Lucesco asked:


Buying a home, even with the downturn in the market, is still the most successful way to invest money. But I don’t make enough money to both save for much of a down payment and still put much money aside for retirement. So how do I choose where to put what money I don’t need to live on?

Ana

Robert Valentine asked:


“Time waits for no man” Ancient Proverb

That ancient quote is a great reminder how important it is to start planning for your retirement. Whether we choose to acknowledge it or not, retirement is creeping up on us. Even for those who have just started their career, retirement planning is essential to providing a secure future for themselves and their loved ones. But that doesn’t mean we’re defenseless against time. In fact, with the proper planning, life after work can be the most rewarding years of your life.

One of the most basic ways to begin planning for retirement is determining your post-work income. Post-work income is the amount of money you’ll need to live comfortably at current income levels, after you’ve retired. That means having enough money to live comfortably without worrying about running out. It also means making sure you have enough extra to do the things you’ve always wanted to, like travel, or just plain relax!

Meeting with a financial professional and determining your post-work income is fairly painless. But not many Americans have done it. According to the 2005 Retirement Confidence Survey (RCS), released annually by the Employee Benefits Research Institute, less than half have tried to calculate needed savings for their golden years. In fact, only 4 in 10 workers say they have tried to calculate how much they need to accumulate for retirement.

So here’s a quick rundown of determining what you’ll need to save for retirement. Your post-retirement income heavily depends on the age you wish to retire and how much money per-year you wish to spend. Generally, you want to have between 75% and 95% of your pre-retirement income available to you, per year. This way, you won’t be forced to deal with a drastic drop-off in the way you live. Many people grow accustomed to living on a certain income, and it’s important to stay consistent after retirement. People are living longer too, so you’ll also want to take that into account, along with inflation. In general, it’s been said that in order to preserve your retirement assets, you’ll want to take out 6% or less of them per year.

Here’s a quick and easy example of how to determine what you’ll need to save to be in the ballpark: Say you retire at age 65 and decide you’ll need 30 years of dependable income, at an average of $55,000 a year (assuming you can live comfortably on that amount). That means, you’ll need to save approximately $1,650,000 to make sure you have enough to retire. And that’s without taking inflation, medical costs, travel, and any other unexpected expenses into consideration.

Getting a rough idea of a number is a good way to light a fire under your retirement plan. Often people believe they are saving enough, when the reality is, they’ll fall short of what is needed. By determining a rough estimate, you can then work with a financial professional to nail down an exact number. The sooner you get started saving, the easier it is on your future.

Of those 4 in 10 who have calculated, one-third has done so with the help of a financial professional. Unfortunately, a whopping 10 percent say they simply guessed how much they will need in retirement! While something can be said for “doing it yourself,” or if you choose, just guessing (we don’t recommend that!) most post-retirement income estimates need to be tested for real-world accuracy by financial professionals.

For instance, you may come up with a number that seems sufficient, but with the help of an expert, your number can be put through a series of scenarios to see if it holds up under certain real-world situations. By running it through a series of tests, professionals can determine what possible risks and warning signs may come up. Say, for instance, if you or a spouse were put in a long-term care facility at some point during retirement, your advisor can look at your determined number and see if it will hold up under the strain.

By determining the exact amount of post-retirement income you’ll need, you’ve taken the first step towards saving for your retirement. Once you get that out of the way, you’ve begun down the path of securing your future. Asking for help can be crucial, because a professional can tell you if your number will hold up in case of emergencies or other unexpected events. Meeting with a professional and determining how much you need to save is the first step towards determining future goals for retirement. It will wake you up to the real number you need to reach. Best of all, it’s painless, and you’ll be glad you did it.



Rachel

John Trauth asked:


What is so hard about retirement? Many people have asked themselves this question. Well, if it is so easy, then why are 41% of retirees five years out depressed and say retirement was the most difficult transition of their life? Now they are unhappy and tell us their life was better when they were working!

You can avoid this fate. To learn how, you need to understand the difficulties associated with this transition, beginning with why there are so many negative psychological associations with the whole concept of “retirement” which you may not consciously understand. You also need to understand the most common retirement myths which may be preventing you from understanding what retirement really is all about and preparing adequately for it.

The word “retirement” comes from the old French verb, “retyrer” which means “to go off into seclusion.” If you look up the word today in Webster’s dictionary, some of the synonyms you will find are: (1) withdrawal; (2) retreat; (3) seclusion; (4) departure; and (5) regression.

Who would want to do any of that? So it is not surprising that we all probably have many unconscious negative associations with retirement. We don’t want to feel old and irrelevant, and we don’t want to regress, but often our parents’retirement was followed shortly by demise and death. We certainly want to deny the inevitable, and denial can become very powerful because we don’t consciously realize we are doing it! And are we going to carefully plan for something we are carefully avoiding considering?

Denial of the importance of planning for retirement has led to five very common retirement myths.

Myth #1 is that retirement is not here now, so there is no reason to think seriously about it and plan for it. “I’ll think about that tomorrow.” We call this the “Scarlet O’Hara” myth. This myth can have devastating consequences including not saving enough money and developing serious conflicts with those closest to you who have different expectations about retirement.

Myth #2 is the belief that retirement is really simple. No big deal. I’ll just stop working and everything will be fine. What’s so hard about that? We call this the “Homer Simpson” myth. Sorry, Homer, but it doesn’t work that way. Oversimplifying retirement and not understanding the enormous personal changes involved can result in disappointment and eventually depression when things do not work out as envisioned.

Myth #3 holds that retirement will be great because it will be one, long, happy vacation. Remember those three weeks we spent in Florida or Hawaii? The rest of my life is going to be just like that. We call this the “Carnival Cruise” myth. But retirees find out very soon that leisure is only relaxing and rejuvenating when it is a counterbalance to some sort of routine, and not as a perpetual escape from reality.

Myth #4 is probably the most common myth, and it expresses the belief that your retirement will be wonderful if only you have enough money. We call this the “King Midas” myth. It is perpetuated by the advertisements of many financial services companies and by the fact that, in America, we are becoming increasingly responsible for our own financial independence after work. This is not to say that money is not important. It is. But only as a means to an end and not as an end in itself. Many wealthy retirees are unhappy.

Myth #5 is the most interesting of all. This myth holds that I am just going to love spending tons and tons of time with my spouse or life partner. We have been waiting practically all our lives to have all this wonderful time together! Now finally we can do it! We call this last myth, the “King Henry the 8th myth.” Couples who have spent 20% or less of their time together pre-retirement will have difficulty adjusting to a much higher percentage. The divorce rate is now the highest for the 55+ demographic.

So now that you know what the five most common retirement myths are, what do you do with this informaiton? You need to establish a process for getting past denial and truly engage in creating a retirement that will complement your own personality and also mesh well with those who will be sharing your retirement life. It is a process which begins with understanding why retirement is such a difficult transition and then taking steps to avoid or minimize these difficulties through planning intelligently to create your ideal retirement life.

For example, the cost of denying that retirement will change your relationship with your spouse or life partner (myth #5) suggests that you need to prepare for changing the depth of your interpersonal transactions. Decisions will now go way beyond “What’s for dinner” and include where and even how to live, which can involve difficult discussions including prioritizing wishes, examining the details of your every day lives, and listening to and compromising with your partner. You can try to “wing it”, but are you prepared to be a statistic in the new divorce paradigm?

This is the intelligent way to prepare for what could either be (a) your most difficult life transition, with a significant chance of unhappiness, or (b) the very best years of your life. Which will it be for you?



Dana

Tracey Anne asked:


Most of us are familiar with these statistics…

Out of 100 people who starts working at the age of 25, by the age 65:

* 1% are wealthy * 4% have adequate capital stowed away for retirement * 3% are still working * 63% are dependant on Social Security, friends, relatives or charity. * 29% are dead.

More Statistics on “The GOLDEN Years”

Retirement by the Governments own statistics:

* The average savings of a 50 year old in the U.S. is $2500. * 32 Million Americans are currently threatened with bankruptcy. * More than 1,000,000 [1 Million] filed for bankruptcy in the year 2000.

More Statistics…

Out of every 100 people who reach the retirement age of 65:

* 62 retire with less than $25,000 in assets and depend on Social Security or family for their retirement.

* Another 35 retire with less than $100,000, have some form of pension in addition to Social Security and are just making it in their retirement. If either Social Security or their pension went away they would have a very difficult time surviving.

* 2 of the 3 remaining retirees have an adequate pension or retirement account. They have assets of between $100,000 and $750,000. They do appreciate having the additional money they receive from Social Security, but could survive without it.

* The last of these 100 retirees, is the only one who is financially independent. This retiree has assets approaching or exceeding $1,000,000. They do not need the income from Social Security at all.

Which group above will you be in when it is time for you to retire?

Still More Statistics…

“According to recent Governmental statistics, most people are very concerned about their financial security in retirement. Over 70% believe they won’t have enough money put away for retirement. Of those between the ages of 30 and 54, almost 80% feel this way about their future.

One of the factors is the uncertainty of Social Security. In the mid 1970’s, 2/3 of the people surveyed said they were quite confident Social Security would be there for them when they retired.

In 1980, of those surveyed, 2/3 commented that they were not confident that Social Security would be there to support them in retirement. They felt that if Social Security was still a functioning service, it probably would not be paying an adequate amount to cover a reasonable standard of living.

So if this is the case… why aren’t people socking away hoards of money so they are not part of the statistics? Well, it seems that saving for retirement is a difficult task to master for the average person.

Some have difficulty saving on a systematic basis. With others, it’s often the case of having good intentions but very poor follow-through. Still others, it’s that they make poor selections with the saving and investment vehicles they choose.”

Clearly, the working-class scenario of toiling away building someone else’s empire for forty years, trying to accumulate wealth (money) so one can retire comfortably, is NOT working. Most people would like to retire with dignity. Wouldn’t you?

Have we shown you enough? Well, here’s a few more facts…

“The rising stock market and escalating property values, while adding general prosperity, hide the brutal fact that for many Baby Boomers-who are now turning 50, retirement may not be a pretty picture.

Over the next 20 years, 76 million of us born between 1946 and 1964 will hit 50. For most, that means facing up to the harsh questions of how, or even if, they will be able to afford to retire.

With meaty employment pension plans gone the way of ancient history, and Social Security increasingly becoming an uncertainty, the lifestyle of retirees is no longer leisure, golfing, fishing and travel. In fact, the lifestyle for many retirees may be continued work and “cans of Spam . . . and not Caviar and Travels.”

The latest Census Statistics show that only 1 out of every 10 Americans today, is financially prepared to retire when they reach the age of 65.

What about the Current Economic Situation?

As we know, the economy is teetering on recession, companies continue to lay off in great numbers. And, you may as well kiss true job security good-bye. It doesn’t seem to exist anymore.

And although you may be one of those that make it to retirement and manage to hang on to your job, according to the Bureau of Labor Statistics, at 65 only 5% have enough money to retire on.

And since the standard route of working a traditional job has failed for 95% of all Americans. Shouldn’t you be seriously RE-evaluating the traditional career job employment scenario and if it is going to get you to and take you through retirement financially sound?

Here’s the real kicker… You and most of the people you know are going to work for at least 30 to 40 years …. at jobs you ****… with bosses you ****… with commutes you ****… with hours that you ****. What a life – failing while you are miserable most of the time. Do you want to do this for the next 40 years?

So What Can You Do About It?

Well, one pro-active move you can make is to avoid common and costly retirement planning mistakes that could seriously jeopardize your future and the lifestyle you dream of for your retirement.

Mistake Number 1: Procrastination Mistake Number 2: Not realizing that you’ll need a specific amount of money to sustain you each month when retired. Mistake Number 3: Relying on the belief you’ll be able to draw FULL Social Security benefits. Mistake Number 4: The under-estimation of your medical costs if you are not in good health. Mistake Number 5: Not setting up your long-term-care insurance early. Mistake number 6: Making the assumption that you can retire early. Mistake Number 7: Getting into the false hope that in retirement you will be in retirement-mode. Mistake Number 8: Failing to seek expert financial and retirement guidance.

Start focusing on these commonly made mistakes and make sure you are not falling into the traps they can create. If you recognize some of them in your portfolio, get them fixed so you are on the right track. You don’t want any of them to affect your retirement planning and live-on income.

Start a pro-active plan NOW! If you want to be able to live financially stable now and into your “golden” retirement years, you need to make changes in the strategies you’re presently using. One other pro-active move you can make is to join the home-business boom. It is the next big trend. CNN reports that a new home based business is started in the United States every 11 seconds.

Why? Well because a new home based business offers a low start-up investment compared to a brick and mortar, or franchise business, low monthly overhead, and you can start part-time while still employed, and create time leverage, residual income, and tax benefits for yourself. Tax expert Sanford Botkin says that a home business can result in tax savings of $3,000 to $9,000 per year.

Follow this trend, however do proceed wisely – you don’t want to get into a situation where you are wasting time or money out of your pocket.

Make sure you do your research. You are looking for an income generating system that allows you to build substantial supplemental income, PASSIVELY; where you don’t have to give up your life, or your spare time to run it successfully.

You don’t want to be adding a lot of additional work hours to your day, otherwise, you might as well start commuting to a second job site.

Start now… remember, procrastination is mistake #1… That way when you do decide to retire, unlike the income earned at a job, which stops when the work stops, the residual income from your home based business will continue to pay you long after the work is completed. Leaving you to enjoy your retirement free and to the fullest.



Paul