Financial Retirement Planning


Five Retirement Issues

September 21st, 2018 ernie Posted in Retirement Planning No Comments »

Five Retirement IssuesThere are fundamentally Five Retirement Issues that everyone should consider if they are going to retire anytime soon! Savings, income, expenses, health and time management. If you have a plan for each that meets your needs in retirement you are well on the way to a successful and satisfying retirement. Many people do not think about retirement until they are heading out the door. Either voluntarily or forced out in a corporate restructuring or downsizing. Don’t wait, develop your plan now!

Five Retirement Issues

Have You Saved Enough

How much income will your savings generate? Post investment advisors assume 4%. Can be drawn down each year. This number assumes a reasonable probability that your savings will last you well into retirement. When you add income from other sources such as pensions, will you have enough? If not, keep working and beef up your savings.

Verify Your Income

How much income will you have in retirement? Add up the income from your savings, pension, investments etc. How does this number compare to your current income? If not enough should you work longer, save more etc?

Review Your Budget

Review your budget now and how it will change post retirement. What expenses will disappear? Will you have new expenses? Travel, new car, home renovation, upgraded and health issues come to mind.

Time Management

Most people will have up to ten hours every day to fill which were originally filled by work. How will you fill these hours after you retire? Many people find it difficult after all the travel and the Home projects are completed. What is your long term time management plan?

How is Your Health

Your health can play a huge factor in retirement. Not only in terms of enjoyment but also from a budget perspective. Be realistic and plan accordingly.

 

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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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Things to do Before You Retire

November 7th, 2015 ernie Posted in Retirement Planning 1 Comment »

Things to do Before You RetireWe have divided out list of things to do before you retire into two categories. First there is the usual financial priorities which we will list in a moment. These are the ones that most people focus on. There are other areas that are non financial that are also important if you are going to truly enjoy your retirement, regardless of when you retire.

Financial Things to do Before You Retire

The first section is all about creating the right conditions to provide as much flexibility as you can financially to enable you to do the things you want to do in retirement, whatever they are. Basically it is maximize income, minimize expenses and have a budget that helps you avoid more debt.

Pay off the Mortgage – no mortgage payment frees up all kinds of cash flow that can be used for all kinds of things. Without this burden you have much more freedom to live in the manner you wish.

Reduce debt i.e pay off cars and loans – the same applies to loans and other debt that you may have. Pay it off, go to one car, focus on reduce your debt payments to zero so that you have the flexibility of cash flow to deal with whatever comes at you later in life.

Ensure you have sufficient pension income and savings income – review your income and where it will come from. If you feel you do not have enough, added savings may be in order, reduced expenses or even downsizing might be needed.

Minimize your expenses – we tend to be a bit frivolous with money especially the small change. Before we know it the money is gone. Watch the big and especially the small expense areas. Reduce or eliminate where possible to build cash flow, to build savings and have more free cash to do some of the really important things you always wanted to do.

Lifestyle Things to do Before You Retire

You may have all of the money that you need to live a comfortable lifestyle, however if you are bored, not challenged or miss the social side of work there is a good chance of really not enjoying your retirement years. Focus on the following areas can sometimes help with these issues.

Create goals – for yourself, review them regularly, adjust them as needed and most important build a plan to actually make them happen, just like you might at work. This will give you purpose and something to look forward to.

Getting adjusted to Retirement – does take time and it is different for each person. Some have so many hobbies and things to do that they wonder why they ever worked while others watch the grass grow and are bored. Review all of the items in this post and figure out what is right for you and what would make it interesting for you during your retirement.

Exercise and eat in a healthy manner – to stay healthy. If you do not have your health you are not going to enjoy retirement. Your health is a precious commodity that you can lose at any time.

Travel – may not be for everyone, but if you want to travel do not put it off. There will come a time when you are unable to travel and you will wonder why you did not do it.

Live on a reduced budget – let’s you sleep at night, especially when you know you have enough income and savings to live comfortably. Establish a realistic budget, track your expenses and adjust as needed.

Keep in touch with friends – having a social life is incredibly important. Never lose site of your friends, help them when needed, and enjoy them for as long as you can.

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Retirement Numbers to Watch

September 21st, 2015 ernie Posted in Retirement Planning No Comments »

Retirement Numbers to WatchWhen you are approaching retirement there are lots of things to think about, but there are a few retirement numbers to watch and pay attention to. You want your money to last and you want your retirement to be pleasant and comfortable throughout your retirement life. If you are going to achieve these objectives, consumers need to pay attention to the withdrawal rate from your savings, the level of pensions that you will receive and the amount and timing of the government pensions that you will receive. Pay attention to these numbers, make the right decisions and re-evaluate as you get closer to retirement to make sure you working with the most up to date information.

Retirement Numbers to Watch

Withdrawal Rate – this is the rate that you withdraw from your savings. The amount you need vs. take will depend on a number of factors. First you need to decide just how long you need your savings to last, what the income level is from your savings and of course how long you will live. Many advisers suggest 4% as a reasonable withdrawal rate. We happen to think that the rate you use should depend on the income level from your investments and the health of your investments. Some years when investments are not doing well you may want to take less, while in good years you can afford to take more out.

Reliance Rate – percentage funded by pensions from employer and government. How much will your income amount to in retirement compared to what you were making prior to retirement. The difference is how much you will need to make up from savings, perhaps working longer and expense reduction.

When to Claim Government Pensions – claim early and you will suffer a penalty i.e. a reduction in the amount paid out, claim later and the pension amount goes up, but you have to do without that income until you claim it. Can you afford it? Will your cash flow allow you to delay your claims?

Add up all of your income from all sources in retirement, compare to your current income level and develop a plan to source the difference in income.

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Have You Saved Enough for Retirement

September 7th, 2015 ernie Posted in Retirement Planning No Comments »

Have You Saved Enough for RetirementHave you saved enough for retirement? Most people don’t know and do not know how to even figure it out! This is the sad reality and one of the things that this website and writer are trying to help consumers with. You can meet with a financial adviser, but that typically costs money. Unless you have some kind of investment portfolio, they probably will not want to spend too much time with you. What can you do to answer the question, have you saved enough for retirement? The answer is fairly simple and we will attempt to help you with  this question.

Have You Saved Enough for Retirement

Start by assessing where your income will come from during retirement. Do you have social benefits, old age pensions, medical benefits, company pension, government pensions and any savings that you may have. Add all of the sources of income you will have during retirement to gain some idea of the income available to you during retirement.

Also take a look at how long these various incomes will continue, whether they will increase or not and how safe they are. Government pensions are often indexed based on the inflation rate. Other pensions may not increase as much. Savings income will change as well based on the type of savings you have and how they are invested. Always try to preserve your original investment and just live off the income.

Next compare this number to your current level of income to see if you have enough to live on during retirement. If your income during retirement is less than your current level of income don’t despair. You will need to make changes, but maybe not as much as you might at first think.

The next step is very important. What are you going to do about the situation you find yourself in? Can you save more money, can you reduce your expenses, can you share expense with a family member etc?During retirement some expenses will naturally be reduced. Commuting and clothing costs will certainly change. Asses how your expenses will change compared to what they are now.

Develop a plan to address this problem and begin working towards developing the income you need to have in retirement. Or perhaps how you can reduce your expenses overall.

Note that your savings are very important, both the amount and how you invest it. Always invest diversely, live off the income it generates to maintain the principle during your retirement. If you spend the principle, it is gone and there may not be anyway to replace it. Spend the principle carefully and wisely if you have to. It has to last a lifetime during retirement.

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Money Moves for a Happier Retirement

August 21st, 2015 ernie Posted in Retirement Planning No Comments »

Money Moves for a Happier RetirementMixed messages about retirement are everywhere. Most people are confused about what they will do in retirement. They just float along through life and hope for the best. The message here is that you can love retirement, have a great time, be fulfilled and satisfied while living comfortably. All you need to do is do a little planning and preparation before you retire to have the type of lifestyle that you really want to have. We cover a few Money Moves for a Happier Retirement in this post that are based on experience as well as many years of research.

Some people ask, “What will I do with my time?”. Will I be bored, will I keep working and what about all of the people from work that will be missed? Some people are so ready to get away from work that they really don’t care what they will do. The sad reality is that they may end up being bored to death literally! Then there is the big elephant in the room! Do I have enough money to live my life in retirement the way that I want to ? If you do not do a little planning and saving, they you probably will not live a happy retirement and certainly not in the manner you expected.

Money Moves for a Happier Retirement – Start Planning

Start planning for retirement! When will you retire? What debts will you have when you retire? What will you do in retirement? Travel, work, babysit the grand kids, or just take up the hobbies you never had time to do? There are some basic things you can do to begin answering these questions.

The first step is hire a financial planner who can walk you through the financial side of things. You may want to meet with several in order to get several opinions. They should be reviewing your income in retirement, your expected savings at retirement, your life style plans while retired and your overall health relative to how much money you will need while retired. This will take several iterations before you settle on a final plan since there really is a lot to think about.

Visualize what you will do in retirement since this is a really big issue for many people. Even if you are an avid golfer, you cannot golf all the time. What hobbies will you take up? what will you do with all of that time.

How much money is available from your employer retirement fund? This is probably a first step. Find this out and then figure out how much more you will need to live the lifestyle that you really want to have while retired. The early you begin planning and take action the better off you will be in retirement!

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Can you retire early?

June 7th, 2015 prrichar1 Posted in Retirement Planning No Comments »

Can you retire earlyCan you retire early or do you even want to retire early? The surprising answer to this question is that many people do not want to retire early for many different reasons. Some would not know what to do with themselves. Others did not start saving soon enough and do not have enough money set aside for retirement. And many more are facing mounting expenses for health issues. They may need money for supporting their kids or mortgages that they never paid off. Regardless of whatever your situation is, we think that planning for an early retirement is always a plus. You can still work as long as you want for whatever reason, but at least you have the flexibility to make your own decision about when you retire.

Can you retire early?

Have your financial planner asess your financial situation, taking into account your age, your savings, your debt and your plans for retirement. Consider this a first draft. It is ok to change it as you go. You will probably make changes anyway as you near retirement. The important thing is to have a plan and to know when it might be feasible to retire.

Let’s assume that you will have paid off your home, you will have a pension at 55 and you have sufficient savings to live the lifestyle that you want for retirement. You also have your health and this really represents the ideal situation. If you decide to work longer you have the confidence of knowing that you have sufficient income when you do decide to retire. If a health issue gets in the way, at least you will be comfortable.

On the other hand if any of these assumptions are not correct you may find that you will have to work until you are older before you can comfortably retire unless you take some steps to correct whatever the issue may be. Completing the financial plan and asking yourself Can you retire early will put you on the road to ensuring that your retirement is what you had envisaged.

Some people do not want to know the answer to the question, Can you retire early, however asking and answering the tough questions can always help you plan for the future.

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How to Retire Rich

May 21st, 2015 ernie Posted in Retirement Planning No Comments »

How to Retire RichKnowledge is everything and as it turns out it is true when it comes to retirement. Having enough money to meet your goals and objectives during retirement is critical on how to retire rich. One study confirmed that if you could answer questions about interest rates, inflation etc, you stood a much better chance of having enough money to retire.  Most people cannot answer these questions and have to live unknowingly with less money than they should be. It affects their quality of life during retirement which is when we should all be enjoying our lives.

In fact over your working life you could end up with 25% more savings if you understand and can answer the following three questions.

Three Important Questions

  1. Interest Rate: Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow? Answer choices: More than $110, Exactly $110, Less than $110.

The answer is More than $110, assuming that you reinvested the interest income each year. At the end of the first year you would have $102. At the end of the second year you would have $104.04 An additional four cents is not much in this example, but it adds up quickly when you are talking thousands of dollars.

  1. Inflation: Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account? Answer choices: More than today, Exactly the same, Less than today.)

The answer is less than today. Your savings account would have $101 dollars in it at the end of the year. With two percent inflation your original $100 would only purchase $98, add your $1 income and you have a total of $99 in purchasing power at the end of the year. If you had to pay income tax on this income, then you will have even less to spend.

  1. Risk: Is this statement True or False? Buying a single company’s stock usually provides a safer return than a stock mutual fund.

Diversity is incredibly important to avoid losing everything when you invest on one company and it goes bankrupt. Mutual funds go up and down. But at least you are protected because you are invested in many companies in stocks and bonds as well as cash. Remember that regardless of how you invest, spread your investments across good quality mutual funds or stocks.

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Am I on the right track for retirement

March 21st, 2015 prrichar1 Posted in Retirement Planning No Comments »

Am I on the right track for retirementMany consumers asked themselves every day whether they have enough money saved for retirement. Am I on the right track for retirement. They are struggling to pay the bills, look after their families, save for emergencies, and save for retirement. They really want to know how much money they need to have to live comfortably during their retirement years. There are many options with respect to retirement including living independently, living with friends, and moving in with the kids.

So economist feel that you should have 1.4 times your annual salary set aside by age 35, 3.7 times by age 45 and 7.1 times by age 55. This can be a great deal of money for many people. For example at age 35 if you make 50,000 a year you should have $70,000 saved for retirement. at age 55 you should have $350,000 saved for retirement. But starting at a young age to begin saving and allowing the income to be reinvested these numbers are achievable.

Am I on the right track for retirement

What can you do to verify your retirement programs progress

There are a variety of steps that you can take to assess how you’re doing relative to your retirement plan. For example start off with reviewing your retirement investments and asked for a projection of what these investments will be at various age levels. Secondly find a good retirement planning tool that allows you to input your savings, your anticipated savings and your expenses at retirement age. You should also be able to enter all of your income from pension, government support and your savings into this plan.

Once you’ve completed your initial plan you will get an assessment of whether you have enough money set-aside for retirement and what your retirement will look like. The next step is to make adjustments in real life in terms of working longer, earning more money, saving more money, or reducing your overall expenses to enable you to have the type of retired life that you would like to have.

It is this self-assessment that can make the difference in achieving the quality of life that you would like to have during retirement. Don’t wait get started now with a savings plan and also analyzing your retirement future regardless of what age you are right now. The sooner you do it the better off you’ll be.

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Characteristics of a Retirement Savings Millionaire

February 21st, 2015 ernie Posted in Retirement Planning No Comments »

Retirement Savings MillionaireHow much do you need to save every week or month to become a retirement savings millionaire? Most people cannot even dream of saving this much money or ever having a million dollars, yet many consumers do it all of the time because they have focused on managing their money in such a way that they are able to deal with all of their expenses and still save money. In this post we will do a few calculations to show you just how easy it is to become a retirement millionaire and also the major advantage of starting early in life to save for retirement.

Retirement Savings Millionaire – Saving Money

The chart below demonstrates several fundamental rules. The earlier you start saving and the longer you save, the more money you will have for retirement. For example if start at age 20 and save $150 a week, you can easily have one million saved by the time you are 55. Wait until 65 and you have doubled your savings in 10 years. If you wait until you are older, you will have to save more each month in order to match the same numbers e.g. at age 40 you need to save $3500 a month to make that one million mark by the time  you are 55. And if you wait until age 50, can you really save $15,000 a month?

We have assumed a 7% return on average over the life of these savings. The stock market has returned this rate for many years. Although there has been a lot of volatility in that period with some years much higher and some years much lower. But people who consistently save their money and do not touch until retirement can easily meet this goal of one million dollars by the time they are 55 simply by saving $600 a month and becoming a retirement savings millionaire.

Age to Start Savings Amount to Save Each Month Avg Interest Rate Save to 55, then Retire Save to 65 Then Retire
 20  $100  7%  $176,560

 $363,901

 20  $600  7%  $1,005,982  $2,079,397
 40  $3500  7%  $1,058,177  $2,661,887
 50  $15,000  7%  $1,036,535 $4,525,982

 

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