There are a number of reactions that the word ‘retirement’ brings about in different individuals. Some people might dread the word. Others, those who have been preparing for the so-called twilight years, might think about it with some amount of glee.
Still, others are indifferent. Regardless of which group you belong to, retirement is an inevitability that has to be met with much preparation.
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As of late, the statistics show that only close to 50 percent of Americans already know how much they need in order to retire comfortably. At the same time, thirty percent of individuals with access to a contribution plan have not participated.
This can be very troubling considering that an American spends an average of 20 years in retirement. Delaying things will only worsen the entire scenario. Here are a couple of ways to jumpstart the entire thing:
1. Save, save, save
If you’re already saving, don’t stop. If you haven’t yet, it’s time to do so. It’s true you do not get much satisfaction in saving, especially when you’re putting away money you could enjoy spending in the present. But what you do get when you save is the sense of security that comes with knowing you have a nest egg you can draw funds from in case of contingencies.
2. Find out how much you’ll need for retirement
The very reason retirement is something individuals dread is because it is expensive. In fact, financial experts believe in order for a person to thrive in retirement, he or she needs to have 70 percent of his or her preretirement income, and even up to 90 percent for those who are earning low, just to maintain the standard of living. Learning how much you’ll need to retire will allow you to take control of your savings and expenditures.
3. Ask your employer about the pension plan they offer
Find out if your employer is offering a pension plan and whether or not you are covered by it. Ask about the benefits you might receive and if you’re still entitled to them even if you switch jobs. There are many options available if you will just ask and find out what your employer can offer in the long run.
Also, try to find out if you can claim pension benefits from your previous jobs. Finally, find out if you are entitled to anything from your spouse’s pension plan if he or she is working.
It's Never Too Early to Prepare for Retirement
According to the United States Department of Labor, fewer than 50 percent of Americans know how much money they'll need to survive retirement. Even though the average citizen will spend 20 years of his or her life in retirement, very few are currently planning for life after work.
No matter how far away or close to retirement you are, it's never too late to start saving. Here are five ways that you can start preparing for your retirement today:
1. Know Your Needs
The first step in retirement planning is to become aware of your post-work needs. On average, it is estimated that you will need about 70 percent of your preretirement income to live the same way you did as when you were working.
This means that if you were making $40,000 per year, you'll need about $28,000 per year to live comfortably. If you still have a mortgage, car payment or other debt when you retire, you may need to have more stored away in your retirement account.
2. Start Now, Start Small
If you haven't yet begun saving for your retirement, open a savings account immediately. Even putting $50 a week into a retirement account will give you $200 a month, or $2400 per year. If you work for the next 20 year, you'll have put away $48,000 on your own, and your money will have grown thanks to interest. Each new year, try to increase your weekly savings amount by at least $10.
3. Hands Off the Savings
Saving for retirement will do nothing for you if you withdraw money from your account. Make a deal with yourself, and your partner, that you will not touch your retirement savings except in the cases of extreme emergency. Even then, it's often better to locate funds from other sources than it is to pull money out of your retirement savings.
Do you spend your tax return on a frivolous item each year? If so, you're making a grave mistake. That chunk of change will work far better for you if you contact a professional financial planner and put it to better use.
A financial planner can help you invest your money in a way that is most beneficial to your future. A professional can also help you diversify your funds, ensuring that you are getting the most bang for your buck.
5. Pension Plans
If you've found a career that you plan on sticking with, talk to your employer about their pension plan or retirement savings plan. Your employer may offer automatic deductions, making it incredibly easy to contribute; you'll never see the money in your paycheck.
Because the unexpected can happen, you should find out what will happen if you quit, are terminated or change jobs before you retire. You'll want to know that your money will follow you wherever you go or, at the very least, remain in your account until you reach a certain age.
Whether you're in your early 20's or late 40's, planning for retirement needs to begin now. If you don't want to spend the rest of your life working, you'll need a nest egg that will support you in the manner to which you've become accustomed. If you don't know how to start saving for your retirement, talk to a professional; he or she can give you the proper guidance.
Ways to Save and Get the Most Money Out For Retirement
The earlier one starts saving for retirement, the earlier it is going to be. While you do not have to begin saving for retirement in your 20s, it's something that you are going to be glad you did later in life. Even if you aren't putting away a large sum of money each year, what you do put away is definitely going to add up and do so much quicker than you may think.
Today we are going to give you a bit of insight into the world of investing and just how simple it truly is. Every little bit counts and we think once you leave here today, you are going to be ready to begin putting money aside even if you didn't previously think you had anything to spare.
Live as If You're Broke
Whether you are on the borderline of being broke or not, choose to live as though you are. Take the money that you could have spent on something frivolous such as that daily coffee or a trip to the movie theatre and place it in a retirement fund instead.
We aren't saying you have to do this all the time, because everyone needs a little fun once in a while but take a moment to think about whether the money you are about to spend is necessary or if you could do without it this time.
This is going to help you in the long term and honestly, are you really going to miss the money? The more money you put away now, the further you will be ahead of your peers. If you start putting money into retirement now, you aren't going to have to come up with more money later.
Think about this: if you put about $333 a month into a retirement fund during your 20s that has a rate of 8%, you are going to have a million dollars saved up by the time you are in your 60s. Being rich doesn't happen overnight but if you want to sit comfortably one day and not have to struggle financially then keep that example at the forefront of your mind. Let that inspire you to struggle a little bit now.
Take Advantage of Things While You Can
If your current job offers a 401K or retirement plan, opt-in and chooses to have the maximum amount of money taken out of your paycheck each month. Another great option is a Roth IRA, which you are not taxed for if you remove money early. You will definitely thank yourself later in life.
The same goes for choosing to purchase medical insurance even if your workplace does not offer it. Sure, you may be healthy today and show no signs of becoming ill but accidents happen and medical emergencies have the potential to occur at any time, without warning.
Do yourself a favor and at the very least choose an option with a high deductible so your monthly cost will be low. Some sort of coverage is definitely better than nothing. Medical care is extremely expensive and the last thing you need is to have an unexpected debt to worry about while you are trying to save for your future.
Get Rid of Debt Fast
Are you currently paying off debt such as a credit card in which you are paying monthly interest? That is just money going directly down the drain. Do your best to put your focus on paying off any and all debts that you have as soon as you can.
Of course, at least paying the minimum is a must so you do not get penalized but whenever you can pay extra; do it. Once your debt is completely paid off, you will be able to use that money towards more important things, such as your future.
Start Focusing on Saving for Emergencies
Once you have all your debt out of the way, the best way to avoid getting back into debt is to have a stash of money set aside that you are not allowed to touch unless there is some sort of an emergency.
The last thing you want to do after working hard to pay off your credit card gets into a situation where you have no choice but to use that credit card yet again and put yourself back into the same cycle as you did in the past. Avoiding interest and late fees are going to save you quite a bit of money over the course of your life so do your best to never get those charges, if possible.
Watch Your Credit Score Closely
An important part of keeping your bills to a minimum is to have a good credit score. Not only can a low credit score affect your eligibility to certain apartments or homes but it can also mean higher interest rates and insurance costs.
Do your very best to pay your bills on time and don't allow your credit card balances to reach above 30% of your total allowance because this can negatively affect your credit score. You want to show credit bureaus that you have the credit available but are responsible enough not to let yourself over-use what you have or they will view you as a 'high risk'.
Set Goals and Stick to Them
The best way to get what you want from life is to set specific goals for yourself. Now, setting a goal such as "I'm going to save $1,000" this month can be quite overwhelming and for most people, something they cannot possibly do.
Start out with small goals and reward yourself as you complete them. As humans, we are very keen to instant gratification. If you can set a small goal for the day, week or even month that you can reach without a problem then you are naturally going to want to reach the next one.
The more times you successfully reach goals, the better your motivation level will be. It's kind of like a child who gets praised for doing a good job; even as adults we thrive when we are positively reinforced and rewarded.
While we know it's tough to begin saving, and the process can be something that's extremely easy to put off until tomorrow, and the day after that, and the day after that; it's something that you really should consider doing now.
Even just going to speak to someone at your local bank and asking questions is a great starting point. There are typically informational packets that you can get from financial institutions which can give you something to think about in your spare time.
Even the Smallest Savings Count
When many people think about saving for their future, they have a hard time seeing how a few dollars here and there can add up. Take a moment to consider this: let's say you go to your favorite coffee shop once a week and spend about $5.
That means in a single month, you spend $20 at that coffee shop. Within a year, you spend $240 just on your coffees. If you took that money (not including interest that you would earn) and put it into a savings account every single month, you would have $1,200 saved up within 5 short years. In 20 years that seemingly small change to your lifestyle would turn into a whopping $4,800!
Sometimes it's hard to see how a little money can go a long way and it's easy to get lost in the moment and want to spend now
, but if you can train yourself to save more than you spend; you are definitely going to be happy you did in the long term.
Retirement Annuity - Awakening a New Dawn
In today’s age, you can hardly settle your eyes for a financial plan that performs well in the market. Suddenly, after having talks with an expert your mind inclined towards annuity schemes. Why did it happen? There are multiple reasons to settle for a wise choice such as this.
One of the key reasons why you have shown keen interest towards a high performing financing vehicle is that a retirement annuity promises you a better and steadier future.
With the right ideas in mind, you can always proceed towards a brighter future and retirement annuities seem to promise you with the same. Yes, you have to compel your funds to enter your savings account so that it assures a nest egg for your future. A retirement annuity is a sensible way of earning substantial income when employment comes to an end.
RA is a potential way to guard your pockets - How?
An investment plan such as RA is not only there to aide your financial future but a shield from estate duty and tax cuts. As the tax year comes to an end you always have an opportunity to make extra contributions to your RA account to stretch a smile on your face. Of course, you will be headed towards a time when such investment would reap you in leaps and bounds.
With an assorted range of investment plans being sold in the market, you can hardly rest your eyes on just a single option. Coming across its benefits, it becomes evident that you will settle nothing less than an annuity scheme.
Annuities follow a particular discipline where you won’t be allowed to secure the accumulated amount unless you reach the age, 55. What’s more? It is one of the tax-sensible ways to secure your retirement days.
It is a prospective way to support medical expenses. The after-tax-returns of the retirement annuity can be utilized for medical expenses. However, only a few actually live a lavish after retirement life. RA is the best way you can secure your nest egg. No, you don’t have to worry about outliving the nest egg because retirement annuity schemes are purposely designed to last for a lifetime.
How does it work
Understanding how retirement annuities work is fundamental before settling your eyes for it. Annuities which are mostly tax deferred in nature are considered the highest performing vehicles of the time. At first, you have to invest in a lump sum to receive periodical or lump sum payments later.
The span when you keep investing is actually referred to as the accumulation period. The earnings that accumulate over the years are undoubtedly tax-deferred. However, this seems to persist for the time you don’t withdraw the funds accumulated.
Annuities are one of the fastest modes of earning money during times when finances tend to remain low. Post-retirement days turn more beautiful with RA because your money tends to grow.
It is one of the most popular vehicles to provide retirement funds during the golden years of individuals. However, handful numbers are blessed with such plans to finance their daily living when earnings become limited.
What's in Your 401K Retirement Plan?
Raise your hand if you’ve got a 401k retirement plan!
Now keep your hand raised if you know exactly what’s in your plan!
The truth is that many of you probably don’t have your hands raised. For anyone who has a 401k plan through their employer, it may seem like everything is taken care of. But even if your employer seems to be on top of things, it’s still a smart idea to take some control
of your own finances and find out what’s really going on in your 401k.
Some plans let you choose
what vehicle you want to have in your 401k retirement plan. These could include stock funds, mutual funds, money market accounts, target-date funds, or pretty much anything else you can think of. If this is the case with your 401k, make sure you research the vehicles you can choose from in order to make the most educated decision
. Make sure you know how much risk you are comfortable with, and how risky each vehicle will be.
Some, like stock funds and mutual funds, can lose a great deal of value in a short amount of time due to a market crash
. The tradeoff is that you will usually have a bigger potential gain from this type of investment.
On the opposite end of the spectrum, money market accounts
can be a safer investment, but your gains will likely be lower. Target date funds are frequently offered as a “hands-off” investment, but it’s always a good idea to be hands-on with your finances. If you are considering a target date fund for your 401k, make sure you know how it works and keeps in mind that it may not always hit its target date.
Some plans may not offer you as much choice if any at all. If this is the case at your company, make sure you know what’s going into your 401k. If it’s too risky
for your tastes, you might be better off investing on your own.
The overall message here is that it’s important to stay informed
about your finances. Many people have no idea what happens with the money they set aside from their paychecks to be deposited in a 401k.
As many people learned in 2008, you can’t always trust
the people who are managing your money. In the interest of being an informed investor, make sure you know where your money is going, and more importantly, what’s being done with it.
Becoming and Staying Wealthy in Old Age
Everyone gets old, and there comes a point where it's no longer possible to work, and people have to rely on what they've put aside. Unfortunately, a great deal of Americans hit retirement age with little to nothing in the bank, and they're forced to subsist on meager social security benefits until the end of their lives.
That forces them to lower their standard of living, and their kids are left with nothing. That's exactly the kind of situation that every working person should try to avoid, and it's never too early to start preparing.
Consult a Financial Expert
People who want to get the most out of their money need to talk to those within the financial industry. There's a lot that goes into making a robust investment portfolio that's geared toward long-term gains, and someone who crunches numbers for a living is far more likely to piece together an effective plan than someone who tries to work from a rudimentary understanding of banking and economics. A trusted banker can even help some people craft a retirement plan if they don't know what kind of goals they want to set.
It's Never Too Early
Whether or not someone decides to create an investment portfolio, it pays to harness the power of compound interest. A savings account with a compound interest rate of eight percent turns $100,000 into $1,000,000 over the course of 30 years, and while $1,000,000 is a lot less than it used to be due to how much the average lifespan has increased, it can go a long way when it's well utilized.
Estimate a Retirement Date
The retirement age will likely get pushed further back as lifespans continue to increase, but picking a tentative retirement date is a good idea for anyone who wants to form a cohesive plan. It puts a timeline in place, and a timeline makes it far easier to solidify certain goals.
It also gives people a metric that allows them to measure their progress, and although the plan may need to be adjusted once in a while, setting a date provides a basis for subsequent adjustments.
Plan to Keep Investing in Retirement
Just as it's never too early to start saving and investing, there's never a good time to stop. Even if someone reaches retirement age with plenty of money in the bank, it's impossible to determine how long someone will live. It's also impossible to determine when the economy will experience shake ups.
Even though the rate of inflation is fairly stable, spikes of increased inflation and deflation do occur, and it's impossible to say what the economy will look like five or ten years down the road. Once someone has acquired a certain amount of wealth, investing is the surest way to guard it.
Keep Taxes in Mind
There are plenty of methods for deferring taxes on savings, but getting the most out of one's money requires a lot of careful planning. This is another thing that experts can help people figure out; the optimal path to saving and withdrawing money isn't an intuitive one, and seeking the guidance of a financial expert before saving and investing makes it much easier to form an optimal plan.
Getting old is a somewhat morbid thought. It's not something that most people like to think about, but indulging the urge to avoid it only causes problems. Someone's retirement years should not be a stressful time; it should be a celebration of the life that has been lived up to that point.
It should be a time when someone gets to enjoy all the fruits of his labor. That's exactly what it can be, and with a bit of careful planning, it can become even more.
What To Do With Your Redundant Retirement?
Redundancy can put unwanted stress on your well-being as well as your bank account, so it will be even more of a worry to hear that your retirement income will not quite go as planned either.
So what do you do when the company you have loyally worked for makes you redundant? The first thing you can do is breathe a sigh relief to know that help is at hand and the second thing you can do is continue reading.
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What Sort of Workplace Pension do you own?
There are two types of workplace pension, and they operate differently to each other. This will affect how you need to deal with them.
The first type of workplace pension is the Defined Benefit (otherwise known as the salary-related or final salary scheme. The amount of received on retirement depends on how many years you paid into the scheme as well as the final salary when you ended the scheme or retired. It may also be your average salary.
The second type of workplace pension is the Defined Contribution (otherwise called the money purchase scheme). This combines the money you pay into it with that of your employers, providing a secure income upon retirement.
You can find out which one you have by asking your employer.
Choosing your Next Move
When you know which workplace pension you own, you can then determine whether to move it elsewhere or keep it where it is.
With a Defined Benefit pension, you will need to stop contributing to it and carry out one of the following.
- Keep your pension within that scheme, and then when you retire, you will have your pension from that particular scheme.
- If it allows to you, move your pension to your new employer's scheme. If you are not working in the public sector, the new pension scheme is unlikely to be the same.
- Open your own personal pension taking advantage of pension reviews to get the best deals and move your contributions into there.
- Bask in early retirement (if you are old enough).
Moving out of your existing scheme should not occur unless with good reason, for example, a previous employer is no longer sufficiently funding your pension or may be going bankrupt. Most of the time, the best idea is to leave your pension in the original scheme. That said if you have your pension with an employer that has gone bankrupt you could check with the Pensions Protection Fund to see if you can claim compensation.
Additionally, while early retirement sounds like an attractive option, providing a much-needed change to your lifestyle and possibly improving your health. There is also a downside in that you will not receive redundancy pay, additionally receiving a smaller pension for working fewer years and you will not receive a state pension until your mid-60s.
With a Defined Contribution Pension, if you are using an occupational scheme, you will need to end any further payments and do one of the following:
- Keep your pension in this account, leaving it to grow until you reach retirement.
- Move it to an alternative Defined Contribution scheme, such as your new employer's scheme or your own personal pension scheme.
Additionally you might have permission to move your pension fund into a salary-related scheme with your new employer; however, this requires their consent. Before making any transfers, you should also find out how much each scheme would cost to ensure they are worth the investment.
Since pensions are complicated things, before doing any of this, you may wish to speak to a financial advisor who can perform pension reviews and help you plan your next move.