Retirement

3 Steps To Early Retirement!

The dream of retiring early for many, remains just that – a dream! Escaping from the rat race and the 9-5 drudge is a tempting thought, but unfortunately feels intangible. People do retire early though, what is their secret? Retiring early would give you the chance to enjoy life to the full whilst still in good health. You could opt to travel to the places you have always wanted to visit or learn a new sport.

There are ways of planning for an early retirement, but it must be put into action as soon as possible – today preferably! This article aims to highlight ways of saving enough money to enable you to retire early.

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Invest any savings

If you are lucky enough to have savings, make them work for you. If you take the decision to invest your savings in stocks and shares, or participate in financial trading it could be potentially very lucrative and will be a huge boost to your retirement fund. Investing your hard earned cash is not without risk and you need to be fully aware of the process. The internet has opened up opportunities for everyone to get involved in financial trading, up until recently financial trading was the sole domain of stock brokers in the city. There are numerous trading platforms to choose from and lots of advice available. CMC Markets is a trading platform which will guide you through the process of trading using contracts for difference (CFD’s). Many trading platforms offer the option of “practicing” first before parting with your well earned money. Financial trading is not to be taken lightly, always seek professional advice.  

Create a budget

To enable you to save enough money for retirement you need to budget carefully. This will enable you to squirrel away any money saved into your retirement pot. Saving sounds a simple concept, but it needs to be managed carefully. Start today and don’t put off until a later date. Putting aside a certain amount of money every month doesn’t depend on how much you earn, getting into the habit of putting a little by every month will soon allow your retirement fund to grow. It’s worth remembering that you won’t need as much money to live on once you’re retired. You won’t have the costs associated with the daily commute and any children you have depending on you are likely to have flown the nest.

Property

Aim to have any outstanding mortgage debt paid off by the time you retire. This will reduce housing costs dramatically. You could also release the equity in your home by downsizing, also you won’t need to live close to a commute route, enabling you to move to a cheaper area.

Investing in property could be another lucrative option, you could build up a portfolio of rental properties or embark on a renovation project.

 


Cashing in your life insurance benefits to pay for retirement – Is that a feasible option?

For majority of the Americans, retirement planning and life insurance are entirely different things. They nurture the notion which says retirement planning is for your future and life insurance is for the future of your beneficiaries. However, there are some expert financial advisors who recommend life insurance as a perfect way of planning for retirement. Due to the hefty costs involved, the strategy is controversial but if you’re good at it, there are many benefits that you can reap.

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Whole life insurance plans – Best way to support retirement savings

Among the different types of life insurance available, whole life policies are promoted as the best way to support your retirement savings. When you purchase permanent life insurance plan, irrespective of whether they’re universal, variable or whole life insurance, a portion of your premiums go to a separate account which builds cash value along with/in addition to the death benefit of the policy.

One of the core benefits of permanent life insurance is the ability to borrow or withdraw money against the cash value of the policy. You may use the proceeds to pay off your mortgage payments for a few months or to support your family when you lose your job or to continue funding your retirement. A point to be noted is that withdrawals and loans will decrease your death benefit unless it’s repaid. On the other hand, there are tax perks on getting cash from your life insurance. As per the IRS, distributions through borrowing are 100% tax-free!

Tax benefits – But with a twist!

There are tax benefits to using a portion of your cash value to finance your retirement. If someone has $40,000 coming from his IRA or 401(k) every year and another $30,000 in Social Security payments, the total $70,000 is deemed as taxable income. However if that $40,000 is coming from life insurance, then the taxable income would only result to $30,000. Not only would that $40,000 be not considered as taxable income, there are even high chances that the person would fall in a lower income tax bracket and the tax on Social Security income could also be lower.

Despite all this good news, most advisors recommend against utilising life insurance to fund retirement and the key reason is that this is a costly way to invest money. The costs of insurance, commission and marketing costs, subaccount costs, premium taxes will soon add up and will eat away your returns. This high cost related to life insurance plans lead to a drag-on performance.

Consider maxing out other assets first

Though this doesn’t mean that none should consider financing their retirement through life insurance, yet if you have other retirement savings like IRAs and 401(k)s, maxing out those first will be a better option. Wise advisors aren’t a big fan of using life insurance to fund retirement. According to them, life insurance should initially be seen as a primary way of protecting your business or family (if something were to happen).

In case you’re older and you have a huge net worth on your life insurance policy, you are eligible to reaping the highest tax savings from life insurance withdrawals. Tax savings are innate tax savings. On the other hand, if you don’t require life insurance yet and you don’t think you’ve reached peak earnings, a Roth IRA would be a better deal. If you still don’t contribute the maximum to your IRA and 401(k), make sure you include these into your budget before raiding your life insurance payments.

Hence, if you have been wondering about whether to cash in your life insurance savings for funding your retirement, you should take into account the above mentioned factors.


Hidden Secrets to Saving for Retirement

Hidden Secrets to Saving for Retirement

Gone are the days where you worked for a certain number of years and had nothing to worry about when it was time for you to retire. Now, in order for you to have a nice-size nest egg, you need to start saving for your retirement as soon as you start working your first job. The average person doesn’t give much thought to their retirement when they are just starting out. However, that doesn’t mean that it is too late for them to start today. Here are some tips and tricks that can help anyone save for their retirement so they can live a comfortable life, not an impoverished one.

Calculate Your Needs

You need to have a realistic picture of how much it is going to cost for you to support yourself once you retire. Don’t assume that if you stick with your employer long enough that you are automatically covered. Take a look at your retirement savings and do the math. Don’t forget to account for the cost of living and inflation. Ideally, you should expect to save up enough money to replace up 60 to 80 percent of your pre-retirement earnings.Brush up on your financial knowledge by readingbooks and surfing the internet on how to start planning for retirement.Fisher Investments Plan Your Prosperity by Ken Fisher lays out what to consider you should consider when planning for retirement. On the internet, Business Insider has a list of the best online financial websites. You can’t do too much research!Don’t forget to check out other sources of information as well.retirement

Check Out What Your Employer Offers

Many employers offer their workers a 401(k). This type of account can be a significant source of your retirement savings if you utilize it properly. Since most employers match a percentage of their employees’ contributions, increasing your own contributions can really pay off. You are essentially getting free money to improve your quality of living in the future.

Many entrepreneurs, independent contractors, and self-employed professionals do not have a 401(k). However, there is an alternative that they can still take advantage of: IRAs. There are two types of IRAs:traditional and Roth. Just like 401(k)s, you can contribute money to IRAs and watch the money grow without being offset by taxes. Just stay mindful of the limits and rules that govern IRAs. For example, the maximum contribution anyone can make to their IRA for 2016 is $5,500. Anyone who is 50 or older can contribute up to $6,500 a year.

It is also possible for you to have a 401(k) and an IRA. If you do, plan your contributions so you can enjoy all of the advantages and increase your retirement savings significantly.

Mutual Funds

Learn what you can about mutual funds, especially target-date ones. Target-date mutual funds can be great investment tools if you utilize them correctly. For example, the “target date” mutual fund uses the date you plan to retire and adjust risk. Once invested, the mutual funds regularly invest into products with consideration to your situation in life.

Social Security Is Extra

Think of social security as dessert. Since you don’t know how much of it will contribute to your monthly income, it is best to leave it as a possibility, not a complete certainty.

Investment Options

There are other sources of retirement income available; however, most require you to make an initial investment. Many of these options do not pay right away. In fact, many of them offer a bigger return on your investment if you are willing to invest for longer   periods of time. Talk with a financial adviser to learn more about your options. Investing for retirement is not as hard as it sounds. With the right amount of knowledge, guidance, and options, you can grow your retirement savings while you sleep. p>

Don’t Touch Your 401(k) and IRAs

If you switch jobs, you may be tempted to cash out your 401(k) or IRA. Not only is this a bad practice, it is one that can hurt your retirement savings efforts tremendously. Instead, a much better option is for you to roll your 401(k) over to your new employer so you can continue what you’ve started to avoid having your hard-earned money taxed at 10 percent and penalized by the IRS at 7.5 percent. IRAs also have age restriction rules that you need to be aware of.

Save Your Windfalls

Every now and then you may receive a bonus from work, a raise, or even win the lottery. While that extra money can help to increase your comfort and financial situation now, they can be more beneficial if you add them to your retirement savings.

Once your retirement savings reach $75,000, you’ll find that increasing it is much easier. Plan your savings decisions wisely and you’ll be able to reap the benefits when you retire.


Are You Going To Work Beyond The Age Of 60 Because You Want To?

More than one in five retirees continues to work even when they have gone well beyond the age of 60. A good number of these retirees will not be in this condition if they didn’t get stuck on a poorly-paying annuity plan. According to a recent survey (by Retirement Assured), life is definitely not slowing down for a lot of people over the age of 60 as more than a million retirees are currently doing what they can to boost their retirement income. The most common way through which this is achieved is by starting a business or pursuing a dream job. The study showed us that 18% of these individuals are working beyond 60 years of age because they cannot afford to rely solely on income due them from their retirement savings.  The study further showed that 43% of people who are aged 60 and above have to watch their spending each day, doing a great deal of budgeting in the process while another 19% of individuals are still working deep into their later years.

Many of the retirees who are working today or set up a business for themselves later in life do so because they found an opportunity and had to embrace it and others are doing something they have always wanted to do all their life. However, the study shows us that over 18% of the retirees have to work because they need the income. One in five of this group even find themselves with more problems than they ever had during their more active life. Of course it is great seeing the number of retiree owned businesses blossoming well be it travel, dog walking or consultancy but it is important for people who are working at an age when they should be enjoying their years of hard work to be sure that they are doing it for the right reasons.  The purpose of retirement gets defeated when you have to work deep into those retirement years because you do not have any other choice.  This explains why individuals who are nearing retirement must make sure that they have secured the best possible type of retirement income they have built up over their working life.

One of the ways through which retirees set up retirement income for themselves after retirement is to purchase an annuity contract. Purchasing this contract is definitely one of the most important decisions you will ever make in life and so you need to ensure that you have considered all options possible for your individual situation.  In getting an annuity deal, factors like where you live, your state of health and the age of your partner can impact the amount you will end up receiving. Buying an annuity is far from other such financial contracts (car insurance of mortgage). This is  because these other commitments allow you change your mind if you get things wrong but annuity contracts cannot be altered once they kick in, showing you the importance of ensuring that you get things right at the first time of asking.

Here are four steps to getting a good annuity deal:

Talk to an annuity specialist 

This is the first step you need to take even in the presence of the growing number of DIY schemes that help individuals make annuity decisions. If you can easily and comfortably make decisions that you won’t regret later on then of course you can avoid making out time to see an annuity expert. But then again, how many individuals have this sort of knowledge? A good number of people are put off from consulting annuity specialists due to the fees they may have to pay. However, this isn’t a good reason to take a massive gamble on an annuity purchase. You may lose more than that nominal fee in the long run and again, do you know that the supposed DIY sites get a commission from the annuity company you end up with? Specialists like Annuity Rater are experts in the annuity field and are worth the initial investment instead of gambling on a DIY policy. Expertise in this field is advised so you can make the best decision possible.

Have a look at the annuity options available to you closely

Before you settle for an annuity plan, you need to be sure you are fully aware of the pros and cons of each type of annuity. This will help you know which ones apply to you more than the others and also reduces the chances of making a mistake. With proper weighing of the pros and cons, the only other problem you should be worried about is choosing options that are ill advised. This is where an adviser will also be of immense help. It is very easy to mistake certain options as very good only to find out much later that it reduces the possibility of you getting value for money before you pass on.

Don’t keep away your health issues

Hiding your health issues can rob you of as much as 50% more income in some cases.  Annuities are not like life insurance so you don’t have to hide your health conditions. Again, even the smallest ailment can increase your retirement income so do not wave off any condition. Smoking, obesity and deep snoring are all common conditions that can earn you reasonable increments in annuity income.

Shop around extensively

Shopping around is what helps you ensure that you are getting the best possible deal from your annuity provider. There have been instances where individuals got over 25% increments in income by looking elsewhere for annuity contracts under the same conditions. Shopping around is a hassle for the average individual though so working with an annuity expert is still the best way to go.

By painstakingly following the above steps, you can be sure that you will never have to go back to working in your 60s unless you are really happy doing it and it is not just for the money alone.

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James Richings is a 26 year old writer from the UK. He enjoys writing about a range of subjects that interest him and has published works on a vairety of topics. To find out more about the author, please follow his twitter here.


Two Ways That You Can Starting Saving For Retirement

Regardless of the numerous uncertainties that the future brings, retirement is one constant fact that looms in the distance. However, if you plan for your retirement well enough, then this period of your life may not be so uncertain after all. It’s not just enough for you to set your finances in order so that you could retire in relative comfort. Part of planning for your retirement also includes knowing when you will, or would want, to retire; where you will live when you do retire; and what you would fill your time with during that time.

5474213121_2dce5e59b3When should you start saving for retirement?

The best time to start saving for retirement is as early as you can manage. The reason for this is because when you start contributing to your retirement fund earlier, the power of compounding allows you to make more out of your money. Stocks, mutual funds and employer-sponsored retirement funds need ample time to give you a significant nest egg since the longer that your money works for you, the more you make in the end. However, it is never too late to start saving for retirement even when you’ve already missed the early train, so to speak.

What is a 401(k) and other company plans?

401(k) is an example of an employer-sponsored retirement plan. On top of 401(k), there is also 403(b). When you take advantage of such retirement plan, you get automatic savings as well as tax incentives to save for retirement. In most cases, these employer-sponsored retirement plans also offer matching contributions.

The great thing about saving through a 401(k) account is that your contributions are tax deductible or you can take advantage of tax-deferred growth. At the same time, when the going gets tough, you have the option to borrow from your plan or to make use of your funds in the event of “hardship” such as when you’re sending your kids to college.

However, there are penalties when you withdraw your funds early, which mean that you’ll have to wait until you are at the normal retirement age before you can take full advantage of your earning. At the same time, there is a yearly cap on the amount of contributions to you can make.

What is a mutual fund?

If your employer does not offer a retirement plan, then you can choose to go for a mutual fund instead. A mutual fund is a pool of stocks or bonds which are professionally managed, divided and then sold to investors. The great thing about going for a mutual fund, especially if you’re on your own when it comes to building your retirement fund, is that the stocks and bonds are already diversified. At the same time,  Nick Scali on twitter also agrees that the low initial purchase of the stocks makes it easy for amateur investors to buy difficult to acquire stocks and bonds of companies. However, just because the fund is professionally managed does not provide an assurance that the funds will perform well and fluctuating returns is not uncommon.

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Carl Farell is a financial planner who has vast experience in mutual funds, stocks, insurances and savings. His blogs often feature articles on investing, financial management and lease financing.


Limits of a Will

Many people believe that leaving a will and testament means that all the last whims, wishes, and bequests in a person’s final days will be honored, by the law if not by family members. However, there are many limits to what a will will and will not do. If you are relying on your will as an ironclad statement of what will and won’t happen after your death, you may be disappointed. If it’s important to you that certain wishes be followed, make sure you know what exactly a will can accomplish and what it will not.

You May Not Dictate Funereal Arrangements

Many people believe that putting funereal requirements in their will makes it so that they cannot be countermanded. However, most wills are not even read (or found) for weeks or months after a person’s death. A funeral, obviously, is held much earlier than this. For specific instructions regarding your last rites, make sure to leave a separate document detailing your requests with your lawyer or family members, especially those that will be handling the disposal of your remains. Otherwise, your last wishes might not even be known until long after the funeral is over.

You May Not Leave Conditional Gifts

Most people are forgiven for believing the lie of this matter, since Hollywood uses it as a convenient plot device for wacky comedy movies. However, there are certainly limits to the kind of conditions you can put on a gift left in your last will. For example, the old hijinks-filled plot that a rascal grandson must marry in order to get his hands on a small fortune is completely illegal. It is not possible for you to leave money that is conditional on a recipient getting married. It is also illegal to leave gifts conditional on someone getting divorced or changing religion.

However, there are certain conditions you are allowed to leave in your will. These include such conditions as going to college, starting a business, etc. What you must understand is that in order for your orders to be carried out, someone will have to continue to execute your will. Unless you leave enough money for your lawyer to continue to enforce these conditions, the money will likely pass from your sphere of influence.

You May Not Pass On Certain Properties

There are certain kinds of property that you cannot leave to anyone in your will. For example, you cannot pass on any property held by you in joint tenancy. Upon your death, that property will become the sole property of the surviving party. You also cannot pass on property you have transferred already to a living trust, or the proceeds of a life insurance policy for which you have named a beneficiary.

There are other kinds of money that you cannot pass on, as well. These include stocks and bonds held in beneficiary accounts, and money that is held in a retirement or pension plan when you’ve already named a beneficiary with your account administrator before death.


Thinking Ahead for Retirement Income

Thinking Ahead for Retirement Income

When you’re working and paying some of your salary into a pension every month, you probably don’t give it much thought. But as the time to retire draws near, there are decisions to be made on how to use the money that you’ve been putting aside in your pension over the years.

How much you have managed to save during the years will depend on how long you have been paying into a pension and whether it’s a personal pension plan or a company one. You may have done it yourself with a Self-Invested Personal Pension.

What most people choose to do is to take a cash lump sum up to the value of 25% out of their pension savings from the age of 55 or when they actually retire. This is tax-free and you can use it how you wish. However, the rest of your pension isn’t so easily accessible. As your pension contains government contributions via tax relief it means that you can’t just fritter that fund away; it’s there to provide you with an income for the rest of your life.

The most common option that people about to retire take is to purchase an annuity. A pension annuity is where you cash in your pension savings (usually minus the 25% cash sum) for a lifetime income via an insurance company.

The amount of income your pension qualifies you for depends on the annuity rate that you get, as well as other factors including your health and life expectancy and whether you want your annuity income set to rise with inflation or at a fixed rate. You can find out what kind of income you are likely to obtain by using the pension annuity calculator from Age Partnership.

Age Partnership is an independent company that offers financial advice and solutions for those aged 55 and over. The company searches the annuities market for the best possible rates most suited to its clients’ needs. Taking out an annuity is a permanent commitment, so it’s best to seek independent financial before deciding which is best suited to your particular requirements.


The Pros and Cons of Annuity Plans: Some important details

The Pros and Cons of Annuity Plans: Some important details

Of late, annuity plans have become quite popular in comparison to other retirement products, particularly among those people who are not ready to sacrifice a part of their retirement savings. However, there are some downsides to it as well. My pension expert is dedicated to make you familiar with the whole concept.

1) Pros of annuity plans

The pros or benefits of annuity plans are listed below:

Lifetime income – An annuity plan assures lifetime income for you as long as you stay alive. The older you get, the bigger the monthly payments you receive will be.

Safeguard against rise in inflation – Annuity plans can be tailored so that it does not get affected by any rise in inflation. This is a very significant benefit offered by annuity plans since inflation can have a damaging impact on your income. Similarly, you would not be exposed to market losses either.

Safeguard of Principal Amount – In case of equity-indexed and fixed annuities, the value of the plan can be assured at or over the sum which you invested. This helps you make sure that you or your inheritors will get the same amount of money which you have invested in the plan as a minimum. You might also qualify for a premium if you live more than the life expectancy.

Tax effectiveness – Annuity plans are tax-exempt plans which are particularly beneficial for retirees who have a limited amount of income. You will also have the option of incorporating other eligible investments into an annuity plan (if permitted) and there are no tax fines imposed for this option, you simply have to pay tax on the earnings generated by the annuity.

Safety of investment – Annuities are good investments for those who don’t want to assume risk in life. Fixed annuity plans will also guarantee a predetermined annuity rates for a specific tenure which will not change and bear no risk of decreasing.

No contribution restrictions – There is no limitation as to how much you can contribute to your annuity plan, so you can save towards your retirement flexibly, thus increasing the lifetime income that your accrue.

2) Cons of annuity plans

Given below are the downsides or negative aspects of annuity plans:

All annuity plans don’t offer similar benefits – The majority of public contends that fixed annuity plans are the perfect solutions for their retirement income and while other variable annuity plans are less fit for purpose; and sometimes this latter option may end up being more costly. Therefore, it is crucial to carefully read and comprehend the terms and conditions of your annuity plan, before settling for either option.

Smaller yields on your investment – When you compare the returns or income offered by fixed annuities and equity-indexed annuities with the returns provided by equities, stocks, and other investments, you may find that the returns are less favourable. However, if you take into account the safety factors that it provides; fixed annuities or equity-indexed annuities are safer investment tools when compared to stocks options.

Lack of flexibility

Annuities are considerably less flexible than other categories of investment. As soon as you enter into an annuity agreement, the amount invested gets fix to that particular annuity plan for the rest of your life. As a result, you lose access to the amount, so it is important to consult an expert before you make any final decisions.

Various expenses – An annuity plan is associated with various expenses such as administrative costs, annual fees, and mortality charges. All these expenses may counterbalance to the cost-effectiveness of an annuity plan.

Tax penalties for premature withdrawal – You will be subjected to pay tax penalties in case you withdraw the amount before maturity and the taxes will be imposed at the ordinary tax rate and not at the capital gains tax rate.

So, you have the pros and cons of annuities in front of you. Look at these and make a learned decision how to go about annuities if you really want to secure your post retirement life.


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