Financial Planning, Retirement Issues


Do I Have Enough Savings for a Secure Retirement 

August 7th, 2017 ernie Posted in Retirement Saving, Uncategorized No Comments »

secure retirementThis is the main question we all have about our retirement future. How can we figure out what our future will be ? How long will we live? Should we base our life expectancy on how long our parents lived? Or perhaps our neighbors since we share a similar economic situation. A secure retirement means that we need to make an estimate of how long we will work, how long we will live and many other assumptions. In this post we will discuss these issues and others that many consumers need to factor into their decisions.

Will You Have a Secure Retirement

If your already retired and wondering if you have enough to live comfortably during retirement, it is time to take stock of a number of things about your life style and your situation. Here are a few, but bottom line, your income must be the same or more than your expenses, plus you needs savings set aside for emergencies that invariably will come along.

Track expenses – to get an understanding of where your money is being spent. If you need to reduce, then you can start here and identify those areas where you can reduce and how much it will save you.

Track income – to understand how much is coming in and whether it will be enough or not. If not you may have to reduce expenses, go back to work, even if it is just part time.

Re-evaluate every 6 months – life events and inflation happen all of the time. Recheck all of your calculations on a regular basis to make sure all of your assumptions are still accurate.

Balance income and expenses – as we said income must be higher than expenses otherwise it will eat into your savings quickly leaving you without enough to live on when you are much older.

Earn more, go back to work etc – going back to work can make a huge difference in both your life style as well as your savings. Your money will last much longer.

Reduce expenses – do you really need to eat out all of the time? Can you make cost cutting painless. Look at all of your expenses and make a decision on those that can be reduced.

Downsize , rent , move in with the kids – if you must, these are drastic reductions that can be made to reduce your expenses.

Obtain expert help – find a financial advisor you can trust and review your situation with him or her. You may want to get several recommendations before settling on one direction or another.

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How Couples Sabotage their Retirement Plans

February 21st, 2017 ernie Posted in Retirement Saving No Comments »

How Couples Sabotage their Retirement PlansThere are lots of ways that couples sabotage their retirement plans. When they do they have to resort to solutions that are brought out in the picture. some have to down size, some have to move in with their kids. Many have to cut back on their lifestyle drastically. They even need to keep working well past their retirement years just to maintain the standard of living they like to have. There are lots of reasons why this sort of thing occurs, however we are going to focus on how couples sabotage their retirement plans in this post.

How Couples Sabotage their Retirement Plans

There are lots or reasons, however most can be narrowed down into three main categories. The first one being one of the most important.

Lack of Communication – do both partners have the same objectives about retirement? Travel, annual vacation, spending time with the grand kids? What do you want to do in retirement and does your spouse agree? These are just a few of the items that many couples just do not talk about these things and receive a surprise. Set some joint goals now and begin to make plans on how you will achieve them.

Savings in the Wrong Account – Are you placing your savings in the right account? do you obtain the appropriate tax advantages which help save even more funds? A regular savings account is to easy to access, generates too little income and is taxable. Consider a retirement account that protects your gains and income from the tax man.

Not Matching Savings with Dreams – planning for a new car, saving for travel, matching your retirement income with your retirement plans? These are just a few of the ideas that need to be considered. Develop a plan around when you want to retire, how much money you will need saved and when you will achieve this goal.

A financial advisor can help you with all of these questions. You may need to spend a few sessions with them as you develop your plan and make adjustments based on the reality of your situation.

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How Much do I Need to Save for Retirement

January 21st, 2016 ernie Posted in Retirement Saving No Comments »

How Much do I Need to Save for RetirementWhen asked the question, “How Much do I Need to Save for Retirement?”, the answer really depends on how much you have already saved for retirement. Also how old you are and what your expectations are for your retirement. We will discuss these topics in a little more detail in a moment. The chart on the left gives and indication of how much money you should have saved by age if your objective is to have one million dollars saved by retirement at age 65. It assumes continuous savings as well as investments that perform and income from those investments being reinvested. It also assumes that you do not dip into these savings at any time for things like house payments, mortgage payments, emergencies and so on. Let’s look at each of the issues we mentioned earlier.

How Much do I Need to Save for Retirement

How much you have already saved for retirement – Your savings rate at your current age will depend on whether you are trying to catch up or just maintain the savings rate you have. If your age 45 for example and have already saved $245 thousand, you are well on the way, providing you continue the savings rate. On the other hand, if your savings are zero, then you have to somehow make up the $245 thousand and also continue savings at the rate called for in this chart to achieve one million by 65 years of age.

How old you are – As mentioned in the previous paragraph, age does matter when planning for retirement. If you are just starting out at age 20, then you have lots of time to achieve the objective, however if your 55 and have not saved enough, then you had better keep working until you have achieved the objective you have set for yourself. The next question really sets the tone for how much do I need to save for retirement.

What your expectations are for your retirement – this is the key to the question. If your expectations are in line with your current lifestyle and your well on the way to achieving your saving objective, then you are probably ok. But let’s assume you want to travel, buy toys that you never had and join golf clubs. You might find that your lifestyle objectives for retirement are much higher, so saving more might be in order to guarantee the lifestyle you are looking for.

The basic question: Do you have enough savings to generate income for you in retirement that meets your current pre-retirement income level and is that enough to sustain the lifestyle you are planning. If yes, they you are ok, if not, then you either must work longer or save more.

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Saving for Retirement

October 21st, 2015 ernie Posted in Retirement Saving No Comments »

Saving for RetirementHow much should you have saved for retirement? in your 20’s, in your 30’s, in your 40’s, etc?  Knowing how much to save and getting there are two very different things. We suggest that you work with an expert adviser. He will start with your age and your current income level to calculate how much you need to save. He will use a combination of employer contributions, savings, interest income on your savings and pensions that you may or may not be eligible for.  While this can be very complex, it can also be simplified as well by making a list of the income you will have at 65, then decide how much in addition you will need to live in the manner you feel is comfortable for you and your family.

Saving for Retirement

Assume you are making $40k a year and are in your 20’s. Experts feel that you should have at least $4k saved.  By the time you are in your 30’s, the amount should have increased to $82k assuming a combination of interest income and contributions. In your 40’s you should have at least $240k and in your 50’s you should have  over $500k saved. By the time you retire at 65, a consumer should have saved at least $900k in funds available to them to generate the cash flow they will need. If you have a pension income, then these numbers become extra dollars to help enjoy your life during retirement.

The above calculations are merely a guideline or a place to start. If you make substantially more income, you probably want to save more money than was mentioned just to maintain the life style you are comfortable with. Pensions are extra and we urge consumers to obtain expert advice regarding savings levels and your retirement income.

Start when you are younger to begin saving for retirement. It is much easier to meet your retirement objectives when you start young than it is when you start saving later in life.

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Don’t Count on Working Longer to Save Enough for Retirement

July 7th, 2015 ernie Posted in Retirement Saving No Comments »

Don't Count on Working Longer to Save Enough for RetirementPeople consistently over-estimate their ability to work in retirement, and they don’t count on working longer to save enough for retirement. The basic assumption is that you will just continue doing what you are doing or perhaps take a retirement package and then continue working on contract or even a new career. In fact many people actually accomplish this and work as long as they wish to. The sad fact is that the vast majority either end up with no job or working at low paying service jobs that barely provide for their needs in retirement.

Don’t Count on Working Longer to Save Enough for Retirement

A variety of situations can occur that get in the way of continuing to work during retirement. These include just not being able to find another job, sickness and poor health, lack of motivation and falling behind the curve of your industry. This later example happens to many people. They are out of the work force for a period of time and then try to get back in only to find that technology, systems and processes s have passed them by. They are no longer current and they do not really have the inclination as well as the drive to keep up. As a result they are passed over for younger more up to date candidates.

Layoffs, down sizing, industry closings all lead to job changes at the very least and being out of work when you least expect it. Sickness in your family or yourself can also get in the way. What are consumers supposed to do to deal with these situations.

There are many solutions, some obvious some not so much. The one thing that is most important is to save for a rainy day and save for retirement. Plan to retire at age 50 and if you decide to work longer, that’s fine, at least you have the funds available to allow you to be flexible and enjoy life. Save as if you are going to retire young and also have a rainy day fund available for emergencies. If you cannot find a job, get sick or just do not feel like going to work, at least you can live comfortably.

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5 Lies We Tell Ourselves About Retirement Saving

June 21st, 2015 ernie Posted in Retirement Saving No Comments »

Lies We Tell Ourselves About Retirement SavingWe all tell ourselves lies from time to time. It makes life easier and we are able to get along with our lives. The problem is that if we begin believing these lies and do not do something about the issues, we could find ourselves in serious trouble at some point and not achieve the retirement that we have always dreamed about. We have summarized 5 lies we tell ourselves about retirement savings in an effort to help people identify these issues and make the changes they need to make to ensure a comfortable and happy retirement.  If you have dreams like the couple in this picture sitting on a sailboat or some other dream, pay attention and quit telling lies to yourself.

5 Lies We Tell Ourselves About Retirement Saving

I have time to catch up on my savings – this is the biggest one that we all fall into. It is simple math to figure out how much money you need to save each month to achieve the level of savings that you will need in your retirement. Your financial adviser can help with these calculations.  You will need to know how much income you need once you retire and what the sources of the income will be. Some will come from pensions and social security. The remainder needs to be generated from savings. How long will you save, how much can you save each month, what interest rate will you assume and how fast will you take out your money in retirement? Your adviser can help you with these assumptions and do the calculation for you.

I am going to die broke – but what happens if you live longer than you expected and now have to live in poverty? Can you predict when you will die? Even if you do not want to leave money for the kids, you still need to make sure you have sufficient funds to live out your life in comfort.

I will not linger – maybe your parents did not linger, but with better health care, we are all living longer and sometimes we live in spite of ourselves. When the time comes none of us really want to die.

Investment companies just want our money – yes they want to make a profit, but they only make money over the long term if their clients are doing well. They get paid and they invest your money wisely. At the same time never blindly hand over your money to an adviser, diversify your investments and get involved so that you know what is going on.

I will adjust to the income I have – easy to say but sometimes very difficult, especially if you must downsize your lifestyle. When we retire we have more time on our hands and that usually means that we spend more money too. Adjustment can be very difficult.

 

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Will Your Retirement Savings Last

March 14th, 2015 ernie Posted in Retirement Saving No Comments »

Will Your Retirement Savings LastMany people just throw up their arms in frustration, confusion and worry regarding the question. Will your retirement savings last? They seem to have no idea whether their savings will last through retirement or not. There are so many variables to think about. It’s really difficult to know if they will have enough money to live comfortably during their retirement. Like all problems of this complexity it is important to break them down into smaller pieces. For example first focus on your income. How much income will you have and where will that income come from. Your income will come from several sources.  A pension from your company, old age pension from your government, and income from any savings that you may have.

Next focus on your expenses. What expenses do you have now, what will you have in the future and what expenses are under your control where you can make decisions with regards to how much you spend. Once you have this information you can begin to assess whether you will have enough money to last through retirement.

Will Your Retirement Savings Last

Let’s look at income and expenses in a little more detail.

Income

Make a list of all the potential income sources that you have. This would include government pension, company pension that you may participate in, income from savings, and income from Business or rental income that you may have. With regard to savings, Many financial advisors recommend that you only withdraw a maximum of 4% each year. This will provide a conservative approach to ensuring that your savings will last through your retirement. If your savings increase through appreciation then your 4% withdrawal rate will increase as well. once you do the calculations you can quickly determine whether your total income will be sufficient for your retirement as compared to your current income or you still need to be working. If not you may want to increase your savings, or work longer.

Expenses

Add up all of your expenses in much the same way as you did your income. First of all identify the fixed expenses for things like mortgage, rent, utilities and communications such as cable TV and telephone. You may also have insurance payment or payments for a variety of things that will last for some period of time. The next set of payments or expenses that you should look at is your discretionary expenses. This would include food, clothing and entertainment as well as vacation travel.

The last group of expenses or expenses associated with things like weddings, emergencies, repair and maintenance to your home and any other major expenses that may crop up during retirement years. You may want to budget for those in advance.

Once you understand your income level, and your expenses during retirement you can then analyze both to make adjustments according to the lifestyle that you would like to live. You may have to generate more income to maintain your lifestyle or conversely you may need to reduce your expenses in some areas to live in the manner that you feel comfortable. The decision is up to you.

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Secrets of successful retirement savers

March 7th, 2015 prrichar1 Posted in Retirement Saving No Comments »

successful retirement saversIf you’re thinking about retirement in your early 40s 50s or even in your 60s you’re probably wondering what does it take to have a happy and successful retirement. Recently several authors did a study and surveyed over 510 people to learn the magic behind retirement.

The following are some of the comments that came out of the study. One of the most significant items regarding retirement and being happy during retirement is the focus on living within their means. They had a savings plan for retirement and calculated how much they would need when retired and began saving for that eventuality.

Over 60% of the people surveyed we’re saving between six and 20% of their income every year. of course there were some people who are saving more and some people saving less but the majority have savings plan in place which was in conjunction with any pension that they might be receiving.

Many of those people up to 44%, said they were comfortably retired with less than $500,000 in assets. this was a huge surprise to the authors preparing this report. It really means coming to terms with what they want out of retirement and how much money they will need during retirement. If you follow the 4% rule then someone with $500,000 in assets could expect to have $20,000 in income from your savings plus whatever they have from pensions. This may be sufficient for many however for many others they would require much more in savings.

Successful Retirement Savers

Another important point about successful retirees is that they are prudent with her funds. Some people would’ve thought them as being frugal but only 35% of the people consider themselves to be frugal the rest said that they would spend enough to live comfortably. Obviously it is a question of managing income and expenses to everyone satisfaction.

many people also used financial advisors, up to 62% of the people surveyed used advisors. And they felt that the financial advisor helped them with their savings.

For the retirement. One big mistake that many felt they made while they were saving for their retirement was not getting into the stock market soon enough or getting out too late. Another concern was the substantial healthcare costs and over 25% are concerned about maintaining their standard of living while dealing with inflation, lifespan increasing and healthcare costs.

Many people have a car that is over two years old and have their homes paid for. They avoid carrying credit card balances and avoid borrowing money. They have a monthly budget and they stick to it and they have discipline as investors.

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Retirement Super Savers

September 4th, 2013 ernie Posted in Retirement Saving No Comments »

Retirement Super SaversRetirement super savers have a plan and a set of objectives for their lives. They are focused and are determined to be independent financially as early as possible so that they have the freedom to do what they want. This could mean retiring early or it could men working until they are in their 80’s. The thing they have in common is that they are working under their own terms when and where they want. There are lots of benefits to having the freedom to retire when you want. Just knowing that it does not matter if you work or not can significantly improve the stress level in your life, give you freedom to travel and enjoy life when other people are going to work everyday and envying your lifestyle. The following is a list of potential objectives that anyone including retirement super savers may have.

Review them and decide what you need to do to achieve your objectives. Change them if you want, but make them your own. Set up a plan to achieve then and stay focused. The main objective is independence. Some of these are both objectives and benefits depending on how you look at them.

Objectives of retirement Super Savers:

  • Retirement at 65
  • Save at 10% or
  • Super save at 20 or 30%
  • Retire early
  • Change careers
  • Independence to do your thing
  • Invest well
  • Diversity
  • Income & growth
  • Stay away from high risk
  • Work as long as you want then change careers or retire

Fundamentally if you aim to have enough savings to allow retirement to be considered in your late forties or early 50’s, then you really have a lot of flexibility in terms of what you do with the rest of your life. You can keep right on working if that is what you really want to do. You can also play golf every day or travel etc. The point is that you will have the flexibility to whatever you wish to do and not really have to worry about where the money is going to come from.

Some people love to work, but they really do not like the job they are currently doing or they want to start their own business. Now they can do this if they were a super saver during the early part of their career. The one caveat that we want to bring to everyone’s attention is that they need to protect the nest egg they have created. For example we do not think it is a good idea to take all of your savings and sink it into a new business venture no matter how strongly you feel about it. You risk your savings and could find yourself having to go back to work if the business fails for whatever reason. Diversity is always one of the most important caveats of the super savers.

 

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5 reasons not to contribute to your Retirement Plan

August 10th, 2013 ernie Posted in Retirement Saving 1 Comment »

5 reasons not to contribute to your Retirement PlanThere are 5 reasons not to contribute to your Retirement Plan, however always have a plan for how you will survive financially in retirement. Many people may find this amazing, but there are some good reasons why you should not contribute to your retirement fund in the opinion of the writer. Give it some thought and then make your own decision. You may also want to chat with some other people such as your family or your investment adviser or banker. It should be someone who will give you an unbiased opinion.

If you do not invest in your retirement because one or more of the reasons below apply to you, make sure that you solve these issues and then get started investing in your retirement. You do not want to end up retiring with no retirement fund. It is very important to save for retirement, but sometimes in the short term there are more important issues to resolve.

5 reasons not to contribute to your Retirement Plan or

No emergency fund.

Everyone should have an emergency fund to get you through those times when you are not working for any reason whether it is because you have been laid off or have health issues. An emergency may also include a major emergency repair, it may include a major health issue or some other thing that you really need to have an emergency fund for. Once you have at least 6 months of take home pay saved up, then you can look at some other issues such as retirement savings.

No match in contributions from employer.

Many employers will match contributions as an additional benefit and also as an incentive for employees to save for their retirement. If your employer does this then you definitely want to take advantage of it. If they do not have such a program then there is no incentive to participate in this particular program other than perhaps convenience. However most advisers would recommend that you keep your retirement savings independent of your employer.

You are swimming in debt.

Paying off your debt especially high interest debt can save you a great deal of money. If your loan is 10% interest, then when you pay off this loan you are reducing the interest that you pay and effectively paying yourself 10% in interest savings. Right now you cannot even come close to that level of income on any investments that are safe enough for a retirement account.

You are afraid of future tax increases.

If you are expecting your income to rise over time, you may not want to avoid putting money in a retirement fund, only to withdraw it later when you are in a higher tax bracket. This probably does not apply to too many people.

High management fees.

Look for plans that have low management fees. If your current plan has a lot of management fees you may want to consider investing elsewhere or focusing on some of the issues above. This is a decision that you need to discuss with your investment adviser.

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