As a part of your retirement planning, have you thought about a retirement job?
Continued income from a post retirement job can have a very substantial positive impact on your retirement finances.
Let’s do a fast calculation and see the impact of an after retirement job on your retirement finances. Let’s calculate the amount of investment that you need to generate a monthly income of $1,000 per month.
To do this we need to make a few assumptions. Assume the income generation rate of your investments is five percent (5%). Let’s assume that we are not going to take any principle from your investments to do this. This will leave the principle intact for use later after you have stopped working in your retirement job.
The calculation is how much principle is needed to generate $12,000 per year ($1,000 per month). The formula is principle divided by the income interest rate ($12,000/.05 = $240,000). I think you will agree that is a large amount necessary to generate $1,000 of income per month.
However, a thousand dollars per month is not too large an amount to expect to make in a retirement job and just look at the impact that it has on preserving your retirement investment.
Three retirement calculators on the Net that include income from work after retirement in the calculations are the AARP Calculator, the Employee Benefit Research Institute Calculator, and the MSN Calculator. The MSN calculator is especially easy to use and is very visual so you can see the results as you change the variables.
These calculators have a weakness since they ask for the amount of annual income from a job after retirement, but they do not ask for the age when that income will stop. They assume the income will continue until death which may not be accurate. We are all living longer, but most of us will not be working at age 90.
These three retirement calculators are the more realistic calculators on the Net. They help us calculate how much money we will need to retire. However, they do not help us manage our retirement funds after we retire.
Once we retire, the variables involved in calculating retirement finances are greatly reduced. Unless Aunt Bess leaves you an unexpected inheritance in her will, you know what your retirement savings are that have to last your lifetime.
Unless inflation runs away during our retirement, the major variables we have to consider are how much we budget to spend each year, the amount we make from our retirement job, and how long we choose to work at that retirement job.
A retirement calculator that will help you plan your after retirement finances can be found at the Retirement Jobs Online website (http://www.retirement-jobs-online.com). This calculator will help you determine how long your retirement savings will last under various different situations.
As part of your retirement plan, you can use the Internet and work from home on your own schedule to generate the income that will extend your retirement savings. Use the calculators mentioned above to see the real impact income from a retirement job can make on your retirement finances.
Thousands of people are using the Internet to make a full time living. Why not use it for retirement work and make some money to boot? This will be a nice supplement to your retirement income from your investments and Social Security. And you can have some fun in the process.
I wish you a great and productive retirement.
About the Author
John V. W. Howe is an entrepreneur, author, inventor, patent holder, husband, father, and grandfather. He has been involved in entrepreneurial activities for over 40 years. He founded http://www.boomer-ezine.com, http://www.boomer-entrepreneur.com and http://www.retirement-jobs-online.com to help Boomers
Published At: www.Isnare.comPermanent Link: http://www.isnare.com/?aid=83834&ca=Jobs
Saturday, December 27, 2008
Thursday, November 20, 2008
Financial Planning For Retirement: For Worry-Free Retirement
Planning can be a tedious activity especially if you are planning for retirement. Many people realize how advantageous financial planning for retirement can be while others find it mysterious.
In fact, most experts say that for people who are only making enough money to make due payments in each month, then it means that they should start contemplating on how they can still make money even if they are already retired.
Surveys show that almost 75% of the American population is earning enough money to pay their monthly bills. This means that they do not have any extra money to put in a bank or in any
financial institution that could provide them enough profit after their retirement.
What's more Social Security is not enough guaranteed income for retired people to live on. Actually, it is still a big question if one’s Social Security will still exist when the retirement day comes.
Hence, it is extremely important to generate some methods that will provide an individual a reasonable amount of money in the future. This should be done regardless of how much an individual earns, the important thing is to start saving today.
1. Visualize and calculate
It is important for a person to visualize his or her own situation after retirement. Then, you can calculate how much money is needed to live on after retirement. Furthermore, people need earnings that compensate 75% of the present amount that he or she is expected to take home.
2. It is important to seek the help of a financial planner or any person competent in financial planning.
By asking for advice from the experts, you will be able to gain more knowledge know how to proceed for you situation. These people are proficient and knowledgeable in all kinds of financial planning and they can provide the most feasible and workable approach for your individual needs.
3. Get rid of loans, debts, and other financial obligations in as little time as possible.
By simply paying off all debts, loans, and other financial obligations in a shorter period of time, you can realize a substantial amount to invest for that retirement. A good financial planner will know exactly how to direct you so you can meet your retirement goals.
About the Author
Henry Clark can show you how to make the most of your retirement years. Visit his website and learn more http://www.push-button-online-income.com/retirement
In fact, most experts say that for people who are only making enough money to make due payments in each month, then it means that they should start contemplating on how they can still make money even if they are already retired.
Surveys show that almost 75% of the American population is earning enough money to pay their monthly bills. This means that they do not have any extra money to put in a bank or in any
financial institution that could provide them enough profit after their retirement.
What's more Social Security is not enough guaranteed income for retired people to live on. Actually, it is still a big question if one’s Social Security will still exist when the retirement day comes.
Hence, it is extremely important to generate some methods that will provide an individual a reasonable amount of money in the future. This should be done regardless of how much an individual earns, the important thing is to start saving today.
1. Visualize and calculate
It is important for a person to visualize his or her own situation after retirement. Then, you can calculate how much money is needed to live on after retirement. Furthermore, people need earnings that compensate 75% of the present amount that he or she is expected to take home.
2. It is important to seek the help of a financial planner or any person competent in financial planning.
By asking for advice from the experts, you will be able to gain more knowledge know how to proceed for you situation. These people are proficient and knowledgeable in all kinds of financial planning and they can provide the most feasible and workable approach for your individual needs.
3. Get rid of loans, debts, and other financial obligations in as little time as possible.
By simply paying off all debts, loans, and other financial obligations in a shorter period of time, you can realize a substantial amount to invest for that retirement. A good financial planner will know exactly how to direct you so you can meet your retirement goals.
About the Author
Henry Clark can show you how to make the most of your retirement years. Visit his website and learn more http://www.push-button-online-income.com/retirement
Saturday, November 15, 2008
Retirement Planning For Dummies: What You Forgot To Include In Your Retirement Plans
Everyone knows that the best way to plan for your retirement is to make sure you have a 401K plan or something similar, so you can save enough money to live on in your golden years. Or is it? If you’ve only planned for your financial security, you have missed a huge and important step in your retirement planning.
Consider this: the average retirement age for Americans is 57.5, and life expectancy is 85 or older. This means the average retirement lasts 30 years or more. Sitting around and doing nothing might be relaxing for a while, but do you really want to spend 30 years gathering dust?
The most important thing you can do for your retirement planning doesn’t involve the financial aspect. Of course you need to make sure you’ll have enough money set aside to maintain your lifestyle, but beyond that, you have to fulfill your non-material needs. How are you going to spend your time? How will you remain satisfied and purpose-driven? The answers to these questions are the aspects too many people neglect to include in their retirement planning.
Your first step should be to determine these answers. There are a number of ways you can do this. Here are some tips on discovering what you really want out of your golden years and planning for more than just financial security:
* List everything that you have always wanted to do, but had to put on a back burner because you didn’t have the time. Is there a place you long to visit? A hobby you’ve wanted to pick up? An organization you’ve been thinking about joining?
* Don’t rule anything out because you think you’ll be “too old” for it. They say you’re only as old as you feel – and if you need proof, just look at how many people in their sixties and even seventies are sky diving, bungee jumping, and rock climbing!
* Consider working when you retire. It’s not as bizarre as it sounds – perhaps there is a place you’ve always wanted to work, but couldn’t make a career out of it because it didn’t pay enough. Retirement is the time to try it out and see what you’ve been missing.
* Think of your retirement as a beginning, rather than an ending. Once you leave the “real” workforce, you can start a whole new life of realizing your dreams.
When you decide on the non-financial course of your retirement, it’s a good idea to keep track of your vision. You may want to start a retirement journal and write down your goals. There are many things you can do now to have everything in place for your re-fired life! Find out what it’s going to take to accomplish your goals, and put down as much of the groundwork as possible between now and retirement time.
Also, keep in mind that it’s never too early -–or too late-– to start laying the foundation for your retirement planning. Once you’ve determined your vision for an ideal retirement that includes the realization of your dreams, you can start taking steps to achieve that vision no matter where you are in life.
About the Author
Dr. Cynthia Barnett is a Re-Firement Lifestyle Coach and the author of Prime Time Makeover: How to Make the Rest of Your Life the Best of Your Life. Visit her online at http://www.primetimemakeover.com for a free newsletter, special report, and to purchase the book.
Consider this: the average retirement age for Americans is 57.5, and life expectancy is 85 or older. This means the average retirement lasts 30 years or more. Sitting around and doing nothing might be relaxing for a while, but do you really want to spend 30 years gathering dust?
The most important thing you can do for your retirement planning doesn’t involve the financial aspect. Of course you need to make sure you’ll have enough money set aside to maintain your lifestyle, but beyond that, you have to fulfill your non-material needs. How are you going to spend your time? How will you remain satisfied and purpose-driven? The answers to these questions are the aspects too many people neglect to include in their retirement planning.
Your first step should be to determine these answers. There are a number of ways you can do this. Here are some tips on discovering what you really want out of your golden years and planning for more than just financial security:
* List everything that you have always wanted to do, but had to put on a back burner because you didn’t have the time. Is there a place you long to visit? A hobby you’ve wanted to pick up? An organization you’ve been thinking about joining?
* Don’t rule anything out because you think you’ll be “too old” for it. They say you’re only as old as you feel – and if you need proof, just look at how many people in their sixties and even seventies are sky diving, bungee jumping, and rock climbing!
* Consider working when you retire. It’s not as bizarre as it sounds – perhaps there is a place you’ve always wanted to work, but couldn’t make a career out of it because it didn’t pay enough. Retirement is the time to try it out and see what you’ve been missing.
* Think of your retirement as a beginning, rather than an ending. Once you leave the “real” workforce, you can start a whole new life of realizing your dreams.
When you decide on the non-financial course of your retirement, it’s a good idea to keep track of your vision. You may want to start a retirement journal and write down your goals. There are many things you can do now to have everything in place for your re-fired life! Find out what it’s going to take to accomplish your goals, and put down as much of the groundwork as possible between now and retirement time.
Also, keep in mind that it’s never too early -–or too late-– to start laying the foundation for your retirement planning. Once you’ve determined your vision for an ideal retirement that includes the realization of your dreams, you can start taking steps to achieve that vision no matter where you are in life.
About the Author
Dr. Cynthia Barnett is a Re-Firement Lifestyle Coach and the author of Prime Time Makeover: How to Make the Rest of Your Life the Best of Your Life. Visit her online at http://www.primetimemakeover.com for a free newsletter, special report, and to purchase the book.
Tuesday, November 11, 2008
Information Investment Planning Retirement-Achieve Your Retirement Goals
So you’re looking for information on investment for planning your retirement? The truth is, investing is the most important vehicle to help skyrocket you to achieving your financial goals. Without the power of compounding interest, you simply won’t have enough money for your retirement years.
The sad reality is that most people reach their retirement years without nearly enough money to support them and their lifestyle. Therefore, they either have to severely scale back their plans in their later years, or continue working just to make enough to survive.
All of this could have been easily avoided with some simple retirement and investment planning. So which investment vehicles are best to get you to your retirement goals? There really is no right or wrong answer to this question.
The truth is, many investors have made a fortune in many different fields, whether it be real sate investing, stock market, etc. So which is the right one for you? The best way is to pick one you are interested in, and focus on that.
However, the most important part is to pick one avenue of investment and focus on that. Don’t dabble in many fields; focus in on one, and stay with that.
For instance, if you decide to become a real estate investor, don’t also invest some in penny stocks, futures, foreign currency exchange, etc. It will simply eat away at your time you could be spending finding more real estate deals.
Now, here’s by far the most important component no matter which retirement planning investment vehicle you decide to go worth; find someone who’s already successful in that field, and model their success. For any result you want to achieve in the world, there are already people who’ve successfully done it.
Therefore, you could either stumble around, make a million mistakes until you learn how to be successful (like most do) or cut years off your learning curve by learning from others and modeling their success. Also, you might want to consider an investment in a financial retirement planning services company.
No, don’t completely surrender your financial future to these companies; however, these experienced companies can certainly give you some advice that will be helpful in helping you map out where you want to be in your retirement years and how to get there. Hopefully this information on investment for planning your retirement will help you achieve your goals, no matter how lofty they may be. Remember, don’t limit yourself in this process; think big, believe you can have it, and it will be yours
About the Author
For more great retirement planning investment advice, check out http://www.online-retirement-planning.com/, and achieve your retirement goals.
The sad reality is that most people reach their retirement years without nearly enough money to support them and their lifestyle. Therefore, they either have to severely scale back their plans in their later years, or continue working just to make enough to survive.
All of this could have been easily avoided with some simple retirement and investment planning. So which investment vehicles are best to get you to your retirement goals? There really is no right or wrong answer to this question.
The truth is, many investors have made a fortune in many different fields, whether it be real sate investing, stock market, etc. So which is the right one for you? The best way is to pick one you are interested in, and focus on that.
However, the most important part is to pick one avenue of investment and focus on that. Don’t dabble in many fields; focus in on one, and stay with that.
For instance, if you decide to become a real estate investor, don’t also invest some in penny stocks, futures, foreign currency exchange, etc. It will simply eat away at your time you could be spending finding more real estate deals.
Now, here’s by far the most important component no matter which retirement planning investment vehicle you decide to go worth; find someone who’s already successful in that field, and model their success. For any result you want to achieve in the world, there are already people who’ve successfully done it.
Therefore, you could either stumble around, make a million mistakes until you learn how to be successful (like most do) or cut years off your learning curve by learning from others and modeling their success. Also, you might want to consider an investment in a financial retirement planning services company.
No, don’t completely surrender your financial future to these companies; however, these experienced companies can certainly give you some advice that will be helpful in helping you map out where you want to be in your retirement years and how to get there. Hopefully this information on investment for planning your retirement will help you achieve your goals, no matter how lofty they may be. Remember, don’t limit yourself in this process; think big, believe you can have it, and it will be yours
About the Author
For more great retirement planning investment advice, check out http://www.online-retirement-planning.com/, and achieve your retirement goals.
Saturday, November 8, 2008
Retirement Communities Or Nursing Homes - Post Retirement Planning Beforehand
A proper, beforehand planning is necessary to safeguard self-dignity and to attain a secured after-retirement life. We all admit that.
Life is never the same after-retirement. Some people want to live close to the hard-earned friends or family whereas some people want to live unaided or in Nursing Homes, Retirement Communities, Home Health Care, Retirement Homes, Active Adult Communities, Senior Apartments. Whatever the reason be, some basic calculations are necessary for a better future.
Let us answer two simple and primary questions-
What is my primary consideration in the decision on where to reside?
It may be closeness to family, state retirement benefits, medical reasons, dream location, specific medical care or other reasons.
Which type of care am I searching?
It may be assisted living, nursing homes, retirement community (Active Adult), Residential Care, Home Health Care, CCRC, hospice care or some other types.
Individuals must explain each little question to themselves to live a hustle-free post retirement life. At times, the simplest of the task turns out to be an epic one.
For example, selecting the right nursing home is often a very hectic job as different nursing home specializes in different features.
Some minute details, in general, tend to be of high importance while selecting a nursing home for future, like the distance from a specific location. Apart from taking information on costs and fees, one must also note the types of care offered and types of aid accepted by that particular house. Even climbing stairs may be a bigger problem in future.
Budgeting is one of the most important aspects that need repeated critical assessment. The financial condition is not the same for everyone and one must sensibly figure out the budget on which he or she can comfortable sustain themselves for rest of life. Additional and hidden costs must be clarified beforehand.
One must take care of some seemingly insignificant issues that in future may become critical. It is always better if the home is in an easy-to-visit location for family and friends.
It is always recommended that the nursing homes should consult the family physician before consulting somebody else. The family members should make it sure that the nursing home uses or may use (if necessary) hospitals where the family physician practices.
Direct interactions with the present residents of the nursing home always provide a lot of information about the living standards and other characteristics.
The post retirement life should be self-planned to seize the most out of life, for which you have worked so hard so far.
About the Author
The author is a freelance writer and founder of ‘Revolutionary Visions’, Parent Corporation to the Retirement Care Guide, a user friendly directory (http://www.retirementcareguide.com ). He has spent years in researching and compiling data that retirement planners find hard to collect.
Life is never the same after-retirement. Some people want to live close to the hard-earned friends or family whereas some people want to live unaided or in Nursing Homes, Retirement Communities, Home Health Care, Retirement Homes, Active Adult Communities, Senior Apartments. Whatever the reason be, some basic calculations are necessary for a better future.
Let us answer two simple and primary questions-
What is my primary consideration in the decision on where to reside?
It may be closeness to family, state retirement benefits, medical reasons, dream location, specific medical care or other reasons.
Which type of care am I searching?
It may be assisted living, nursing homes, retirement community (Active Adult), Residential Care, Home Health Care, CCRC, hospice care or some other types.
Individuals must explain each little question to themselves to live a hustle-free post retirement life. At times, the simplest of the task turns out to be an epic one.
For example, selecting the right nursing home is often a very hectic job as different nursing home specializes in different features.
Some minute details, in general, tend to be of high importance while selecting a nursing home for future, like the distance from a specific location. Apart from taking information on costs and fees, one must also note the types of care offered and types of aid accepted by that particular house. Even climbing stairs may be a bigger problem in future.
Budgeting is one of the most important aspects that need repeated critical assessment. The financial condition is not the same for everyone and one must sensibly figure out the budget on which he or she can comfortable sustain themselves for rest of life. Additional and hidden costs must be clarified beforehand.
One must take care of some seemingly insignificant issues that in future may become critical. It is always better if the home is in an easy-to-visit location for family and friends.
It is always recommended that the nursing homes should consult the family physician before consulting somebody else. The family members should make it sure that the nursing home uses or may use (if necessary) hospitals where the family physician practices.
Direct interactions with the present residents of the nursing home always provide a lot of information about the living standards and other characteristics.
The post retirement life should be self-planned to seize the most out of life, for which you have worked so hard so far.
About the Author
The author is a freelance writer and founder of ‘Revolutionary Visions’, Parent Corporation to the Retirement Care Guide, a user friendly directory (http://www.retirementcareguide.com ). He has spent years in researching and compiling data that retirement planners find hard to collect.
Wednesday, November 5, 2008
For Those Approaching Retirement Or In Retirement, Additional Income If Needed. Can No Longer Count On Social Security
As many workers approach retirement age they begin to look through their retirement account and are dismayed that what they have managed to save over the years will not come close to what they need to live on in their so-called golden years. The funds they established when they were in their 20’s or 30’s may not have considered the rising costs of housing, food and transportation and may not be sufficient to cover medical expenses, which have gone through the roof in the past few years.
As the initial anxiety subsides, they may realize there is a need for additional funding and with the dire condition of the Social Security fund, it probably cannot be counted on to make up the difference. Finding a higher paying job may be desirable, but probably unlikely, revealing the available option of finding additional sources of income. Many may believe they have worked too hard for too long to have to find a part-time job to help augment their retirement account, but many more are realizing there can be gold in the hills of home business opportunities.
While their retirement account may be lacking, the one thing they have built up over the years is experience, something many companies are eager to have, but lack the resources for full-time consultants. They are in the market for someone who can provide the expertise they may require and starting a part-time home based business offering the experience may help fund the pension plan as well as a new business train their new workers.
Lousy investments and falling real estate prices can strip value from a retirement fund but the experience is never lost. It may take some time to consider what a person is exceptional at doing and adjustments may be needed, depending on the industry seeking the advice, but management and executive experience can typically be translated into any industry with a little research and thought.
One area of concern in many businesses as well as among many young workers is personal development. Learning the proper techniques in areas such as decision making and project planning can be boon to their careers as well as to their business if they own it. Offering expertise in these areas can provide additional income that can be used to supplement the existing retirement account, bringing it closer to what will be needed if retirement becomes necessary.
Home based business experience is not necessary, but being able to work independently and being well organized is. Having the commitment and structure to be successful working a home business may take some personal development as having the commitment to succeed is different than having the needed dedication to meet any obligations made to others.
For those fortunate enough to find a position in which telecommuting is available on a part-time basis will allow additional funding for retirement without losing time away from home. While there will be time spent on your computer, you can still be at home, mostly establishing your own work schedule and hours, without the need to travel and be committed to someone else’s schedule.
Network marketing is a growing field of internet business as a web-based business that cannot be found on the internet is a failure waiting for its time to die. Many avenues of network marketing are just beginning to be realized and finding new ways of getting attention for a site will continue to grow as more sites are vying for the attention of the same potential customers.
High income careers can be built from a part time endeavor that was begun perhaps as a need to help fund a retirement account, but once it is found that high income opportunities do exist in a home based business, it may be possible to transfer the efforts to home.
About the Author
Jim Biscardi is owner of Dynamic Wealth Systems, LLC and writes on a variety of subjects. To learn more about this topic Jim recommends you visit: www.DynamicWealthSystems.com
As the initial anxiety subsides, they may realize there is a need for additional funding and with the dire condition of the Social Security fund, it probably cannot be counted on to make up the difference. Finding a higher paying job may be desirable, but probably unlikely, revealing the available option of finding additional sources of income. Many may believe they have worked too hard for too long to have to find a part-time job to help augment their retirement account, but many more are realizing there can be gold in the hills of home business opportunities.
While their retirement account may be lacking, the one thing they have built up over the years is experience, something many companies are eager to have, but lack the resources for full-time consultants. They are in the market for someone who can provide the expertise they may require and starting a part-time home based business offering the experience may help fund the pension plan as well as a new business train their new workers.
Lousy investments and falling real estate prices can strip value from a retirement fund but the experience is never lost. It may take some time to consider what a person is exceptional at doing and adjustments may be needed, depending on the industry seeking the advice, but management and executive experience can typically be translated into any industry with a little research and thought.
One area of concern in many businesses as well as among many young workers is personal development. Learning the proper techniques in areas such as decision making and project planning can be boon to their careers as well as to their business if they own it. Offering expertise in these areas can provide additional income that can be used to supplement the existing retirement account, bringing it closer to what will be needed if retirement becomes necessary.
Home based business experience is not necessary, but being able to work independently and being well organized is. Having the commitment and structure to be successful working a home business may take some personal development as having the commitment to succeed is different than having the needed dedication to meet any obligations made to others.
For those fortunate enough to find a position in which telecommuting is available on a part-time basis will allow additional funding for retirement without losing time away from home. While there will be time spent on your computer, you can still be at home, mostly establishing your own work schedule and hours, without the need to travel and be committed to someone else’s schedule.
Network marketing is a growing field of internet business as a web-based business that cannot be found on the internet is a failure waiting for its time to die. Many avenues of network marketing are just beginning to be realized and finding new ways of getting attention for a site will continue to grow as more sites are vying for the attention of the same potential customers.
High income careers can be built from a part time endeavor that was begun perhaps as a need to help fund a retirement account, but once it is found that high income opportunities do exist in a home based business, it may be possible to transfer the efforts to home.
About the Author
Jim Biscardi is owner of Dynamic Wealth Systems, LLC and writes on a variety of subjects. To learn more about this topic Jim recommends you visit: www.DynamicWealthSystems.com
Monday, November 3, 2008
Balancing Distributions Across Retirement Vehicles Can Add 5-8 ½ Years Or More To Your Retirement Dollars
The greatest retirement fear today is outliving your savings. Maximizing the number of years your retirement savings will last may be as simple as apportioning distributions among tax free and tax deferred retirement savings. Balancing tax rates on distributions against retirement savings growth rates can add 5 to 8 ½ years or more to your retirement, when you have both tax deferred (e.g., 401K) and tax free (e.g., ROTH IRA) retirement savings.
First we assume that both tax deferred and tax free accounts are growing at the same rate. If not, then the asset allocation of the accounts should probably be adjusted. Given that the tax deferred account is taxed upon distribution, we can effectively say that it grows at a slower rate than the tax free account. It would make sense then to take all distributions from the tax deferred account first, until there is nothing left, so as to let the tax free growth continue unmolested as long as possible.
However, under our current tax laws, tax deferred retirement savings are taxed upon distribution, using the same income tax brackets as any other earned income. This is a graduated scale, such that the marginal tax rate increases with income. E.g., the 10,000th dollar earned is taxed at 10% while the 20,000th dollar earned is taxed at 15% and the 70,000th dollar earned is taxed at 20% (married filing joint).
Considering a 3% inflation rate, a static tax table (using federal taxes only), and the desire to take the same net distributions annually, then taking all distributions first from the tax deferred accounts will result in paying higher and higher taxes over time. Paying the higher tax cuts into how long the money will last. The challenge then is to balance the taxes paid on distributions from tax deferred accounts against the growth of the tax free accounts. Selecting the correct amounts can easily make 5 to 8½ years of difference in how long the savings can be played out, as will be shown in the charts below.
In the following scenario, we take nine couples who have each accumulated $1,000,000, spread across tax deferred accounts (e.g., 401K or IRA) and tax free accounts (e.g., ROTH IRA). They need $60,000 per year, in after taxes in distributions, in today’s dollars.
Should the tax deferred money be used up to a specific tax bracket and tax free money used to round out the desired distribution? Does the apportionment of distributions differ depending on the allocation of tax deferred and tax free retirement savings?
The answer depends on the allocation of funds across tax deferred and tax free retirement savings. It also depends on the actual amounts (not covered in this article). The chart below compares these nine couples, showing the significant difference the selection of distribution source makes.
Tax Def Tax Free Distrib Timespan Distrib Timespan
$100,000 $900,000 $0 26.39 years $ 8,500 27.46
$200,000 $800,000 $0 24.89 years $16,500 26.93
$300,000 $700,000 $0 23.53 years $24,500 26.16
$400,000 $600,000 $0 22.23 years $33,000 25.43
$500,000 $500,000 $0 20.96 years $42,000 24.71
$600,000 $400,000 $0 19.79 years $51,000 24.02
$700,000 $300,000 $0 18.68 years $60,000 23.33
$800,000 $200,000 $0 17.61 years $69,000 22.58
$900,000 $100,000 $0 16.59 years $82,000 21.71
With $900,000 in tax deferred accounts and only $100,000 in tax free accounts, a 5-year difference exists depending from which accounts distributions are taken. Limiting distributions from the tax deferred account to only be $82,000 in any given year achieves a 21.71 year lifespan for their retirement dollars, whereas using tax free distributions first only achieves a 16.59 year lifespan – a 5.12 year difference. If the couple only needed $50,000 after tax distributions, the chart would show an 8 ½ year difference (not shown).
If the couple used only tax deferred income until it was exhausted, they would have had 21.54 years for their retirement money – a loss of only 0.17 years against their maximum. The lesson here is to err on the side of taking distributions from tax deferred accounts first. This is also significant as it is far easier to accumulate tax deferred savings. There are more stringent contribution limits to ROTH IRAs and not all companies support ROTH 401Ks. And you have to pay taxes at the very beginning in order to grow your money tax free. Different needs with respect to the available savings can result in over 1-year of difference; it still pays to pay attention. The greater the retirement savings and distribution requirements, the more important the balancing act.
Due to our tax code’s graduated tax brackets, properly apportioning distributions among tax free and tax deferred retirement savings can add 5 to 8 ½ years or more to your retirement. This varies with distribution needs and the amounts saved in differing retirement vehicles.
About the Author
Robert T. Boyer, Ph.D., works with professional advisors to perform comprehensive, collaborative, integrated financial planning. VP of San Diego’s Finest Real Estate, he developed the unique concept of Real Estate Financial Planning (REFP) to fill a void left by the financial planning industry. Including REFP enables the team to development a fully integrated financial plan.
First we assume that both tax deferred and tax free accounts are growing at the same rate. If not, then the asset allocation of the accounts should probably be adjusted. Given that the tax deferred account is taxed upon distribution, we can effectively say that it grows at a slower rate than the tax free account. It would make sense then to take all distributions from the tax deferred account first, until there is nothing left, so as to let the tax free growth continue unmolested as long as possible.
However, under our current tax laws, tax deferred retirement savings are taxed upon distribution, using the same income tax brackets as any other earned income. This is a graduated scale, such that the marginal tax rate increases with income. E.g., the 10,000th dollar earned is taxed at 10% while the 20,000th dollar earned is taxed at 15% and the 70,000th dollar earned is taxed at 20% (married filing joint).
Considering a 3% inflation rate, a static tax table (using federal taxes only), and the desire to take the same net distributions annually, then taking all distributions first from the tax deferred accounts will result in paying higher and higher taxes over time. Paying the higher tax cuts into how long the money will last. The challenge then is to balance the taxes paid on distributions from tax deferred accounts against the growth of the tax free accounts. Selecting the correct amounts can easily make 5 to 8½ years of difference in how long the savings can be played out, as will be shown in the charts below.
In the following scenario, we take nine couples who have each accumulated $1,000,000, spread across tax deferred accounts (e.g., 401K or IRA) and tax free accounts (e.g., ROTH IRA). They need $60,000 per year, in after taxes in distributions, in today’s dollars.
Should the tax deferred money be used up to a specific tax bracket and tax free money used to round out the desired distribution? Does the apportionment of distributions differ depending on the allocation of tax deferred and tax free retirement savings?
The answer depends on the allocation of funds across tax deferred and tax free retirement savings. It also depends on the actual amounts (not covered in this article). The chart below compares these nine couples, showing the significant difference the selection of distribution source makes.
Tax Def Tax Free Distrib Timespan Distrib Timespan
$100,000 $900,000 $0 26.39 years $ 8,500 27.46
$200,000 $800,000 $0 24.89 years $16,500 26.93
$300,000 $700,000 $0 23.53 years $24,500 26.16
$400,000 $600,000 $0 22.23 years $33,000 25.43
$500,000 $500,000 $0 20.96 years $42,000 24.71
$600,000 $400,000 $0 19.79 years $51,000 24.02
$700,000 $300,000 $0 18.68 years $60,000 23.33
$800,000 $200,000 $0 17.61 years $69,000 22.58
$900,000 $100,000 $0 16.59 years $82,000 21.71
With $900,000 in tax deferred accounts and only $100,000 in tax free accounts, a 5-year difference exists depending from which accounts distributions are taken. Limiting distributions from the tax deferred account to only be $82,000 in any given year achieves a 21.71 year lifespan for their retirement dollars, whereas using tax free distributions first only achieves a 16.59 year lifespan – a 5.12 year difference. If the couple only needed $50,000 after tax distributions, the chart would show an 8 ½ year difference (not shown).
If the couple used only tax deferred income until it was exhausted, they would have had 21.54 years for their retirement money – a loss of only 0.17 years against their maximum. The lesson here is to err on the side of taking distributions from tax deferred accounts first. This is also significant as it is far easier to accumulate tax deferred savings. There are more stringent contribution limits to ROTH IRAs and not all companies support ROTH 401Ks. And you have to pay taxes at the very beginning in order to grow your money tax free. Different needs with respect to the available savings can result in over 1-year of difference; it still pays to pay attention. The greater the retirement savings and distribution requirements, the more important the balancing act.
Due to our tax code’s graduated tax brackets, properly apportioning distributions among tax free and tax deferred retirement savings can add 5 to 8 ½ years or more to your retirement. This varies with distribution needs and the amounts saved in differing retirement vehicles.
About the Author
Robert T. Boyer, Ph.D., works with professional advisors to perform comprehensive, collaborative, integrated financial planning. VP of San Diego’s Finest Real Estate, he developed the unique concept of Real Estate Financial Planning (REFP) to fill a void left by the financial planning industry. Including REFP enables the team to development a fully integrated financial plan.
Friday, October 31, 2008
Retirement Planning And Employee Benefit-tips To Help You Reach Your Retirement Goals
So you're looking for some retirement planning and employee benefit tips? First of all, keep in mind that employee benefits should be one of the biggest things you look at when choosing which company to work for. Quite simply, there are few things in your life more important than your retirement planning, because you will be living without any income coming in, or at least a much reduced one.
Of course, with people living longer and longer today, this leaves about 30 to 40 years you will need to support yourself with a much lower income than you were getting by with earlier. This makes retirement planning essential to live the kind of lifestyle you’ve always wanted to live when you retire.
Most people never take the time to plan out their retirement, and find themselves in a financial crisis when they are ready to stop work. As a result, many, many people end up working long beyond the time they wanted to retire at. Don’t let this happen to you; by doing some simple planning, you can easily avoid this outcome and have all the money you need to retire on, and then some.
Of course, don't be bashful in this retirement planning and employee benefit process; your retirement years should be one of the most awesome times in your life, because you'll have time to do things you weren't able to do what you are working. Therefore, think of anything you want to do during this time, and write it out. This will serve as your guide in your retirement planning process.
So what you look for when choosing the right company for you and finding the right retirement planning and employee benefit package? As I said before, your employee benefit package should be one of the biggest things you look for. First of all, do they have an IRA?
This should be one of the biggest things to look for. An IRA, otherwise known as a pension fund, is one of the best ways to plan for your retirement, because it allows you to contribute money from your own salary and your employer will match it often times.
This way you are receiving more money into your retirement account than simply a portion of your salary. When looking for an IRA, try to find a company that offers a self-directed IRA
The main reason you want a self-directed IRAs because it will allow you to choose which investment you want for your IRA for your own situation. Relying on other people such as your company to do this for you could be financial suicide. Quite simply, most people simply throw their money away to a fund manager or their company, and allow them to do what’s best for them in their retirement planning process.
Unfortunately, using these methods will not make you rich. The only way to make yourself wealthy is to become financially educated and learn to pick up on investing and spot your own investment opportunities. Follow these retirement planning and employee benefit tips and you'll be able to find the right company for you and live the retirement lifestyle you've always wanted to.
About the Author
For retirement planning investment and retirement planning calculators info, visit online retirement-planning.com
Of course, with people living longer and longer today, this leaves about 30 to 40 years you will need to support yourself with a much lower income than you were getting by with earlier. This makes retirement planning essential to live the kind of lifestyle you’ve always wanted to live when you retire.
Most people never take the time to plan out their retirement, and find themselves in a financial crisis when they are ready to stop work. As a result, many, many people end up working long beyond the time they wanted to retire at. Don’t let this happen to you; by doing some simple planning, you can easily avoid this outcome and have all the money you need to retire on, and then some.
Of course, don't be bashful in this retirement planning and employee benefit process; your retirement years should be one of the most awesome times in your life, because you'll have time to do things you weren't able to do what you are working. Therefore, think of anything you want to do during this time, and write it out. This will serve as your guide in your retirement planning process.
So what you look for when choosing the right company for you and finding the right retirement planning and employee benefit package? As I said before, your employee benefit package should be one of the biggest things you look for. First of all, do they have an IRA?
This should be one of the biggest things to look for. An IRA, otherwise known as a pension fund, is one of the best ways to plan for your retirement, because it allows you to contribute money from your own salary and your employer will match it often times.
This way you are receiving more money into your retirement account than simply a portion of your salary. When looking for an IRA, try to find a company that offers a self-directed IRA
The main reason you want a self-directed IRAs because it will allow you to choose which investment you want for your IRA for your own situation. Relying on other people such as your company to do this for you could be financial suicide. Quite simply, most people simply throw their money away to a fund manager or their company, and allow them to do what’s best for them in their retirement planning process.
Unfortunately, using these methods will not make you rich. The only way to make yourself wealthy is to become financially educated and learn to pick up on investing and spot your own investment opportunities. Follow these retirement planning and employee benefit tips and you'll be able to find the right company for you and live the retirement lifestyle you've always wanted to.
About the Author
For retirement planning investment and retirement planning calculators info, visit online retirement-planning.com
Tuesday, October 28, 2008
Saving For Retirement: Compound And Grow Your Employer Matching Retirement Plan
If your employer offers a matching contribution to your retirement plan, the cardinal rule is: contribute whatever the employer is willing to match—even if it is only a percentage of your contribution and not a dollar for dollar match.
Imagine depositing $1,000 of your money into the bank, but instead of getting a crummy toaster, you receive an extra $1,000 to go along with your deposit. To add to the fun, imagine getting a tax deduction for your deposit and not having to pay tax on your “gift.” Furthermore, both your $1,000 and the gift $1,000 grow (it is to be hoped), and you don’t have to pay income tax on the interest, dividends, capital gains, or the appreciation until you withdraw the money.
When you withdraw the money, you will have to pay taxes, but you will have gained interest, dividends, and appreciation in the meantime. That is what employer matching contributions to retirement plans are all about. If the employer matches the employee contribution, it offers a 100% return on the investment in one day (assuming no early withdrawal penalties apply and the matched funds are fully vested).
Over the years, I have heard hundreds of excuses for not taking advantage of an employer-matching plan. All those reasons can be summarized in two words: ignorance and neglect. If you didn’t know that before, you know now. If you are not currently taking advantage of your employer-matching plan, run—don’t walk—to your plan administrator and begin the paperwork to take advantage of the employer match.
Matching contributions are most commonly found within Section 401k, 403b, and 457 plans. Even if your employer is only willing to make a partial match up to a cap, you should still take advantage of this opportunity. A fairly common agreement is that the employer will contribute 50 cents for every dollar up to the first 6 percent of salary you contribute. Don’t grouse that it is not enough or not worth it. You have everything to gain—this is free money that will compound and grow—and as Einstein said, “The most powerful force in the universe is compound interest.”
About the Author
Top IRA expert, James Lange, has developed tax-savvy retirement & estate plans for many with appreciable assets in their IRAs & 401(k) plans. In his book, Retire Secure! Jim proves you can be tens of thousands to over a million dollars richer by "paying taxes later" & using Roth IRAs. Get the book now & learn how: http://www.retiresecure.com/
Imagine depositing $1,000 of your money into the bank, but instead of getting a crummy toaster, you receive an extra $1,000 to go along with your deposit. To add to the fun, imagine getting a tax deduction for your deposit and not having to pay tax on your “gift.” Furthermore, both your $1,000 and the gift $1,000 grow (it is to be hoped), and you don’t have to pay income tax on the interest, dividends, capital gains, or the appreciation until you withdraw the money.
When you withdraw the money, you will have to pay taxes, but you will have gained interest, dividends, and appreciation in the meantime. That is what employer matching contributions to retirement plans are all about. If the employer matches the employee contribution, it offers a 100% return on the investment in one day (assuming no early withdrawal penalties apply and the matched funds are fully vested).
Over the years, I have heard hundreds of excuses for not taking advantage of an employer-matching plan. All those reasons can be summarized in two words: ignorance and neglect. If you didn’t know that before, you know now. If you are not currently taking advantage of your employer-matching plan, run—don’t walk—to your plan administrator and begin the paperwork to take advantage of the employer match.
Matching contributions are most commonly found within Section 401k, 403b, and 457 plans. Even if your employer is only willing to make a partial match up to a cap, you should still take advantage of this opportunity. A fairly common agreement is that the employer will contribute 50 cents for every dollar up to the first 6 percent of salary you contribute. Don’t grouse that it is not enough or not worth it. You have everything to gain—this is free money that will compound and grow—and as Einstein said, “The most powerful force in the universe is compound interest.”
About the Author
Top IRA expert, James Lange, has developed tax-savvy retirement & estate plans for many with appreciable assets in their IRAs & 401(k) plans. In his book, Retire Secure! Jim proves you can be tens of thousands to over a million dollars richer by "paying taxes later" & using Roth IRAs. Get the book now & learn how: http://www.retiresecure.com/
Saturday, October 25, 2008
Saving For Retirement: Make The Maximum Contribution To Your Retirement Plan & Retire Secure
Many people—perhaps you—feel they cannot afford to save for retirement. The truth is you may very well be able to afford to save, but you don’t realize it. That’s right. I am going to present a rationale to persuade you to contribute more than you think you can afford.
First, I am operating on assumption that you are following the cardinal rule of saving for retirement: If your employer offers a matching contribution to your retirement plan you are contributing whatever your employer is willing to match—even if it is only a percentage of your contribution and not a dollar for dollar match.Now, let’s assume you have been contributing only the portion that your employer is willing to match and yet you barely have enough money to get by week to week. Does it still make sense to make non-matched contributions or Roth IRA contributions assuming you do not want to reduce your spending? Maybe.
(This article does not address Roth IRA contributions vs. non-matched 401(k) contributions and hereafter only refers to non-matched 401(k) contributions). If you have substantial savings and maximizing your retirement plan contributions causes your net payroll check to be insufficient to meet your expenses, you should maximize retirement plan contributions. The shortfall for your living expenses from making increased pre-tax retirement plan contributions should be withdrawn from your savings (money that has already been taxed). Over time this process, i.e., increasing contributions to your retirement plan and funding the shortfall by making after-tax withdrawals from an after-tax account, transfers money from the after-tax environment to the pre-tax environment. Ultimately it results in more money for you and your heirs. Another way to squeeze blood from a stone is to consider an interest only mortgage. The reduced mortgage payment (in contrast to what you would be paying on a 30-year fixed rate mortgage) is deductible as a home interest expense.
The additional cash flow from the reduced payment could be used to pay credit card debt or fund one or more tax favored investments. You could open a Roth IRA, make additional retirement contributions, and/or purchase a tax-favored life insurance plan. In the long run, you could be better off, often by hundreds of thousands of dollars. Of course there are risks with this strategy.Another opportunity to shift savings from the after-tax environment to tax advantaged retirement savings might arise if you are the beneficiary of an inheritance.
Take this “Changing Your IRA and Retirement Plan Strategy after a Windfall or an Inheritance” mini case study for example:Joe always had trouble making ends meet. He did, however, know enough to always contribute to his retirement plan the amount his employer was willing to match. Because he was barely making ends meet and had no savings in the after-tax environment, he never made a non-matching retirement plan contribution. Tragedy then struck Joe’s family. Joe’s mother died, leaving Joe with $100,000. Should Joe change his retirement plan strategy? Yes. If his housing situation is reasonable, he should not use the inherited money for a house—or even a down payment on a house. Many planners and people will disagree. Of course it depends on individual circumstances. Instead, Joe should increase his retirement plan contribution to the maximum.
In addition, he should start making Roth IRA contributions. Many of you who live in areas that have seen huge real estate appreciation think he should use the money to invest in real estate. You may have been right yesterday. You might even be right today. It is, however, a risky strategy, unsuitable for many if not most investors. Assuming he maintains his pre-inheritance lifestyle, between his Roth IRA contribution and the increase in his retirement plan contribution, Joe will not have enough to make ends meet without eating into his inheritance.
That’s okay.
He should then cover the shortfall by making withdrawals from the inherited money. True, if that pattern continues long enough, Joe will eventually deplete his inheritance in its current form. But his retirement plan and Roth IRA will be so much better financed that in the long run, the tax-deferred and tax-free growth of these accounts will make Joe better off by thousands, possibly hundreds of thousands, of dollars. The only time this strategy would not make sense is if Joe needed the liquidity of the inherited money, or he preferred to use the inherited funds to improve his housing.Now, do you think you can afford to make the maximum contribution to your retirement plan? The truth of the matter is you cannot afford to ignore my advice and not make the maximum contribution to your retirement plan.
About the Author
As one of the country’s top IRA experts and author of Retire Secure!, James Lange, can keep you from jeopardizing your family’s security. He has developed tax-savvy retirement and estate plans for over 800 U.S. citizens with appreciable assets in their IRAs and 401(k) plans. Your family’s future depends on you signing up now for his monthly Retire Secure newsletter at http://www.paytaxeslater.com
First, I am operating on assumption that you are following the cardinal rule of saving for retirement: If your employer offers a matching contribution to your retirement plan you are contributing whatever your employer is willing to match—even if it is only a percentage of your contribution and not a dollar for dollar match.Now, let’s assume you have been contributing only the portion that your employer is willing to match and yet you barely have enough money to get by week to week. Does it still make sense to make non-matched contributions or Roth IRA contributions assuming you do not want to reduce your spending? Maybe.
(This article does not address Roth IRA contributions vs. non-matched 401(k) contributions and hereafter only refers to non-matched 401(k) contributions). If you have substantial savings and maximizing your retirement plan contributions causes your net payroll check to be insufficient to meet your expenses, you should maximize retirement plan contributions. The shortfall for your living expenses from making increased pre-tax retirement plan contributions should be withdrawn from your savings (money that has already been taxed). Over time this process, i.e., increasing contributions to your retirement plan and funding the shortfall by making after-tax withdrawals from an after-tax account, transfers money from the after-tax environment to the pre-tax environment. Ultimately it results in more money for you and your heirs. Another way to squeeze blood from a stone is to consider an interest only mortgage. The reduced mortgage payment (in contrast to what you would be paying on a 30-year fixed rate mortgage) is deductible as a home interest expense.
The additional cash flow from the reduced payment could be used to pay credit card debt or fund one or more tax favored investments. You could open a Roth IRA, make additional retirement contributions, and/or purchase a tax-favored life insurance plan. In the long run, you could be better off, often by hundreds of thousands of dollars. Of course there are risks with this strategy.Another opportunity to shift savings from the after-tax environment to tax advantaged retirement savings might arise if you are the beneficiary of an inheritance.
Take this “Changing Your IRA and Retirement Plan Strategy after a Windfall or an Inheritance” mini case study for example:Joe always had trouble making ends meet. He did, however, know enough to always contribute to his retirement plan the amount his employer was willing to match. Because he was barely making ends meet and had no savings in the after-tax environment, he never made a non-matching retirement plan contribution. Tragedy then struck Joe’s family. Joe’s mother died, leaving Joe with $100,000. Should Joe change his retirement plan strategy? Yes. If his housing situation is reasonable, he should not use the inherited money for a house—or even a down payment on a house. Many planners and people will disagree. Of course it depends on individual circumstances. Instead, Joe should increase his retirement plan contribution to the maximum.
In addition, he should start making Roth IRA contributions. Many of you who live in areas that have seen huge real estate appreciation think he should use the money to invest in real estate. You may have been right yesterday. You might even be right today. It is, however, a risky strategy, unsuitable for many if not most investors. Assuming he maintains his pre-inheritance lifestyle, between his Roth IRA contribution and the increase in his retirement plan contribution, Joe will not have enough to make ends meet without eating into his inheritance.
That’s okay.
He should then cover the shortfall by making withdrawals from the inherited money. True, if that pattern continues long enough, Joe will eventually deplete his inheritance in its current form. But his retirement plan and Roth IRA will be so much better financed that in the long run, the tax-deferred and tax-free growth of these accounts will make Joe better off by thousands, possibly hundreds of thousands, of dollars. The only time this strategy would not make sense is if Joe needed the liquidity of the inherited money, or he preferred to use the inherited funds to improve his housing.Now, do you think you can afford to make the maximum contribution to your retirement plan? The truth of the matter is you cannot afford to ignore my advice and not make the maximum contribution to your retirement plan.
About the Author
As one of the country’s top IRA experts and author of Retire Secure!, James Lange, can keep you from jeopardizing your family’s security. He has developed tax-savvy retirement and estate plans for over 800 U.S. citizens with appreciable assets in their IRAs and 401(k) plans. Your family’s future depends on you signing up now for his monthly Retire Secure newsletter at http://www.paytaxeslater.com
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