Category Archives: Retirement

4 Tips About Retirement

Retirement. I know a lot of people don’t necessarily think about retirement until they’re in their thirties or forties, which is probably a bit of a mistake. I know some people who are working toward their retirement with eager anticipation, whereas others try to ignore it until they absolutely have to deal with it. Saving for retirement may seem like a burden now, especially in this economic climate, but it’s definitely something that we should be thinking about. You don’t want to be penny pinching until the day you die, do you?

So, what are some things that we can do in order to start thinking about retirement? Today, we’re going to look at four tips that may help you while making your decisions about retirement.

1. Even if you don’t have a “career,” start something. If you’re younger, like I am, you still need to be thinking about retirement. A lot of people are having a hard time finding a steady “career.”   But even if this is the case in your life, you should consider starting some sort of retirement account, even if it’s something small. Talk to an investment professional or family and friends about how they got their retirement accounts started.

2. Don’t go by set “save this much” rules. There are some people that say you need to save 4% of your income per year, others give dollar amounts to shoot for. But a lot of times, these don’t account for inflation or other factors that could affect your final retirement balance. Save what you can afford to save, and do the math with a financial professional. The numbers may be more or less than the “set rules.” If you don’t have access to a financial professional, they are good starting points, but you need to consider a lot more factors than just that.

3. Plan for a long life. Americans’ lifespans are getting longer. Apparently the average now is 78; and don’t only save till 78, that’s an average. Some people are retired for 20+ years easily; my stepdad’s father is 78 and has been retired for 15 years, I think, and his health is great. So he’s going to be retired into that 20+ years. Are you saving enough, or are you of the “I’ll only be alive 10 more years” mindset?

4. Make sure you talk about it. Retirement can be scary! It’s not easy to talk about the stuff that’s going to happen later on in your life. But, you really need to sit down with the people you love and talk about it. They want the best for you at the end of your life, and you should want the best for yourself too. Take the stress off and let your friends and family help you out.

What other tips do you have about saving for retirement? Are you working toward your retirement, or is it something that you really don’t think about? What other concerns do you have about retirement? Share your thoughts in the comments, have a great week, and we’ll see you back here next week!

 

4 Often-Overlooked Retirement Facts

Retirement may seem a long way off for some of you. It sure feels that way to me sometimes, considering I’m 26 and the retirement age is estimated to be around 70 when I get to that point. Ouch. So why in the world should someone my age be thinking about retirement now? Well, in short, because if someone like me starts now, I’ll be in a much better position financially when it comes to the point of actually retiring.

Today, we’re going to look at 4 facts about retirement that are often overlooked when planning for the future.

1. Extra retirement plans. 401k’s and IRA’s are not the only retirement plans out there. There are several others, including these two:

-419e plans- A plan where your employer can offer insurance that you can use after you retire.
- 457f plans- an employer assists the employee by essentially paying for some of all of the taxes the employee would have to pay on their IRA or 401k contributions.

2. You can collect social security while working. People on disability do this too; you can still work part time and collect on your social security benefits. They just won’t be as much as they would be if you were not working at all. Don’t strain yourself in retirement; if you need to keep working a little to make ends meet, you won’t lose those benefits you worked so hard for.

3. You can’t hold your standard of living. As much as you want to believe that the opposite is true, it really isn’t. Most people who have a middle-class income have to reduce their standard of living by 50 percent or more when they retire. That is a significant change; imagine only being able to pay for half of the things that you pay for now. Add in the fun numbers of inflation and the change in costs for pretty much everything, and you probably aren’t saving enough in order to live the same life that you are now.

4. Couples who don’t have a set plan by their mid-thirties are at the highest risk for a financially difficult retirement. This sounds like a really random statistic, and it kind of us. But the people who suffer the most are the people who have to support others. If you are in this category, now is the time to figure out what needs to be done in your retirement. Medical costs, end-of-life costs, and other things are more expensive when there are two of you, and burdening your family with it is both unfair and unnecessary. Find a financial adviser and make a plan.

Retirement. It’s never too early to think ahead. It’s never too early to make sure  that your retirement is enjoyable for you and your loved ones. So, save up, do your research, meet with an adviser, and get yourself on the road to financial freedom during your retirement. Have a great week, and we’ll see you here next week.

6 Ways to get Rich

automaticmillionaire1.jpg

Lately, I’ve been listening to this audio book called the “Automatic Millionaire” by David Bach, and let me tell you that it’s awesome. I recommend this audio book to everyone, it’s a great read/listen, whichever you prefer. So while I was listening to it, I noticed some cool things that I thought I wanted to share with you.

When it comes down to it there are 6 approaches to wealth. Here they are.

  1. Win it. For example, the lottery. Did you know that over 500 Billion dollars have gone into the lottery business since the early 70′s when the lottery was first started? Imagine if all that money was put into an investment account, there would be over trillions of dollars right now. This is not a realistic approach but it happens to the very few. Do you know anyone who has won the lottery? Probably not, so I wouldn’t recommend waiting around for this one.
  2. Marry it. Wouldn’t it be great to marry your self into wealth? But lets face it, it’s not that easy to marry for money. Not only is it not easy to marry for money but “when you marry for money you pay for it for the rest of your life”. Good luck with this one.
  3. Inherit it. Now inheritance is actually a real approach to gaining wealth. Within the next 15 years, we’re going to see over 15 trillion dollars transfer from one generation to the next. But I mean, who wants to rely on their parents to past away so that they can get their money. No one I know, hopefully no one you know either. If you are fortunate enough to have your parents or family members leave you something after they pass, you can be grateful but don’t depend on it. Not a good way to live and you don’t want to rely on this for your retirement.
  4. Sue for it. Why work when you live in a country that pulls in 90% of all lawsuits made in the world? Just sue your way into wealth, right? Wrong. Again, you don’t want to rely on something like suing someone to get rich. This is not a real approach to wealth.
  5. Save for it. For all the little things we spend our money on like fast food and starbucks, this alone over a long period of time could end up to be a considerable amount. Say you spend on average roughly $10 for lunch and starbucks. Over a year it’s $3,650 and over thirty years it comes to 109,500! Now imagine you put this money away in the stock market in some kind of an index fund, which historically averages about a 10% return. Using this compound interest calculator, you would end up with 660,443.50! Isn’t this amazing? So yes, your daily fast food and starbucks is costing you over half a million dollars. This is also known as the Latte factor.
  6. Earn it. Yes, you can earn your way into wealth. Although the automatic millionaire has many great tips on how to accumulate wealth, the main concept of the audio is to pay your self first. What does it mean to pay your self first? It means that when you get your paycheck, before you pay anything or anyone, including the government, you make sure to pay your self first. When you automate this process electronically, it’s very easy to do because you don’t have to do it manually and the great thing is it doesn’t require motivation or work once its all set up. This is why out of all the 6 approaches, this is the most promising. As Bach mentions in the audio, you can start paying yourself as low as 1% of your gross income. Then over time, slowly start to increase your percentage and you won’t even notice it.

Just to let you know, I’m not getting sponsored or getting paid for saying any of this, I just want to share with you how much this program works.

So ever since I started listening to this audio, I made everything automatic and so far it’s doing great. As of now, I am automatically paying myself 20% of my gross income each paycheck. I stated out with 10% but then realized that I can afford to do 20%.

Having this process automated is the main key. Since it’s automated, you don’t have to worry about keeping your self motivated and that’s a huge factor, especially for me. Lets face it, it’s really hard to stay motivated 24/7 and thinking about finance day in and out. Another thing is when you have this process automated, once you have everything setup, you don’t have to work at it. Everything is automatic! It’s working for you while you’re not thinking about it.

The thing is, most of us know the concept of paying yourself first, but no one ever executes them. In his book, he pays down solid principles and honestly tells you that it’s not a get rich scheme. That it takes years for it to work. But its a solid plan that I think is guaranteed to work. What I like about the book is that it’s really simple to understand and easy to follow. If you have the chance, go check the book out for your self. It’s definitely worth the investment.

Carnival of Money Stories: Chicken Soup for the Financial Soul edition

Welcome to the 13th edition of the Carnival of Money Stories! This week we had a little over 30 great article submissions, however since majority of the submissions did not have a personal story or experience behind it, I had to omit most of it. Remember guys, Carnival of Money Stories is strictly dedicated to articles with some kind of personal story and/or experience involving finance so if your article did not have either or, then it was not included in the carnival. For awesome articles that does not fit the Money Stories, there is the Carnival of Personal Finance.

For this edition, I’ve decided to take the popular “Chicken Soup for the Soul” idea as my theme but instead filled with money stories with pictures. There is a total of 14 great stories and I put them each into their own perspective chapters or topics. In order to get to the story, just click on the picture. Anyway, without further delay, I present to you the Carnival of Money Stories #13 :Chicken Soup for the Financial Soul.

Chapter One: Real Estate

real-estate-1.jpgTrent from The Simple Dollar

real-estate-2.jpgSilicon Valley Blogger from The Digerati Life

real-estate-3.jpgCap from Mint

Chapter Two: Customer Service

customer_service-1.jpgMr Medicated Money from Medicated Money

service-2.jpgFire Finance from FireFinance

Chapter Three: Financial Mistakes

money-mistakes-1.jpgBret from The Frugal Law Student

money-mistakes-2.jpgMr Credit Card from Ask Mr Credit Card

Chapter Four: Credit Cards

credit-card-1.jpgFundZine

credit-card-2.jpgThe Credit and Credit Card Blog

credit-card-3.jpgMatthew from Getting Green

credit-card-4.jpgSkilled Investor from The Skilled Investor Blog

Chapter Five: Career

career.gifNina from QueerCents

career2.jpgFreeMoneyFinance

Chapter Six: Retirement

retirement.jpgStop Swimming

So that concluded this weeks Carnival of Money Stories. I want to thank all the contributors for their great work.

The next edition of Money Stories will be hosted Monday over at Frugal Law Student, don’t miss it! You can submit your money stories here.

Are you a Traditional or a Roth?

retirement.gifAs many of you know, the importance of investing is crucial. Since investment is tied with time, it’s also obvious that the sooner you start your investment portfolio, the better and bigger your outcome.

Today we’re going to look at the individual retirement account, or also known as the IRA. In short,  IRA is an personal, tax-advantaged retirement plan. An employed person can contribute earned income into an IRA account up to $4,000 per year if you’re younger than the age of 50 and $5,000 if you’re over. In 2008 this amount will increase by a thousand dollars. If you need some more information on IRA accounts, you can get more details here.

Although there are more than just two types of IRA accounts, I want to just pick on Traditional and Roth today.

So how do you know what account is best for you?

If you compare a Traditional IRA with a Roth IRA, a Traditional IRA may be a better move for you than a Roth IRA if you:

  • Don’t qualify for a Roth because of your income level but still want the tax deferral on earnings in a Traditional IRA.
  • Believe that income tax will decrease in the future.
  • Expect to be in a lower tax bracket during retirement.
  • Qualify for a tax-deductible IRA contribution.

Now, if you compare a Roth IRA with a Traditional IRA, a Roth IRA may be a better choice than Traditional if you:

  • Anticipate remaining in your current tax bracket after your retirement.
  • Believe that income tax will increase in the future.
  • Expect that when you retire, you will be in a higher tax bracket.
  • Have income below the MAGI limit for a Roth IRA, but still too high to qualify for a deductible Traditional IRA.

Even though you may have an idea on what kind of account you’re interested in, its always a good idea to ask your personal finance advisor and seek their opinion. From personal experience, they always seem to have some useful information.

Roth IRA

investmentpic.jpgSo my last post from yesterday covered the basic fundamentals of what a Traditional IRA was. Today I want to cover Roth IRA and just like last post I want to keep it sweet and simple. So lets get started.

A Roth IRA’s main advantage is its tax structure. The contributions made to this account is only from earned income that has already been taxed, therefore it is not tax deductible. The total contribution for all IRA’s are limited and changes from year to year. This year the limit is at $4,000.00 for people 49 and under and $5,000.00 for people 50 and over. And starting in 2008, the contribution will increase to $5,000.00 for people 49 and under and $6,000.00 for people 50 and over. Here is a simple chart to see the previous and the future limits.

contribution-limit.JPG

Here are some Advantages and disadvantages:

Advantage:

  • At any time, the IRA owner may withdraw up to the total of his contributions without getting a penalty fee.
  • When a Roth IRA owner dies, and the spouse is the sole beneficiary of that Roth IRA and he or she also owns one, the surviving spouse may combine the two Roth IRAs into a single account without penalty.
  • If you are a first time home-buyer or paying qualified educational expenses, you are able to take out not only your contributions but also your earnings without a penalty( up to $10,000.00 in earning).
  • Lack of forced distributions based on age. All other tax-deferred retirement plans, including the Roth 401(k), require withdrawals to begin at age 70½, and impose an annual minimum distribution once withdrawals begin at any age beyond 59½. The Roth IRA is completely free of these mandates.

Disadvantages:

  • Contributions are not tax-deductible. This can be a disadvantage in the long run if you are making a decent amount of income. I suggest Roth IRA for people who are just started out and Traditional IRA for those who are making well over 80k.
  • With a Roth IRA, there are heavy penalties for early withdrawals of earnings. An unqualified withdrawal of earnings will result in federal income tax plus a ten-percent penalty on the amount.
  • Just a rumor but there is the risk that Congress over the next few years may decide to tax earnings on Roth IRAs.

So in general, Roth IRA has these following characteristics:

1.) Unlike Traditional IRA, contributions are not tax-deductible.

2.) Withdrawals are usually tax-free.

3.) At any given time, the Roth IRA owner may withdraw up to the total amount of his contributions.

General Overview of Traditional IRA

investing.jpgSo I’m in the process of researching what investment funds to choose from for my first contribution. Since I’ve been reading a lot about IRA accounts I decided to share some useful information that I gathered.

The traditional and the Roth IRA, also known as Individual Retirement Account, is a retirement plan account that offers some tax advantages  for retirement savings .They are usually invested in stocks or mutual funds( there also other methods such as Certificate of Deposits, notes, and derivatives). There were 5 different kinds of IRA that I came across.

  1. Traditional IRA
  2. Roth IRA
  3. SEP IRA
  4. SIMPLE IRA
  5. Self-Directed IRA

Out of these 5 I’m going to concentrate on the two most popular the traditional and the Roth. Today I will cover just the Traditional  IRA and tomorrow I will go over Roth IRA.

I think the easiest way to understand what Traditional IRA is is to develop a list to differentiate between the goods and the bads. So heres a list of 4 advantages and disadvatages of Traditional IRA:

Advatages:

  • The main advantage of a Traditional IRA, is that contributions are often tax deductable. If a taxpayer contributes the maximum amount of $4,000 to a traditional IRA and is in the twenty-five percent marginal tax bracket, then a $1,000 benefit ($1,000 reduced tax liability) will be realized for the year.
  • If a taxpayer expects to be in a lower tax bracket when the person is close to his retirement than during the working years, then a traditional IRA offers an increased incentive over the Roth IRA.
  • The taxpayer gets the tax benefit immediately
  • This is just a rumor but With the Roth IRA, there may be a risk that over the next several decades Congress will decide to tax Roth IRA distributions.

Disadvantages:

  • There are the eligibility requirements for the tax-deductibility.
  • All withdrawals from a Traditional IRA are included in gross income and subject to federal income tax.
  • If one has a lot of disposable income, (total amount of income an individual makes after taxes), a Roth IRA in effect shelters more assets from taxes on gains than a Traditional IRA does.
  • The greatest disadvantage of the Traditional IRA is its forced distributions based on age.

So in general, Tradiontal IRA have these following characteristics:

1.) Contributions are often tax-deductible

2.) All transactions and earnings within the IRA have no tax impact

3.) Withdrawals at retirement are taxed as income

Tomorrow I will be covering Roth IRA so stay tuned.

Start saving for retirement asap, compound interest says so.

So here is the scenario:

Person A is 20 years old and has nothing start off with since he’s fresh out of school. But he has a decent job and he able to invest 100 dollars a week. He does this til the age 60.

  • Starts with $0.00
  • Invest $100.00 a week ($4,800.00 a year)
  • Interest rate going at 10%
  • 40 years to invest

Person B is 40 years old and has waited this long to wait to start saving for his retirement. He has some money saved up and is able to put down 15,000.00 dollars to start off with. Also, since hes much older, he makes more than person A and is able to put 200 a week. He does this til the age 60.

  • Starts with $15,000.00
  • Invests $200.00 a week ($9,600.00 a year)
  • Interest rate going at 10%
  • 20 years to invest

Lets put these numbers in the compound interest calculator I found in MoneyChimp.com and see how we do. 

So here are the charts.

Person A: 20yearoldinterest.JPG

 

 

 

 

 

 

 

 

Person B:40yearoldinterest.JPG

 

 

 

 

 

 

 

 

As you can see, although person B invested 15,000.00 more than person A, he still has no where near as much as person A when it comes time for retirement. The difference comes to a total of $1,631,152.20! This is all because person A decided to start 20 years before person B. Now that’s the power of compound interest baby!

I don’t think there is a “right” age to start saving for retirement but I do know that there’s no such things as starting too early. Most people think to themselves, “Retirement is long ways from now and I can afford to wait another year…”. Well if you keep thinking in that mentality, you’ll find yourself in person B’s shoes and miss out on millions of dollars.

As for myself, I don’t have a retirement savings account yet but if everything goes according to plan, I will by the end of this month. :) We’ll see.

Retire Young Retire Rich

retire_young_retire_rich.jpgOne of the Chirstmas gifts I got this year was a book called Retire Young Retire Rich, from the same author who wrote the best seller Rich Dad Poor Dad, Robert Kiyosaki. I am looking forward to reading this book and possibly share some key points and post them here. My goal is to read at least one chapther a day so that means I should be done in twenty one days which is the 16th of January.

So far I have read the introduction to the book called ”Why David Met Goliath” and want to point out some parts that I liked. Robert Kiyosaki talks about how one the most important word in the world of money is leverage. He says, “Leverage is the reason some people become rich and others do not become rich.” The book is broken up into four sections based on leverage.

  1. The leverage of your mind (chap 1-8)
  2. The leverage of your plan (chap 9-13)
  3. The leverage of your actions (chap 14-20)
  4. The leverage of the first step (chap 21)

In the introduction, he noted that David and Goliath was one of rich dad’s favorite stories. Saying that he suspects that his rich dad may have seen himself as David, a man who started with nothing, yet to rose to compete against the giants of business. Rich dad said,”David could beat Goliath because David knew how to use the power of leverage. A young boy and a simple slingshot were far more powerful than the feared giant, Goliath. That is the power of leverage.”

I’m looking forward to starting this book.

Paris Hilton’s Retirement Plan

As of this post, Paris has 202 days, 6 hours and 15 minutes until she retires.You’re probably asking, “What does she have to retire from? Her sex tape?” That’s the same question that I had when I first had came across an article from MSNBC, but apparently it seems that she planshiltonparis88454.jpg on retiring from her public life within the next year.

It appears that the general image that we all have of Paris is not quite the case. She claims that she is just acting up when she’s in public and that she is a business woman at heart.

“I think maybe when I was younger, I thought it was cute to play the dumb blonde,” she says. “On TV, I do it because it’s funny. I consider myself a businesswoman and a brand.”

I don’t know how serious this may be, considering she still spends a million and 5 minutes on her cell phone with her hair stylist. But it seems that when she is talking about her business ventures (Paris Hilton perfume, jewelry, nightclubs and dog accessories, not to mention her movie career), her inner airhead gives way to a voice that’s much slower, deeper and (dare we say?) serious.

I can tell her that she’s a lot smarter than the woman who once asked if Wal-Mart was a place to buy walls. Then she’d respond telling me ” I know exactly what Im doing…”

Whatever may be the case, she has managed to make her self an icon. There is one thing that I want to point out what she does whenever she’s in public, and I think its brilliant. Wherever you may catch her, be at a party, a club or in just in front of a camera, I noticed that she always, intensionally or unintentionally, advertises things she’s affiliated with. This is brilliant because she’s helping those companies whenever she talks about where she got her designer dress from or where she went clubbing the previous night, or even if she talks about how she got her burgers from McDonald’s. Paris does this quite often and I’m sure whoever is the receiving end, they’re saying to themselves, “Thank god she talks so damn much.”

Well, according to Newsweek, Paris plans on retiring sometime near June / July of 2007. I’m not sure exactly how accurate this date is but I like set dates so I’m gonna take it.

Here’s some interesting quotes from Paris. Knock yourself out.

  • “Every woman should have four pets in her life. A mink in her closet, a jaguar in her garage, a tiger in her bed, and a jackass who pays for everything.”
  • “Who are you wearing?”
  • “Thank you, officer. We love the police.”
  • “I don’t really think, I just walk.”
  • “Wal-mart… do they like make walls there?”
  • “It will work. I am a marketing genius.”
  • “This is Earth. Isn’t it hot?”

More info…

Hilton Hotels
Recent Price $25.31
Market Cap $9.74 billion
52-Week High/Low $18.78 / 29.22