Feb 27 2012
It is important to start now if you’d like to build up your savings over time. In this short video, Dave Young discusses compound interest and some tips on how you can start to build your wealth now.
Feb 21 2012
When you reach the age of 66 many rules change for claiming social security. The following article outlines the important things you should know as you prepare for retirement.
by Emily Brandon
visit Money Retirement to view the complete article
In 2012, the oldest baby boomers will turn 66, an important age for Social Security eligibility. At 66, boomers can claim the full amount of Social Security they have earned, and the penalty for working and claiming Social Security benefits at the same time disappears. Here are some retirement planning tips for those turning 66 next year.
Social Security eligibility. Baby boomers born in 1946 will hit what the Social Security Administration considers the full retirement, at which time they are eligible to claim the full amount of Social Security they are entitled to. Boomers who claimed their due early are receiving a reduced payout.
Delay and get more. You can further increase your monthly Social Security payments if you delay claiming your benefits up to age 70. “Financially speaking, it makes more sense to wait until later when you can get more money per year, especially if you are healthy and think you will live a long time,” says Daniel Goldie, president of Dan Goldie Financial Services in Menlo Park, Calif., and coauthor of The Investment Answer: Learn to Manage Your Money & Protect Your Financial Future. “You will get more money per month and that money will continue at that higher level for the rest of your life.”
Claim twice. Married individuals (or those who were married for at least 10 years) are eligible for Social Security payments based on their own work record or payments equal to up to 50 percent of the higher earner’s benefit, whichever is higher. Baby boomers who have reached their full retirement age can even claim both of these types of payments at different times. A 66-year-old retiree may sign up to receive spousal payments and continue to delay receiving his or her own retirement benefit. A retired worker who uses this strategy between ages 66 and 70 will get higher monthly payments after age 70 due to delayed claiming plus four years of spousal payments.
Work without penalty. If you work and claim Social Security payments at the same time prior to age 66, part or all of your Social Security benefit will be temporarily withheld. Social Security recipients under age 66 who earn more than $14,640 in 2012 will have 50 cents of each dollar above that limit deducted from their Social Security payments. The year you turn 66, the earnings limit jumps to $38,880 and the amount withheld is reduced to 33 cents for each dollar earned. And the earnings limit disappears once you turn age 66.
Don’t forget about Medicare. Boomers born in 1946 should have signed up for Medicare in 2011. Retirees can sign up for Medicare beginning three months before the month they turn 65. It’s important to sign up for Medicare as soon as you are eligible because premiums may increase by 10 percent for each 12-month period that you delay enrollment. People who are still working and are covered by a group health insurance plan through their job must sign up within eight months of leaving the job to avoid the penalty. If you elect to receive Medicare Part D prescription drug coverage, it’s important to shop around for a new policy annually during the open enrollment period because covered medications and cost-sharing requirements often change each year.
Protect what you have. At this stage of your life, it is important to protect the nest egg you have built for retirement. “Make sure you are continuously tracking and monitoring how you are spending your money and the types of returns you are generating from your portfolio,” says Gordon Tudor, a certified financial planner for Wealth Analytics in San Diego, Calif. “It’s not about return-it’s about reducing your risk and avoiding losing money.” While many retirees maintain some exposure to stocks, which provide continued growth and fight inflation, it’s important to keep a gradually increasing portion of your nest egg in safer investments that will allow you to meet your everyday spending needs.
Plan your new life. Retirement planning isn’t just about meeting your financial needs. You also need a plan for how you will spend your days after you leave the workforce. “Develop a part-time dream job that you could now potentially afford to do,” says Maurer. “Look at this as a time of commencement.”
Feb 15 2012
The following article outlines tips to help boost your retirements savings if you are getting a late start. But the most important steps in building wealth is to start saving now.
By Deborah Fowles
visit about.com to view the complete article
In Your 40s or 50s With Little or No Retirement Savings?
If you’re one of millions of Americans who are on the other side of 40 and don’t yet have a substantial retirement nest egg, don’t despair. It’s not too late, but time is of the essence.
1. Estimate roughly how much money you’ll need to live on in retirement. Don’t get bogged down by conflicting advice on how to calculate the amount. A ballpark figure is a good starting place, and you can use one of a number of good online retirement calculators to get an estimate.
2. Once you have an idea of how much you’ll need for retirement, calculate what will be available from sources other than your savings. For example, what is your expected Social Security benefit at retirement age? Do you or your spouse have a pension from a previous or current employer? If you have a 401(k) plan, what is its expected value at your planned retirement age? Use a conservative rate of growth to avoid overestimating.
3. Set goals for reaching the amount you’ll need to make up the difference between Social Security, pensions, and any other retirement funds you already have.
4. If your employer has a 401(k) or 403(b) or other voluntary contribution retirement plan, and you’re not already participating, sign up today and try to contribute the maximum allowed by law. Remember that the tax savings on your deductions will soften the blow. If you’re in a combined federal and state income tax bracket of 35%, your contributions will only cost you 65 cents for every dollar you put into your account.
The maximum contribution for 2006 is $15,000 for those under 50 years old and $20,000 for those over 50. If you’re currently 45, you have 21 years until retirement. Your $15,000 a year contribution will grow to nearly three quarters of a million dollars (pre-tax) in 21 years at a seven percent rate of return. (This is a very rough estimation that depends on if you contribute the “catch-up” amounts each year and other unknown factors.)
If your employer matches a percentage of your contribution, that’s free money you should never pass up. Add your employer match to your own retirement contributions and you’ll have a tidy additional sum of approximately $364,000, assuming a 50% employer match, for a total of well over one million dollars.
5. Go for the Roth. If you make under the income thresholds, you can contribute to a Roth IRA in addition to your 401(k) or 403(b) plan. The contribution is not tax deductible, but the earnings will be tax-free in retirement. The maximum contribution for a Roth IRA in 2006 if you’re under 50 years old is $4,000 ($5,000 if you’re over 50). $4,000 a year will grow to nearly $208,000 in 21 years at a 7% rate of return, and you will owe no taxes on any earnings in your Roth IRA.
6. Don’t Be Too Conservative. Even at 45 or 50 years old, you have several decades for your retirement earnings to grow, so invest a large percentage in carefully researched, proven stocks, or better yet, mutual funds.
7. Consider relocating or downsizing. If you live in an area with a high cost of living, moving to a less expensive area and investing your savings for retirement could make a big difference in your ability to amass a nice nest egg.
If your kids have left the nest and you’re still living in a big house that has appreciated in value, consider selling it and buying a smaller, less expensive home. You’ll save not only on your mortgage payment, but in less obvious places like the cost of heating, cooling, insuring, and repairing your home, property taxes, etc. You can sock all the savings away for retirement or use some of them to enjoy your life now.
8. If you’re worried about ever being able to amass enough money to retire, consider taking on a second job and investing your earnings.
9. Play catchup. The tax laws now allow those over 50 to contribute a little extra to 401(k)-type retirement plans and IRAs, so they can do a little catching up as they near retirement age. Take advantage of this if you’re over 50.
10. Get out of debt. If you carry thousands of dollars of credit card balances and pay the minimum payments each month, your potential retirement savings is going directly to your credit card company in the form of interest. Paying only the minimum payment on credit cards is one of the worst financial mistakes you can make. Start applying as much as possible to your credit card balances and once they’re paid off, resolve to pay the balance in full each month. You’ll be amazed at how much money it frees up for retirement savings over time.
The older you are when you start seriously saving for retirement, the harder you’ll have to work at it, but it can be done by following the advice above, so don’t let doubt or discouragement keep you from starting right away, regardless of your age.
Feb 06 2012
It is not only important to be frugal while saving and preparing for retirement but it especially important during retirement. The following article provides tips of ways you can reduce your expenses in retirement.
visit USA Today to view the entire article
by Dave Carpenter, Associated Press
Seniors have to stretch savings over as much as three decades, face steep health care costs and have few ways to make up for any shortfall. For most, savvy spending is a must.
But being smarter about money goes beyond sticking to a budget and checkbook-balancing. It’s about spending not just carefully but meaningfully.
Control prescription costs.
Think generics and store brands. It can cost more than three times as much to fill a brand-name prescription than a generic equivalent. There’s a smaller but still significant savings to be had by buying store brands of over-the-counter medicines, too.
Joining store discount programs will compound your savings. Pharmacy, grocery and big-box chains offer them, usually for an annual fee.
Also take a look at Consumer Reports’“Best Buy Drugs” website, which mixes education with consumer tips.
Join a club.
Retiree couples or singles may think they don’t have enough food or shopping needs to join a warehouse club. But it’s not necessary to buy in bulk to save enough to quickly cover the $40 or $50 annual fee. Non-food items from books to clothes to electronics and gasoline are discounted at places, and they can stock up on non-perishable grocery items. There’s also the possibility of joining with neighbors or friends to split large purchases.
Save on travel costs.
Planes, trains and automobiles - it’s possible to find deals on all three.
Air travel discounts for seniors aren’t what they were a decade ago, when those over 62 could get 10% off most fares. But some carriers still offer special prices in certain markets. American, Continental, Delta and United all offer senior discounts on certain flights, and Southwest has them on its flights for those 65 or older, according to Cheapflights.com. Such tickets sometimes cost more than the airlines’ online-only specials, however.
Amtrak offers 15% discounts for those 62 or older. And retirees can find senior prices on auto rentals as well as hotels, tours and cruises through AARP’s active discount travel program.
One real gem is the $10 lifetime pass issued by the National Park Service that admits seniors 62 or older and their travel companions to most U.S. national parks, monuments and recreation areas.
Reevaluate insurance coverage.
Retirees should evaluate their auto, homeowners, life, disability and any other insurance annually and try to find lower premiums, discounts or other potential price cuts. If in doubt, call the insurer and ask for a reduction.
Review deductibles on all policies and get price quotes to see what the rate would be if, for example, the auto insurance deductible was bumped from $500 to $1,000. It could save you 15% to 30%, according to the Insurance Information Institute.
Those who still have life insurance and grown independent children, might consider dropping coverage. If you’re in your mid-50s or older, consider getting long-term care insurance - it could be hundreds of dollars a year cheaper than if you wait.
Seek out senior specials.
Many businesses offer senior discounts, but you may have to ask. Savings can be substantial; for example, AMC Theaters and Carmike Cinemas give seniors a 35% savings.
One good place to check is Sciddy.com, a new daily deals site for seniors. It offers deals in several categories from automotive and beauty to pet services and more.
Get serious about coupons.
Even if you don’t master “extreme couponing,” whose practitioners can get a shopping cart’s worth of goods for a pittance, learning how to categorize, combine and maximize the coupons you find online and elsewhere can pay off in huge savings.
Restaurant coupons are particularly popular with seniors and others living on a limited budget. But the biggest coupon savings can be had on groceries.
Go local.
Take advantage of opportunities in your community. See plays and concerts for free by volunteering as an usher. Use your local library more. Besides books, CDs and DVDs, some libraries now have e-readers you can check out. And most offer great free programs for all ages - from movies and lectures to various performers.
Limit family spending.
Even if it sounds heartless, cut back on gifts and spending on kids and grandkids. Remember, it’s in their best interest; keeping your finances in order ensures they won’t have to come to your rescue someday.
Think secondhand.
Borrow, swap or hit garage sales and thrift stores.
This approach is at the core of the eco-friendly principles of reduce, reuse and recycle. It can make retirees feel good while protecting their pocketbook.
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