Retirement Plan
French workers strike against Sarkozy pension reform
French workers took to the street Tuesday to challenge President Nicolas Sarkozy’s plan to raise the retirement age the centrepiece of his reform agenda as he prepares to seek re-election.
Read more on AFP via Yahoo! UK & Ireland News
If you are just starting out in your career, you may have heard about the benefits of saving for retirement. But if you are in your last few years of your job, chances are you did not hear much about saving when you were starting out. This is a huge disadvantage for those reaching retirement age because they may not have enough to retire on and live comfortably. Even if you began savings ten or fifteen years ago, you may end up on a fixed budget well into your golden years.
This is one reason why people oftentimes work after retirement even if it is just part time. While they may have enough to cover medical expenses, housing and other living expenses, there may not be enough to pay for the little things in life. If you want to earn extra money but do not want to go back to working in an office or other type of environment, there are many online businesses that can provide you with extra income and the flexibility you want to spend time with family, take up new hobbies, travel, and more. By encouraging others to sign up for services, you can earn commissions for your efforts.
Preparing for your retirement may not be at the top of your list, especially if you have children, a mortgage and other bills. By contributing to your retirement plan, you can begin to save for the future. But how much you save can also make a difference in terms of how comfortable you will be. For those who still have a few years before retirement, taking on extra work is not out of the ordinary. Working from home part time can help you save for your retirement while you pay other bills and debts.
Depending on your skills and interests, you should be able to find a part time job that is fun and rewarding. If you enjoy working with others, then a sales representative type job may be for you. There are many companies online that need these types of positions filled so they can increase sales and build a name for themselves. If you enjoy talking to people, then this could be the second job you have been looking for. With the commissions you earn, you can pay off extra bills, save for retirement, or use the income anyway you see fit.
It is important to consider all of your options when it comes to taking on extra work before or after retirement. While you may never be rich, you can live the rest of your life in comfort because you took the effort to prepare in advance for it. While those who are very close to retirement age have fewer options than those starting out, there is still money to be made. The sales opportunities online and off are available to you when you want to make more money. These jobs are also less stress and can be done at home in your spare time. In addition to your retirement package, extra income can go a long way.
Steve and Sharon have definite dreams for retirement, and they have worked hard with Wealth Management Advisor Delynn Alexander to help make their dreams come true. While the couple has been affected by the economic downturn, their retirement plans are intact and on schedule. For more advice on your retirement plan, visit www.northwesternmutual.com
Hurley and family adapt
TEWKSBURY – John Hurley stares into the light of a computer screen late at night and searches for answers. He will be up for work at 4:30 a.m. while helping his sons Pat, Sean and Dan to organize their respective lives in shifts as they all care for their mother Carol, who in February of 2009 was diagnosed with the onset of Alzheimer’s.
Read more on Tewksbury Town Crier
Stay focused on money management in Sept.
September brings about the annual back-to-school and off-to-college rituals for many families. Of course that translates directly to the wallet — think lunch money, SAT test fees and other costs.
Read more on Detroit News
Retirement may be a long way off for you or it might be right around the corner. No matter how near or far it is, you have absolutely got to start saving for it now. However, saving for retirement is not what it used to be with the increase in cost of living and the instability of social security. You have to invest for your retirement, as opposed to saving for it!
Lets start by taking a look at the retirement plan offered by your company. Once upon a time, these plans were quite sound. However, after the Enron upset and all that followed, people are not as secure in their company retirement plans anymore. If you choose not to invest in your companys retirement plan, you do have other options.
First, you can invest in stocks, bonds, mutual funds, certificates of deposit, and money market accounts. You do not have to state to anybody that the returns on these investments are to be used for retirement. Just simply let your money grow overtime, and when certain investments reach their maturity, reinvest them and continue to let your money grow.
You can also open an Individual Retirement Account (IRA). IRAs are quite popular because the money is not taxed until you withdraw the funds. You may also be able to deduct your IRA contributions from the taxes that you owe. An IRA can be opened at most banks. A ROTH IRA is a newer type of retirement account. With a Roth, you pay taxes on the money that you are investing in your account, but when you cash out, no federal taxes are owed. Roth IRAs can also be opened at a financial institution.
Another popular type of retirement account is the 401(k). 401(ks) are typically offered through employers, but you may be able to open a 401(k) on your own. You should speak with a financial planner or accountant to help you with this. The Keogh plan is another type of IRA that is suitable for self employed people. Self-employed small business owners may also be interested in Simplified Employee Pension Plans (SEP). This is another type of Keogh plan that people typically find easier to administer than a regular Keogh plan.
Whichever retirement investment you choose, just make sure you choose one! Again, do not depend on social security, company retirement plans, or even an inheritance that may or may not come through! Take care of your financial future by investing in it today.
French unions launch strike over pension overhaul
French train traffic began tapering off Monday at the start of what promises to be a major strike over unpopular conservative President Nicolas Sarkozy’s plans to raise the retirement age from 60 to 62.
Read more on San Diego Union-Tribune
Before you take the time to learn about baby boomer retirement communities, there are a few important things that you will want to learn more about, and that includes learning about how to properly plan for retirement. One of the most common questions that people ask is what the baby boomer retirement age.
There is actually no specific baby boomer retirement age, but instead a bracket that people fall into and in which they are eligible to begin receiving retirement benefits. There are some people who reach the baby boomer retirement age but who are not prepared, personally or financially, and in this case a lot of the time they will continue to work so that they can make money and feel safer and more secured.
Retirement Tips
When you reach the baby boomer retirement age or even if you are just nearing it, there are a few tips that you are going to want to be aware of. For one thing, you need to realize that when compared to your parents when they retired, much more money is needed these days in order to live even just comfortably then back then.
Also, people live longer today than before, and so because of this, they are going to need more money because there are going to be more years for them to have to support themselves.
One of the best tips for baby boomers who are retiring is to make sure to get started early. Instead of waiting until one or two years before you actually retire, you want to take the time to start planning and preparing as early on as possible, even when you are as young as in your twenties.
This way you are going to have more time to put away money and to learn the details on baby boomer retiring. The longer that you save, the better off you are going to be, without a doubt, once you hit that baby boomer retirement age and find that you need the money to support yourself, and possibly your spouse as well.
The main reason that seniors go back to work is because of financial need, because they find that the money they are receiving now that they have retired is simply not enough and that they need more just to get by on the day to day. With retirement savings plans, you can have extra money saved up to help you out.
According to a study conducted by the Employee Benefit Research Institute in 2005, 20% of all 401k investors who were eligible for borrowing from their 401k plans (taking out 401k loans) did so. The average loan option exercised in 2004 was $6,946 which is about 1/2 of the average debt of households in America (excluding mortgage debt). The $6946 figure represents the following percentages of peoples’ total retirement savings
Age % of Total Savings 20s 25% 30s 20% 40s 22% 50s 11% 60s 9%
As you can note from above, as the person gets older, he has more retirement savings and tends to borrow less from his/her 401k plan. However, people in their 40s borrow about 2% more than people in their 30s, anyone have a logical explanation for this? Post your comments below if you do! And while it is good that as the person gets older, he tends to borrow less, it is not advisable to borrow from your 401k at all! We will go over 8 major reasons why you should never borrow from your 401k.
Some financial advisors might tell you that borrowing from your 401k is better than using your credit cards or taking out a commercial loan with higher interest rates. They also say that when you repay your 401k loans, you will be repaying interest to yourself, and not some bank. While this is partially true, in the long term, you would be way better off accumulating your savings and gaining compound interest, rather than reducing your principal amount by borrowing money from it.
1) Your Savings Growth is Reduced
If you take out a 401k loan, most plans have a provision that you cannot make any more contributions until a certain percentage of the loan is paid back. Some plans may even have a provision that states that 100% of the loan amount must be repaid! Added to that, even if your plan does not have a repayment provision, you may not be able to afford to keep up with your 401k loan payments and make additional 401k contributions (that you were supposed to make every month anyways). This significantly reduces your ability to grow your 401k savings. The whole point of 401k plans is to save for your retirement, by withdrawing any amount of money from it, you are really defeating the purpose of the plan!
2) You Are Losing Money
Every monthly contribution that you miss also misses the growth & appreciation that is available from the stock markets, bond markets as well as commodities futures markets. Furthermore, you are also missing the power of compounding interest on your total principal balance. The low interest payments that you are paying to yourself is likely to be insignificant compared to the appreciation & returns on investment that is available in stocks/bonds/commodities markets. Also, the money you are paying yourself will be after-tax. For every $1 you earn, your ability to repay the loan will only be $0.78 (considering you are in the 22% tax bracket). Also, that $0.78 that you have to repay yourself will be taxed AGAIN when you retire and withdraw your money from your 401k. You are pretty much getting beat down by the double taxation & losing the power of compounding interest, you do not want that!
3) Time is Not In your Favor
By making monthly contributions to your 401k, the idea is that over the long term, your money will grow substantially and accumulate the power of compounding interest. Compounding interest calculators state that your money will double every 8 years if you invest diligently and with discipline. Most 401k plans allow loans to be held for up to 5 years. If you used a 401k loan to purchase your home (or finance for a down payment on the home), you are losing the ability to double your money in 8 years average. What’s more, you will lose the power of making additional contributions & more growth opportunities & returns on investment. Over time, your 401k balance will never reach its maximum potential and the greatest sum of money you could have had!
4) Unable to Repay the Loan? More Trouble!
If you get yourself in a situation where you cannot repay the loan, it will be considered a taxable withdrawal and you will be subject to income taxes. This is in addition to the 10% early withdrawal penalty you will have to pay for your withdrawal.
5) Quit Your Job? Repay the Loan!
If you quit your job with your current employer, the 401k plan administered by your employer will require you to repay it immediately! Thus if you have a 401k loan, you will be stuck at your current job for as long as you do not repay the loan. This is because if you quit, you will have to come up with the cash to repay the loan. If you do not have that cash, you cannot quit your job. This might require you to pass up a better opportunity where there’s more pay, challenge and career enhancement.
6) No Financial Cushion
You should borrow a 401k loan in the toughest of circumstances where you really have NO other source of funding, no family, no relatives, etc. If you borrow a 401k loan to pay off your credit card debt or to fund an exotic vacation, this money will NOT be there when you really need it in the toughest of circumstances. That is why we say, do not borrow from your 401k!
7) Living Beyond Your Means?
If you need to borrow from your 401k, this automatically creates a red flag that you are living beyond your means. If you cannot find any other way of making money other than borrowing from your 401k, you should revisit your spending habits and see where you are blowing up excess money.
Violates the King Rule of Personal Finance
Borrowing from your 401k violates the very important saying of “Pay yourself first.” It is definitely a bad idea to violate this rule.
Should you pay off your mortgage when you retire? That’s a tough decision that many people face. Lots of people think that no mortgage at retirement is the way to go. Unfortunately that’s not true for everyone. Having a mortgage can lower your tax, increase your cash flow, and diversify your assets. Most retirees will be living on a majority of fixed income so not having debt can be very attractive. But consider these 5 factors before you make that important decision:
1) If you are still able to write off the interest on the loan, then I would recommend that you keep the mortgage because you still get the tax advantage of the interest deduction. If you are in a high tax bracket at retirement, this would be a savvy move. The higher the interest deduction, the higher the tax advantage.
2) If you don’t have enough interest deductions to itemize on your taxes then pay off the balance if you have the money to do so and only if those funds are making less than your mortgage interest. For example, if your cash to pay off the mortgage is making 4% and your fixed rate mortgage is 7%, then pay off the balance with the cash. You are basically investing more money in your home.
3) Even though your mortgage is paid off, it is a good idea to make a monthly payment into cash reserves set aside especially for maintenance on your home. Just because the mortgage is paid off doesn’t mean you can let that large investment sit without repairs. Too many seniors sit alone in large homes in disrepair. Don’t let this happen to you.
4) A common mistake is for retirees to refinance a high interest fixed loan for a lower interest fixed loan. When you refinance, the interest and principal is amortized over the life of the loan and in the beginning you will be paying mainly interest. But if you had your loan for over half of its life, then you are paying down principal not interest which is a good place to be when you are on a fixed income.
5) You don’t want all your eggs in one basket, so why own a home with no mortgage? If you do, your largest asset may be your home and if it goes down in value, then most of your net worth will too.
Some people consider their home as their investment, and have no problems selling it to turn equity into cash and downsize to a smaller home. Other people feel attached to the home that they raised their kids in and want to stay for the long haul. Most baby boomers are heading into retirement with large mortgages and have no intention of paying them off.
Your individual circumstance will tell if it is the right thing to pay off a mortgage before you retire. By understanding the tax implications of your decision and how it affects your cash flow and your portfolio, you will feel better about making the right decision for you.