Posts Tagged ‘Retirement’

Get Your Head In The Game!

March 31, 2009

Have you ever been out of touch? clueless? puzzled?  Maybe you got benched by your coach for not having your head screwed on right?  You just weren’t up to the task and you were sent to the pine for some reflection time.  You ask yourself:  What did I do?  What was I thinking?  How did I forget what we practiced? Mismanaging money kick you to the sidelines as well.  Managing money is a game.  There are rules to follow.  There are offensive and defensive moves that must be practiced.  Neglecting the principles and practices can result in failure.  Below you will find some tried and true advice to keep yourself in the financial game.

1) Know where the goal is.  You must know your destination.  You need to know what produces results.  Is your goal to be debt free?  more unity with your partner about money? start investing for retirement? I’ve heard it said that a goal is a dream with a deadline.

2) Have a solid offense.  Offense means putting points on the board.  If your goal is to have a comfortable retirement, then you need to designate a place for this money to go.  Some of your choices are IRA, Roth IRA, 401K, and pensions.  You must have a budget as well.  If your dollars don’t have a destination you will not get the most out of them.

3) Have a solid defense.  You need to protect what you earn.  If you’re married and have children this part of your game needs serious attention.  Some examples of good defenses are: having reliable insurance (home, life, auto, health,disability), emergency fund, and a will.  Life has risks and you need to be prepared ahead of time. 

4) KnowYour Strengths.  You need to be aware of the options available to you.  Not using Michael Jordan or your 401K can have disastrous results. In regards to retirement, you need to know what is offered by your employer.  You need to educate yourself about these options so you can maximize the benefits you are offered.

Advertisements

Roth IRA: Great Retirement Option

March 22, 2009

The Roth IRA is a great way to invest for the future. It gives the investor more options than most other investment types. If you don’t have a 401K at work, a Roth IRA is probably your best choice. The main thing a Roth gives you is options. Below are the main advantages to having a Roth IRA.
1) Contributions Grow Tax Free.  Any money you put in a Roth IRA can be withdrawn without tax consequences.  While you are taxes at ordinary tax rates when withdrawing 401K money, this is not so with the Roth.  Being able to withdraw this money at retirement with Uncle Sam getting a slice is a good deal.

2) Contributions can be used to fund college expenses.  This is one of those options that make this investment great.  You can use contribututions to pay for your college or your children’s college.  Our financial needs change due to circumatances.  Even if you desire to use this for retirement, if your financial picture changes you can use this to help fund Suzie’s first year in college.

3) Contributions can help with the purchase of a first home.  Here is another great option provided by this investment.  Money inside a Roth IRA can be used as down payment toward your first home purchase. 

4) Roth IRA assets can be passed to your heirs tax free. What a comfort knowing that your children won’t lose a portion of your estate to the government!  If you have a Roth IRA, this money will pass to your designated survivor without tax consequences. 

5) Contributions (not earnings) can withdrawn at anytime without tax consequences.  You never know what is around the corner.  If a costly financial issue drains your emergency fund, you can use money in a Roth (contributions) as a back up.

I hope you can see a Roth IRA is a GREAT investment tool.  If you’re interested in reaping any of the benefits above, open one real soon.  You won’t regret it.

Retirement Planning: 3 Reasons To Start

January 27, 2009

Retirement for a lot of folks seems so far away.  Oftentimes this results in a lack of urgency to begin saving for the future.  There will be expenses when you retire.  There are many forces to take into consideration when you think about when to start planning for retirement.  Knowing more about these challenges can give you motivation to begin saving for your future.  Money is active and always changing.  Below are three reasons for you to learn more and start planning for your retirement.

 

 

1) Inflation

Put simply, inflation is defined as continuously rising prices, or the continual fall in the the price of a dollar.  It is measured in percentages.  We all know the price of groceries and gas went up this past year.  The last decade inflation has averaged around 3%.  However, inflation in 2008 will probably be at least 4.0%.

I went to www.usinflationcalculator.com and found that what cost $20.00 in 1988 cost $35.54 in 2008.  This is a 77% increase in price over a 20 year span.  If you are 5 or 25 years from retiring, you must take inflation’s affect into account when thinking about your future.

I’m not a mathematician but if the rate for the past 20 years remains the same for the next 20, here is what a round of golf will cost.  Today’s cost: $30.00.  2028 = $53.10.

Sometimes seeing the numbers can help us see the need for investing now.  The earlier you begin saving can help you enjoy the benefits of the next reason.

 

2) Compound Interest

This has been called the 8th wonder of the world.  The money that you invest compounds each year. Example: $1200 invested in year 1, compounded twice a year at 10% interest is 1323 (1200 + 123)

                1323 at end of year 2, same 10% rate 1323 + 135 = 1458

                1458                     3,                      1452 + 145 = 1608

This example assumes you make no new contributions to the original amount. I’m not good at math so I included a link for you to run your own numbers.  

Here is the address:  http://www.webmath.compinterest.html.  When asked to enter how often the money compounds, I think 2 or 4 are what you find in most investments. I’m limited in the math of compound interest. However, this is valuable knowledge to grasp in regards to how money can grow.

 

3) Healthcare Costs

Medical News Reports Today reports that healthcare spending grew at a rate of  6.1% in 2007 down a little bit from 2006 rate of  6.7%.  If you breathe air you know the high cost of healthcare.  There is no sign that this rate will decline in the years ahead.  The average inflation rate in America is only half of the growth rate of healthcare costs. We will have healthcare costs in retirement.  They will be a real issue as we become older.

Here are three reasons you need retirement money for healthcare:

1) Your need for healthcare treatment increases as we age; 2) The cost of those services are going to be higher; 3) Medicare coverage will not cover all medical expenses in retirement.  The Kaiser Family Foundation reports the following expenses as uncovered by Medicare: dental care, eye exams, eyeglasses, short-term skilled nursing care, and healthcare given outside the United States.  In summary, you need to have retirement dollars set aside for healthcare expenses.

 

 

Funding Retirement: Can you afford to wait?

January 6, 2009

Funding retirement is an important part of your financial plan.  Where are you at in this process?  Which perspective best describes you? 1) I’ll get to it later; 2)  I’m too young to worry about it; 3)  I’ve got too many other bills to pay.  Each of these excuses are common in today’s society.  Each day we choose what we spend our money on.  If we spend it all on today’s needs, we’ll be less than happy when we get to retirement.

Procrastinator (I’ll get to it later)

When faced with the decision to save for the future or spend for today, a lot of people prefer the latter.  Putting off retirement has financial costs.  For example, look at the different monthly investment required to achieve a $375,000 nest egg.  At age 35 you need to save 251.62 per month.  Wait five years  (40) and the monthly requirement increases to 394.12.  Investing early and often can pay off big time due to the power of compounding. 

Getting to it later is not a good strategy. You can open a Roth IRA with as little as $250.00.  You can make monthly investments as small as $50.00 per month.  You can start small and increase your investment as your income increases.

I’m too young to worry about it.

You need to worry about it.  The previous example illustrates that the earlier the better. 

I have too many bills to pay.

Granted, we all must pay our bills.  However, there are things that happen to most of us that can get the investment ball rolling.  Here are a few suggestions: 1) Pay raises; 2) Income tax refund;  or 3) second jobs.  Do yourself and your family a favor and get started today on your retirement.  Be on the lookout for future articles on the beginning steps to your retirement.