aikon56 asked:


Can a 66-year old individual with no retirement or regular income file for a tax return and be eligible for the stimulus package check in May 2008?

Thanks.

Pamela

Mike Kennedy asked:


Terminal wealth dispersion is the technical term that describes the variability of the future value of investment portfolios. This inevitable variability means that no one knows what the value of their investment portfolio will be when they reach retirement age or at any time during their retirement. And the uncertainty of individual’s life expectancies compounds this problem.

Hedging against the risks associated with these two factors places an onerous burden on individuals. Although this hedging could result in a very comfortable retirement, if one can afford the hedge and their timing is right, the potential downside risk is so great that it may be deemed unacceptable by many individuals. So one has to ask “Do individuals really prefer to forgo a sure but modest retirement income and play the odds with their retirement savings in hopes of being very well off in retirement?”

With individual accounts, individuals lose the benefit of the pooling of risks. The two risks that force individuals to over-save are investment risk and the risk of living beyond the average life expectancy. In both cases the outcomes, terminal wealth and life span, are highly variable. When the risks are pooled for a large number of individuals over many overlapping life spans, the average outcomes are highly predictable, which is what makes traditional pension plans work so well.

Traditional pension plans exist, for all intents and purposes, in perpetuity. This being the case, they can build reserves during good times in the financial markets and weather the bad times, thus enabling them to make consistent payouts to retirees regardless of the timing of their retirement. Unfortunately, individuals do not get to choose their holding periods or the years of their retirement and must take whatever comes along, and what comes along might be good or it might be bad. Thus individuals must set savings goals that are sufficiently high to hedge against the risk of the average return of an investment portfolio over its holding period falling well short of that which would be expected very long term.

The relatively short duration of individual’s holding periods leave them very susceptible to the effects of market cycles, which are notoriously unpredictable in amplitude and frequency. Being broadly diversified mitigates this risk but does not eliminate it, as it’s entirely possible for a worldwide bear market to occur during one’s holding period. Then at the end of the holding period for wealth accumulation, a second holding period begins, which will be the term of retirement, and this second holding period carries the same risks as the first, but at a time in life when there is no source of income to make up for portfolio under-performance.

The other component of risk that individuals must hedge is the risk represented by the uncertainty of one’s life span, which means that individuals must aim even higher when setting their savings goals. The managers of large pension plans can depend on retirees living on average for only the average life expectancy of employees who reach retirement age. The average life expectancy for someone who reaches the age of 66 is currently 82 years, and 66 is currently the age when workers are eligible for full Social Security benefits, which makes it a reasonable baseline. Based on those assumptions, the average term of retirement would be 18 years and pension plans should only have to be funded to the extent necessary to cover the cost of this average term of retirement.

Individuals, however, don’t know how long they’re going to live, so they must over-save to ensure that they don’t run out of money before they run out of time. This need to over-save is independent of the first need, thus the need to over-save is compounded, i.e., an individual needs to save enough to cover the cost of living well beyond the average life expectancy and the targeted amount of savings at retirement age must be great enough to ensure with a reasonably high level of certainty that the actual amount on hand at retirement is at least the bare minimum necessary to get by on.

A popular estimate of the term of retirement for which individuals must plan is 30 years. Saving enough to cover the cost of a 30-year retirement is a much greater burden than saving for an 18-year retirement, but planning on a shorter retirement exposes individuals to tremendous risk. It also exposes taxpayers to tremendous risk, as individuals who outlive their savings will undoubtedly require some form of public assistance to make ends meet and are likely become wards of the state when they become physically incapable of caring for themselves.

An individual who bases their retirement saving on living to the age of 96 but only lives to be 82 will have forgone a lot of pleasures in life, such as travel, fine dining and better vehicles, that they could otherwise have enjoyed. But many individuals just don’t have the level of income required to support the saving rate necessary to amass the wealth required to hedge against the downside of terminal wealth dispersion and the possibility of living well past the average life expectancy. For them it’s not a matter of forgone consumption, it’s a matter of going through life with the knowledge that they are likely to spend their golden years living in abject poverty and that that will be their reward for 40 or 50 years of hard work. And it gets worse!

Some economists now believe that within 15 years or so, 100% of Social Security benefits will be spent on medical expenses: Medicare Parts B and D premiums, copayments, uncovered expenses and medigap insurance premiums. If that becomes the case, anyone without substantial savings or a defined benefit pension will be looking for public assistance the day after they retire.

With the situation already at this state, adding private Social Security accounts to the mix would be like throwing gas on a fire, as individual Social Security accounts carry the same risks as other individual retirement accounts. Those who have tried to kill Social Security since its inception find private accounts very appealing. But, not so coincidentally, most of them seem to be in the enviable position of not needing Social Security to support their retirement. More recently, younger workers, too, have come to oppose Social Security, but not for the same reason as the traditional opponents. Young workers may be crushed by the burden of social Security and may never receive any benefits from the system. Those who oppose Social Security simply because it’s a social program should be expending their efforts on reforming it rather than killing it.

If Social Security had been managed like a pension plan rather than a pyramid scheme, its current situation wouldn’t be so dire. Indeed, it might very well be a fully funded, functional system. CalPERS and other large public employee retirement plans have operated successfully for decades, with success being defined as being able to meet their obligations, not having an adverse effect on the financial markets, no scandalous events attributable to malfeasance by the plans’ sponsors and being free of influence from elected officials. There’s no reason that Social Security can’t also be managed in such a manner. It would literally take an act of Congress to do this, but the hardest part for Congress would be letting the system run without their interfering with its operation.

Passing off the burden of retirement to individuals was a great deal for corporations but it’s a very poor deal for most individuals, and extending individual accounts to include the Social Security system would only make a bad situation worse. It’s not a poor deal for all individuals because there will be some who can afford to save a substantial portion of their income and whose holding periods will coincide with bull markets, thus putting their wealth in the upper range of their terminal wealth dispersion, and who also live a long, healthy life. They will be the ones who benefit from over-saving and living beyond the average life expectancy, but they may end up forfeiting a portion of their wealth in the form of taxes to support the less fortunate. I don’t believe that is what the public expects from a well-conceived system.



Mark

ronfurg asked:


I receive a retirement annuity from my service in the federal government and would like possibly to move to a state which does not tax the annuity income.

Philip

Dr. Cynthia Barnett asked:


Many people in our society are clinging to retirement myths, despite the publicity and information available. Holding on to these myths as truth can be very harmful to your happiness in retirement.

To help you avoid holding on to these detrimental myths, I’d like to offer my take on some of the most widely held retirement myths.

Myth #1: Retirement is an event that occurs on the last day of your career. This is false. Retirement is a new phase of your life, quite unlike any previous stage of living. Few people step from the career phase of life to the retirement phase in a single action. The truth is that there will be a transition period of moving into a new lifestyle. The truth is that it will probably take a year or more for you to create your new retirement lifestyle.

Myth #2: Someone or something else will take care of me in retirement. This is unlikely today. Whether myth is that Social Security will take care of you or that you will be taken care of by an inheritance from your parents or by your children, it is increasingly unlikely that someone else will take care of you. Many retirees cannot subsist on Social Security alone. Many pensions have evaporated. Your parents now face the same economic challenges you are facing and will probably need to use much of their savings. Your children will also face these economic challenges, will need to be attending to the needs of their children, and must be saving for their own retirement. While I don’t think Social Security will disappear in the next ten years, as some predict, I do think it likely that retirement income from the government will decrease in the future.

Myth #3: I won’t need much to live on. The truth of this statement depends on how you define “much.” A recent study indicated that the average retiree will spend $250,000 on medical expenses between age 65 and death. We can expect to live another 18 to 30 years after retirement. As the cost of many essentials for living continues to rise, you might need to be thinking seriously about how you will supplement your retirement income.

Myth #4: Retirement is easy – it’s just one great long weekend. For the vast majority of people, this is simply not true. We all need meaning and purpose in our lives – this does not end when we retire from a job. The retirement transition can be difficult and can result in depression. Many people enter the second phase of life (retirement) with the attitude that they will spend the rest of their lives relaxing on a beach somewhere or pursuing other leisure activities. Most discover within one to three years, that a steady diet of leisure and relaxation creates a pretty empty and shallow existence. Our rest needs to be balanced by activity; our relaxation needs to be balanced with purposeful activity.

Myth #5: Retirement will be wonderful because I’ll spend all of my time with my spouse or significant other. Spending all of your time with your spouse or significant other will introduce new challenges to your retirement lifestyle. Many couples actually spend only about 20% of their time with their spouse before retiring. They don’t realize there must be some adjustment to spending significantly more time with their spouse. Statistics are indicating now that the highest divorce rate is with couples over age 55.



Ernest

Elijah James asked:


You are middle aged, and retirement seems far away for the moment, but in this current economical crisis, will there be a future for your retirement?  This and other concerns are starting to settle in the minds of middle-aged Americans today.  With Social Security in the balance, banks being closed, and people losing their 401K accounts, it’s time to start looking much deeper ahead than we first realized.  Using a Basic Retirement Calculator can give an idea of what you need to do today for a comfortable retirement tomorrow.

Living on a budget is what many Americans have to endure these days.  Prices are going up on the staple of existence.  Food, mortgages, and gasoline have all hit high marks, with no indication that it will get better.  Businesses are closing down, and many people who thought they were secure are now losing their homes and pensions.  Frightening as this all sounds, there is a way to secure at least enough funds to get us through our retirement years.

The next step is to use the basic retirement calculator for what is needed now for retirement later.  There is a simple method of calculating a goal and current income.  For example, if you would like to have at least a $45,000 annual retirement income, and you project no house payments by that time, then you have to look at your present income, monthly contributions, payments and tax for the projected retirement age.  If you already have IRA or 401K accounts that are secure, then you will have even more monthly payments upon retirement.  Savings and brokerages are also put into the calculation under current retirement assets.  Any accounts that are tax-advantaged give much needed leverage when considering retirement income.

Consider any pensions and, of course, Social Security payments that will be given at retirement age.  Expected inflation during retirement is another issue to consider.  Projecting this number from historical rate increases gives an idea for the future, but not completely reliable.  Calculating your current retirement assets can give an idea of what you will have after retirement from your accounts.  A rate of return for any of your portfolios that are high risk/high return can be toned down once retirement is on the horizon.  That way you have them to draw on when needed without fear of loss.

Sale of real estate or any other one-time income should also be entered into the basic retirement calculator.  This will affect your monthly amount, but could also lend a hand as being a much-needed emergency nest egg.  An after retirement job may be necessary to supplement your income, and many retirees choose to work after retirement as a rewarding experience anyway.

Looking to the future is important if you need to be secure in your retirement.  What happens today will reflect on your quality of life tomorrow.  A Basic Retirement Calculator online can help you see immediately what you need to do to have a comfortable retirement.



Christopher

Eric Bayne asked:


Many people, after having invested much of their money into a safe 401k fund, are ready to begin their retire with no money problems. But how many of them have actually taken the time to take a pen and calculator and begin to compute exactly how much of their monthly expenses that their 401k will actually cover? Many haven’t, and many are shocked when they find out how much of a shortfall they have.

Most people never take the time to map out a long term retirement strategy. For some reason, doing so never seems to rise to that level of importance. Sure they’ll save a little here and there and some may even have a structured savings plan where a certain amount of money is taken out of their paycheck weekly and deposited in a fund. But very few people go through the hard process of putting down in writing such basic facts as what age they plan to retire, how much money they’ll need when they retire, and how much money their fund will provide for them when they retire.

And that’s a big mistake. It’s also why when the big day finally comes, many new retirees will belatedly discover that their 401K and Social Security payments will not even come close to covering their monthly dollar outlays. So, unfortunately, at the age of 65 or whatever age they retired they discover that they have to go back to work – sometimes part time but sometimes full time – in order to make ends meet.

So, why does this scenario happen so often? And is it avoidable? To put it bluntly – it happens because they failed to make themselves a retirement plan. And yes, this situation is avoidable – if you don’t wait too late to start. So let’s start now.

Here’s a practical, easy way to at least begin to create a retirement plan. How much do you currently earn a month? Most experts figure that you’ll need at least 60 to 80% of your pre-retirement gross income to keep you at the same standard of living that you now enjoy. So let’s be conservative and figure that you’ll need 80% to be comfortable. So, if you make $4,000 a month, your retirement fund plus Social Security payments would have to provide you with at least $3,200 a month.

Now ask yourself. How much will your current 401k fund plus Social Security provide for you at retirement. Is it at least 80%? This part may take a bit of work on your part, but there are calculators all over the Internet that can help you to answer this question.

If you discover that your retirement fund as currently constituted will not provide you with this 80% of your pre-retirement gross income, you have one of two hard choices to make. You either make a conscious decision to lower your standard of living when you retire. Or, you make a conscious decision to increase the amount of money that will be in your fund when you retire. You can do this by either taking extra jobs and placing the excess money in your retirement account or by choosing more profitable investments. Whichever decision you choose, at least you won’t be going into your retirement years financially blind.

Now admittedly, this quick and dirty retirement plan analysis does not take into account many factors that a thorough analysis would. For example, we’ve left out factors such as whether your house has been paid off at retirement, whether you’ll still be supporting your children at retirement, and whether you have other substantial debt loads. And it’s more than worthwhile for you to map out a thorough retirement analysis plan as soon as possible. But even a quick and dirty plan such as this is more than most people do and is better than no plan at all which, unfortunately, is what most people have.



Esther

Elijah James asked:


Retirement Calculate planning can be complicated. There are numerous factors that you need to take into account, several of which will not be within your control. For example, you cannot predict the inflation rate, or the number of years you will need an income for post-retirement. Depending on how complex your financial affairs are, you may need expert advice. Using a retirement calculator is a useful way to get an idea of how suitable your existing retirement planning is or, if you are just starting to save for retirement, gaining insight into how best to go about it.

They can allow you to enter your key financial and personal information in order to estimate how much you will need to pay in, or how much you can expect to get out of your existing plan over the years of your retirement. You will need to have a variety of information to hand about your financial status. This will typically include your current income (or joint income if you are married); the proportion you are investing in retirement funding; the rate of return you are expecting both before and after retirement; the age at which you plan to retire, and how many years you want your retirement funding to cover. Some will give you the option of factoring in the impact of Social Security eligibility and other data that will impact upon your retirement income.

The calculator will do all those complicated sums for you. Some will also generate a report, giving some analysis of the status and financial implications of your actual or proposed retirement calculate plan. As a tool, a retirement calculator can be invaluable in your retirement planning. It is not something you should do just once. The analysis should be run regularly, especially if your circumstances and/or the economic climate change. Alternatively, running different figures through the calculator will allow you to plan your contributions and envisage the different outcomes that different retirement saving strategies can yield for you.

All retirement calculators are based on some pre-existing assumptions. For example, it may assume that you make payments at a certain time of year. Such small assumptions could make an impact on the final figures and for this reason the calculator should be regarded as a guide, not the last word. Though you enter your own specific data, retirement calculators are nevertheless designed for an ‘average’ individual and, if you have special circumstances that may affect your tax and investment status, it will not be able to take those into account.

However, even an accountant or actuary is not going to be able to give you a fully accurate report, since the world is a changing place. For example, changes to tax laws or fluctuations in the rate of inflation simply cannot be predicted in advance. Nevertheless, using a retirement calculator is an invaluable exercise and may alert you to problems or oversights in your retirement plans and strategies.



Dawn

Uchenna Ani-Okoye asked:


Some buy bonds as savings for retirement while some others purchase bonds for college education. Individual Retirement Annuities (IRAs) In this case, IRA stands for Individual Retirement Annuities rather than Individual Retirement Account. For example, it is possible to use your 403(b) to fund your 401(k), Individual Retirement Account (IRA), or another 403(b).

A couple had saved up for their retirement. This income would consist not only of the interest or the earnings that the retirement plan would earn but also the principal amount, which is also protected in this kind of annuity. You have goals you want to reach — saving for retirement, vacations, new furniture and many other things.

If you were able to implement a strategy to squeeze a little more out of your 401k plan, say 8% more every year, this would result in four times the amount of money you would have at retirement because of the power of compounding interest. Don’t provide employee-type benefits (paid vacation days, health insurance or retirement plans). Most recently, the SEC issued a report on pension consultants regarding conflicts of interest and the objectivity of advice given to retirement plan sponsors.

Cost estimates for outsourced asset retirement programs can vary widely– be sure to include retirement costs and downstream liability into your overall cost calculation. Gone are the days when employees sought to remain with a company until retirement. Why wouldn’t they be when ‘early retirement is within reach’ if you’ll just BUY and follow their proven success formula valued at $2995, for just $147, BUT if you act today you can have it for ONLY $97.

This article describes seven specific ways in which the home equity nest-egg can be used to enhance retirement income planning. An appropriate asset allocation, retirement plan and insurances can together create a financial strategy to help your savings last a lifetime. Many experts point out that the death benefit provision (which guarantees that if you die while still saving for retirement, your beneficiaries will receive at least the amount of your principal and in some cases, with the purchase of optional riders, which carry additional fees, that amount plus locked-in investment gains), as well as the potentially strong performance of variable annuities, can make them a smart choice.

You could start a retirement savings plan. The Daily’s would be able to send their children to college without sacrificing their retirement savings. One person was keeping in touch with them, though, even in his retirement Don Keough.

The answers to those two questions help to form much of your retirement strategy. At retirement he had a nice house paid for, a good car paid for, a pension, and $85,000 plus in company stock that would now be worth a fortune. Invest in tax-free municipal bonds or tax-deferred US Savings Bonds instead of bank CDs (remember that tax-exempt interest is included in the calculation of taxable Social Security and Railroad Retirement benefits).

It helps in personal budgeting, investment management, debt management, managing medical expenses, retirement planning and so on. If you had to come up with $200,000 in disposable income over the next 20 or 25 years (the duration between retirement and death), could you do it, only you can determine whether your retirement will be spent counting pennies or living life to its fullest.

5 million in their estate, including the life insurance, retirement money, and business, they should either have an individual trust for each or have a trust that ’splits’ into two trusts when the first one of them dies.



Loretta

Eric Bayne asked:


Do you know how much money you will need at retirement? Do you know if you will even have that much money? The best method to know for certain is for you to start putting together your retirement worksheet today. Before you begin your worksheet, however, you will need to answer the following 3 vital questions:

How much do you want to make a year, in today’s dollars, when you retire? Or, to put it another way, if you were to retire right now, what yearly salary would you require in order to keep you living in the fashion to which you have become accustomed. The majority of worksheets and calculators will have built into them projected appraisals for inflation and will be able to use this figure to calculate roughly the amount of annual income you will need at retirement.

How many years are there before you retire? This is critical because it is the number of years you have remaining in which to add funds to your financial portfolio. The spreadsheet will take the value of your current portfolio and add to it any expected contributions up to the retirement date. The calculation will show how much you can expect to have at retirement. If this amount is less than what you require, you will either have to add more money to your portfolio, change your investment strategy, or lower you expected standards of living at retirement.

What is the sum of all your sources of expected retirement income? This includes your expected Social Security income as well as any of the following investment plans – 401k, 403b, 457, Keoghs, SEP, IRA, and pension plans. It’s important to get as concrete figures as you can and put them on paper. This helps to avoid the rose colored glasses scenario where you think you have more money than you actually do. A major cause of people getting to retirement and being shocked that they don’t have enough money to live at their current lifestyle level is their failure at an earlier age to take a hard look at their financial situation when they had plenty of time to do something about it.

How many years will your retirement funds be expected to last? This is a sensitive question as it gets into life expectancy and mortality issues. Once you begin to collect Social Security, your income from it will be relatively constant. But Social Security will most likely cover less than half of your desired income. And in many cases, it will cover much less. This means that your remaining investments have to supply the rest of your income. In the best of circumstances, you will be able to live off of a combination of the interest and dividends from your investments and not have to touch the principal. If, however, you are forced to start drawing against the principal, your annual income from it will continually decrease until gone. Knowing how many years your retirement funds will be necessary will help you make the decision as to whether you should start to draw the principal down or accept a lowered standard of living.

How is your health? For many retired people, their medical bills are their biggest out of pocket expense when they retire. Even with Medicare, you may have deductibles to pay for. We can’t look into the future and say for certain what our health will be at retirement. But if you already are taking medical treatments for a disease such as high blood pressure, diabetes, cancer, and so on – you can be almost certain that those bills will increase significantly as you reach retirement age. Many people when making their retirement plan, forget planning for future medical bills. But now, before your retirement, is the best time to do this.



Vanessa

dipendra asked:


Most of the people I have met have not planned for their retirement as they say ‘future is unpredictable and we need to live in present’ but my dear friend’s future is the outcome of present, our present will decide our future. When we think of retirement we generally think of old age, a period when you have to give up the job and sit at home doing nothing. Contrary to the fact, most of the retiree lives a very active life. We need to seriously consider out planning towards retirement because once we retiree our income stops coming but our expenses remain as it is and in some cases it rises with the rising inflation.

In this regard mutual fund has turned out to be the right answer for making retirement planning easier and safer. Mutual fund being managed by professionals is a key to effective retirement planning.

Some people like it. Some people don’t but the fact is that retirement is a reality for every working person. Most young people today think cannot think of retirement as reality as they believe in ‘living at present’. However, it is important to plan for your post-retirement life if you wish to retain your financial independence and maintain a comfortable standard of living even when you are no longer earning. This is extremely important, because, unlike developed nations, India does not have a social security net. In India people still depend upon bank savings and fixed deposits for retirement purpose, which is unfortunately inadequate.

Retirement Planning acquires added importance because of the fact that though longevity has increased the number of working years haven’t, so you end up spending the last phase of your life without earning.

In simple words, retirement planning means making sure you will have enough money to live on after retiring from work. Retirement should be the best period of your life, when you can literally sit back and relax or enjoy your life by reaping benefits of what you earn in so many years of hard work. But it is easier said than done. To achieve a hassle-free retired life, you need to make prudent investment decisions during your working life, thus putting your hard-earned money to work for you in future.

With the special features of mutual funds like Systematic Investment Plan, Systematic withdrawal plan, systematic transfer plan in addition to other unique features of different funds, the investor can easily plan for its post retirement requirements and ways to achieve it.

Unlike many other countries of west, in India we do not have state-sponsored social security for the retired people. While you may be entitled to a pension or income during retirement, but will it be sufficient post retirement.

Although the compulsory savings in provident fund through both employee and employer contributions should offer some cushion, it may not be enough to support you throughout your retirement. That is why retirement planning is extremely important for every one. More over with mutual funds the investors can actually plan for themselves and also achieve their planned objectives. As compared to direct equities this option of mutual fund is much safer for planning your retirement corpus.

There are many reasons for the working individuals to secure their future emergence of separate families and its attendant insecurity, increasing uncertainties in personal and professional life, the growing trends of seeking early retirement and rising health risks are among few important risks. Besides falling interest rates, also the sustained increase in the cost of living make it a compelling case for individuals to plan their finances to fund their retired life.

Planning for retirement is as important as planning your career and marriage. We need to take conscious and careful decisions to prepare for our retirement. Life takes its own course and from the poorest to the wealthiest, every one gets older with time. We get older every day, without realizing. With our coming old age we tend to become more understanding to the facts of life and realize the importance and impact of retirement. The future depends to a great extent on the choices you make today. Right decisions with the help of proper planning, taken at the right time will assure smile and success at the time of retirement.

In my words, retirement planning means making sure you will have enough money to live on after leaving your work. Retirement should be that period of your life, when you can sit back and relax. Retirement should bring more of enjoyment in your life by reaping benefits of what you earn in so many years of hard work. But it is easier said than done. Most of the people live their worst life during retirement. To achieve a hassle-free retired life, you need to make right investment decisions during your working life, thus putting your hard-earned money to work for you in future. If you are not very aware of the investment that you need to undertake then you can easily take help of online advisers to help you with your retirement plan through mutual funds. The earlier you start the better it is for you.

Now retirement planning can be done with a single click and with the advice of a registered mutual fund advisor by Association of mutual funds in India (AMFI). Fill this retirement questionnaire to know your current financial situation and your investor profile which will help you plan for a worry-free retirement.

This is a no obligation free mutual fund advisory; investors can make informed mutual fund investment decisions with the expertise of our advisors.



Ruby