to calculate your income from private company pensions and government pensions. When will you receive these pensions?

Your expenses are next. Add up all of your regular monthly and annual expenses for everything that you have. Utilities, food, rent, taxes, clothing entertainment etc. Compare your annual income with your annual expenses to get the first indication whether you will have enough in retirement.

You may need to make some adjustments. This could include working longer to save more money. It could also include reducing your expenses. Perhaps you will need to eat out less. Maybe reduce your utilities or downsize to a smaller less expensive home. You also may need to make adjustments to accommodate the objectives you have with regards to travel, etc.

Work with an expert to gain help with this process to answer the question and plan your future retirement.

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Are You on track to a secure retirement

December 21st, 2016 ernie Posted in Retirement Planning | No Comments »

Are You on track to a secure retirementThe question, are you on track to a secure retirement is a common one that many people have. They may be nearing retirement or their company is about to provide a special retirement plan. They wonder if they should take it and whether they will be OK financially in retirement. Whether you are retired about to retire or have a few years yet to work it is never too late to assess whether you will be comfortable in retirement.

Are you on track to a secure retirement

One of the best ways to answer this question is to build a retirement budget. First you should identify where your income is going to come from. Your income may include company pensions, government pensions, income from investments, and other miscellaneous income that is on a recurring basis.

Next you must consider all of your expenses. Your expenses will include all of the regular monthly expenses such as heat, Hydro or electricity, utilities such as cable TV, telephone etc. You should also include your taxes and mortgage payment if you have one. Your home is going to need maintenance over the years and you should budget an amount each year for maintenance of your home. The same applies to your car and whether you have a car payment or car maintenance, insurance etc. this should be part of your budget.

Once you have totaled up all of your income and expenses you will have some idea as to whether you will have sufficient money during your retirement.You may find that your expenses are going to be greater than your income. You will either have to work longer or cut your expenses. You may also decide that you will increase your savings if you have time.

Another area that we did not mention is all of your expenses associated with your free time. You now have a great deal of free time to pursue hobbies, travel and even go back to work. Depending on what you decide he may need to budget for this activity.

A good plan developed early, reviewed regularly and adjusted as needed will help to ensure a secure retirement.

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How much do I need to save to retire a millionaire

November 21st, 2016 ernie Posted in Pension Plans | No Comments »

How much do I need to save to retire a millionaireEveryone sometime in their lives asks the following question? How much do I need to save to retire a millionaire? The answer is not that hard to come up with. It really depends how old you are and how much you have already saved for retirement. Consumers who start early and stick to it, have an advantage. Their savings work for them and their investment income continues to build towards their retirement objective. In the following paragraphs we will give you some examples. You decide where you are and whether you can meet the objective of having a million dollars by the time you retire.

How much do I need to save to retire a millionaire

Assuming a 10% average annual rate of return which is the historical average of the S&P 500. Assume you are going to 40  years, a 25-year-old could build a $1 million retirement nest egg by saving just $175 a month in their investment accounts. Their total contributions over those 40 years would amount to less than 10% of that total, just $84,000. All the rest would come from the income from your investments.

If you are 35-years old and starting from scratch, your monthly contributions would have to be more than twice as great as a 25-year-old’s. Saving $470 each month in your retirement investment accounts over the next 30 years will yield $1 million, assuming the average 10% annual rate of return. Your total contribution over the years would be $169,000.

At 45, if you’re starting from scratch, then your monthly payments will need to be significantly higher. To reach $1 million by age 65 with 10% annual growth, you’ll need to contribute $1,330 a month. Your total contribution will be about $319,000.

As you can see it pays to start early! During your 40’s and 50’s it can be your prime earning time where you make the most money. However what if you get laid off or there is a health issue. Or perhaps you don’t like your boss. Would you not like to have the flexibility to make your own decision regarding when you retire. Start saving now!

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Your 5 Point Mid Year Financial Checklist

October 21st, 2016 ernie Posted in Financial Planning | No Comments »

Your 5 Point Mid Year Financial ChecklistMany consumers are pretty much focused on their current life challenges. Thinking ahead about retirement, emergencies etc are just not on their radar. Until, of course, something happens to make them realize that retirement is near or there is some kind of emergency. The most important step you can take is to develop a savings plan or strategy. That gets you to where you should be from a financial perspective by a specified age. If you can do that and implement this strategy you will be better off than most consumers. Once you have this strategy invest your savings accordingly. It is now time to complete your 5 point mid year financial checklist which we out line below.

Your 5 Point Mid Year Financial Checklist

Check your Budget – If you do not have a budget, develop one and review it. Make adjustments as needed to balance your budget. If you need to cut back to avoid building further debt, then do it.

Review your Retirement Contributions – What is the status of your contributions, are you meeting them and are the investments performing?

Review your Retirement Targets – consider how much you have saved, the number of years left to work and your retirement targets. Does something need to be adjusted? Review these changes with your family to make sure they are on board.

Adjust your Investment Strategy – review the returns, the level of diversity and your long-term goals. If you are over weighted in one area should you make adjustments? Take into account the cost of balancing your stocks and fees that you may need to incur.

Review your Investments – Diversity, long-term growth, investment income etc need to be reviewed and how each of your investments meets these goals.

 

 

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Money Management for Kids

September 21st, 2016 ernie Posted in Life Style | No Comments »

Money Management for KidsThis is a continuation of the previous post about teaching your kids about managing money. In this post, Money Management for kids we will explain some of the terms we discussed in the previous post. These are lifetime skills that will help them and even yourself in the long term. One of the most important rules is the 10% rule. Save 10% of all income, including allowances and pay checks. It is never too late to start, but if you can get them to begin as children and follow this rule into adulthood, they will be financially well off by the time they are in middle age, barring other unforeseen emergencies and lifestyle issues. This is one of the single most important rules that your kids and even yourself can follow.

Money Management for Kids

  • Pay an allowance – and teach them what they can do with the allowance they receive. Many will want to spend it immediately, however the power of saving for a goal is a major lifestyle achievement.
  • Assign age appropriate tasks tied to their allowance – money received that is not tied to some kind of performance teaches nothing. Real life ties work, performance and pay checks. They might as well learn now, even if it is just taking out the garbage.
  • Open a savings account to teach about saving – watching their money grow through savings is a powerful tool. While they will collect little interest on their savings at this time, watching their balance grow is still an important lesson.
  • Establish emergency savings – everyone needs to have emergency savings. You never know when you need some money for health issues, major repairs etc.
  • Establish goal oriented savings accounts – saving for a new bicycle, trip, car, education or many other items is a great way to establish goals and save towards them.
  • Young adults should start saving for retirement – most people think that retirement is too far away to worry about, however if you start saving early, it takes the pressure to keep working later in life instead of retiring on your own terms.
  • Learn the power of compounding interest rates and income – tied to saving early for retirement, with proper investment, savings can morph into a large number if all income is reinvested – interest, dividends etc.
  • Older teens should obtain a credit card to learn about credit, debt and credit ratings – focus on repaying the balance every month to avoid the high interest rates charged on overdue balances. It also helps to establish a credit rating.
  • Start saving for a down payment on a home – if you want to purchase a home, the minimum amount you will need is 10% of the value of the home. Some lenders will want to see 15% or even 20%. The more you have as a down payment, the lower your monthly payments will be.
  • Learn about debt ratios and the 35% rule – most lenders will tell you to never allow your monthly debt payments and living costs (rent , mortgage payments) to be above 35% of your monthly income. This is the maximum for most people to ensure that they have sufficient spending money for utilities, food and clothing.

That is it for this post, stay tuned for more money management posts.

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Lifestyle Guidelines

September 7th, 2016 ernie Posted in Life Style | No Comments »

As we grow older, and hence wiser, we slowly realize that wearing a $300.
or a $30.00 watch – – – – – – – they both tell the same time

Whether we carry a $300 or a $30.00 wallet/handbag – – – – – – – the amount of money inside is the same

Whether we drink a bottle of $300 or $10 wine – – – – – the hangover is the same

Whether the house we live in is 300 or 3000 sq. ft. – – – – – – loneliness is the same.

You will realize, your true inner happiness does not come from the material things of this world.

Whether you fly first or economy class, if the plane goes down – – – – – you go down with it

Therefore. I hope you realize, when you have mates, buddies and old friends, brothers and sisters, who you chat with, laugh with, talk with, have sing songs with, talk about north-south-east-west or heaven & earth ….. That is true happiness!!

FIVE UNDENIABLE FACTS OF LIFE:
1. Don’t educate your children to be rich.

Educate them to be Happy. So when they grow up they will know the value of things not the price.

2. Best awarded words in London …

“Eat your food as your medicines – otherwise you have to eat medicines as your food.”

3. The One who loves you will never leave you because even if there are 100 reasons to give up he or she will find one reason to hold on.

4. There is a big difference between a human being and being human. Only a few really understand it.

5. You are loved when you are born.

You will be loved when you die. In between, You have to manage!
If you just want to Walk Fast, Walk Alone!

But if you want to Walk Far, Walk Together!

SIX BEST DOCTORS IN THE WORLD:

  1.   Sunlight
  2.   Rest
  3.   Exercise
  4.   Diet
  5.   Self Confidence and
  6.    Friends

Maintain them in all stages of Life and enjoy healthy life  The older we get, the fewer things seem worth waiting in line for

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Why is Compounding Important to Retirement

August 21st, 2016 ernie Posted in Retirement Income | No Comments »

why is compounding important to retirementThe question, why is compounding important to retirement is one that everyone should understand the answer to. If you can take advantage of compound interest, compound dividends and income, your retirement savings are going to be significantly higher and your quality of life is going to be much better in retirement. This is where you let your savings work for you and help you. Many people would say that interest rates are so low right now that it does not really matter. You are not going to earn much anyway. Yes interest rates are low, but even 3% income is better than no income and over 30 years it can still add up to a significant amount. A few examples will help to illustrate.

Why is Compounding Important to Retirement

If you start saving $100 per month at age 25 for retirement and continue until you are 55 assuming that you do not generate any kind of interest or dividend income, your savings will be 30 years times 12 months times $100 = $36,000. Not very much and not enough to live on in retirement.

If you averaged 3% over those same 30 years,  your savings would jump to over $58,000. In fact your compound income is almost equal to what you contributed. Interest rates and dividend rates are low at this time, however over 30 years they probably will average close to 6% making your $100 investment over 30 years grow to over $100,000!

Consumers who can save more for retirement or who work longer will find that their money grows even further. Many people will work until they are 65 or 40 years in our example. Their money would grow to almost $200,000 at 6% or almost doubling over that extra 10 years.

If you can save more early on, your compound interest income is going to grow even faster. Focus on high quality dividend paying stocks that have a history of increasing dividend every year and you will do very well in deed over your working career.

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Nearing retired stage of life how much life insurance do you need?

August 1st, 2016 ernie Posted in Life Insurance | No Comments »

Nearing retired stage of life how much life insurance do you need?If you are nearing retired stage of life how much life insurance do you need? This is the question that many seniors ask themselves. You probably have heard the horror stories about people who canceled their life insurance and died shortly after. They left a huge debt for the family and no income to support dependents. They were simply trying to save money and did not expect to die so soon.

How do we know how much to have and when should we cancel our life insurance coverage? Frankly it depends on your personal situation, both financial and your overall health. On a personal level, the writer has been evaluating their needs for the last few years. They have been decreasing the amount of coverage as they age and the need decreases. It basically comes down to how much debt you have, income needed by dependents after you are gone and your savings.

Nearing retired stage of life how much life insurance do you need?

If you are nearing retirement or are retired, add up your total debt and determine how your estate would pay for this debt. Sell the house, disperse your savings etc. If you have enough to pay off your debt and you have no dependents then you probably have no need for life insurance.

On the other hand you do not want to have your dependents left destitute. They should not be forced to sell the home and lose all of the family savings. Have sufficient life insurance to cover the debt that you owe . Also provide for income as well might be the right answer. A life insurance sales person can help you with deciding the correct amount.

By the time you have retired, your debt levels should be relatively low or zero. Pension income should be sufficient to support any dependents that you may have.

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BREXIT Impact on Retirement Portfolios

July 21st, 2016 ernie Posted in Personal Finance | No Comments »

BREXIT Impact on Retirement PortfoliosEveryone is wondering what the long term BREXIT Impact on Retirement Portfolios will be. Markets were down significantly and then have rebounded again. In effect in the short term there has been little impact on portfolios so far. But what will be the long term impact be on your retirement nest egg? If anyone tries to tell you they know, don’t believe them. They just cannot predict what will happen in the future. There are so many financial decisions that will be made by governments over the next couple of years, no one knows. It will take them several years to unwind the UK’s involvement in the EU. So what should an investor do in the mean time?

BREXIT Impact on Retirement Portfolios – Long Term

Bottom line, if you have a well diversified strategy in quality investments stick to your plan. Adjust as you would normally based on your plan and do not make any sudden or emotional changes.

There will be many more equivalent volatile events over the next few years. Investing for the long term means you need to be prepared for this volatility and invest accordingly. If you had spare cash available, you have already missed the window to take advantage of the downturn.

Timing the market is almost impossible for the average investor. Most people are far better off investing for the long term in blue chip dividend paying stocks across a diversified set of companies.

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