Retirement Planning Blog

It has hit the world drastically in an unprecedented manner; it has shaken the whole world as never before. The recent recession has resulted in a series of job loss, financial market loss, drastic fall in the real estate values and a lot more setback. And the wave has also reached to the retirees and also to those who are in verge of their retirements. They are certainly feeling the heat of it.

As the recession destabilizes the world economy, one of the segments that feels its heat at the very first instance is surely the job market. Organizations need to go for cost-cutting, which resulted in cutting down of manpower. Many had to lose their jobs in the recession. According to an AARP survey, 30 percent of the Americans in the age group of 45–64 have escaped layoffs, but have had to settle for a pay cut. 29 percent of them have ceased to contribute to various investments like 401(k), IRA and others. 18 percent have withdrawn their funds from these accounts prematurely. According to the executive Vice President of AARP, Nancy LeaMond, this population of 45 to 64 age-groups is particularly squeezed. This economical downturn has left them in such a squeezed state where they hardly focus on their own financial and retirement security as they have to take care of their aging parents as well as their children.

Recession is also having an impact on the state of health of people, especially to this 45 – 64 population. With a rise in the health cost, they are required to pay more to their health insurance premium. 22 percent have faced this problem where they have been asked by the health insurer or their employer to pay the extra amount. As a result, 9 percent, being unable to pay the higher premium, lost their health insurance coverage. 27 percent are also having problems in paying their medical bills. People have to take some unusual means to cut down the medical care expenses, which may prove to be quite harmful sometimes. Many have cut down their necessary medical or dental work; some cut their pills in half or even skipped the doses.

The impact of recession can also be seen in the driving habit of the seniors. Many have cut down on driving in order to reduce the fuel costs. Some have also opted out of their gym membership.

Recently a letter from AARP was sent to the Congressional leaders asking for their approval for emergency one-time payments of $250 to the seniors. And the reason is quite simple – to provide some relief to the seniors in this time of economic downturn. It is making the lives of people tough and seniors are not any exception. Owing to the low inflation, seniors aren’t going to get a cost-of-living increase in the Social Security payments in 2010 and most likely in 2011 as well. So, the life is going to be tougher for the seniors in the coming days.

With the rising cost of healthcare, the amounts of insurance premiums are also soaring up. Also the out-of-pocket Medicare costs are going up. Though measure has been taken by the U.S. House of Representatives to keep a lid on the premiums for the part of healthcare covering doctors fees and some other non-hospital expenses, however this constitutes only a small part of the healthcare expenses of the seniors.

According to Cristina Martin, Director of Financial Security of AARP, the economic security of many, especially the retirees who hardly have any time to make up substantial 401(k) and stock market losses, has changed a lot since 2008. As the costs of healthcare, prescription drugs and other daily necessity items are soaring up, seniors are going to face more and more problems in the coming days and would badly require some relief.

However, a recent report by the U.S. Census Bureau states that the seniors have done much better than the other age groups last year. Interestingly, the report says that the incomes of the seniors even increased last year. The poverty rate didn’t get affected and remained almost unchanged, which was amongst the lowest in all major age groups. But AARP strongly contradicts this report. According to AARP, if they included the cost of out-of-pocket medical expenses, which were quite high for the seniors than the other age groups, then the poverty rate for the seniors would have become almost double.

Therefore, whatever may the outcome of some reports be, the reality is, seniors are in great need of some financial relief.

Post-retirement is the perfect phase of life to go for a long holiday. You don’t have the head-ache to manage a few days of leave from your office, you don’t have to look after the education of your children, or you don’t have any other commitments which can restrict you to go for a vacation – post-retirement days offer you a wonderful opportunity to spend a few days away from your home and also from all the worries of daily life. And there is more in store for you – as a senior, you are entitled to a number of discounts in your traveling expenses, which make your trip a truly affordable one. Let’s see how you can make your travel a truly affordable one.

The travel industry has come to realize that retirees could be a potential segment of customers in this field of business. They are the ones who can spend some time in visiting various tourist attractions. Seniors are also economically quite strong to afford the cost of the trip as they don’t have children and their education to take care of. So, they can easily spend their time as well as money to go for a pleasant vacation. And realizing it, many hotels, airlines and other transportation services are focusing on providing lucrative discounts to the seniors in order to woo them. A lot of discounts and attractive deals are on offer for the seniors. However, you may need to do an extensive search for that. But these deals certainly lower down the cost of your vacation.

One of the most popular travel discounts that you can find these days is certainly the hotel discounts for the seniors. A number of hotels, chain of hotels and motels offer attractive discounts to the seniors. Hyatt hotels offer 25 to 50 percent discounts to the seniors of 62 years and above. Marriott hotels offer 15 percent discounts to them. Ramada Inn also has good deals for the AARP members, which offers discounts up to 10 percent.

As a retiree, you can save a few bucks on your airfare as well. Though, not many of the airlines are currently offering discounts to the seniors, however Virgin Atlantic and US Airways have some discounts for the seniors in selected routes. If you are going to travel in buses and trains, you can also get some discounts there too. Greyhound offers 5 percent discounts to the U.S. retirees with an age of 62 and above. Amtrak offer discounts up to 15 percent.

Not only these, as a retiree, you can also avail of various other discounts like entry fees in museums, national parks and others. So, retirement brings you a wonderful opportunity to travel in a much lower cost. It is the right time to go for long vacations and see the beautiful world. Bon Voyage!

Are you a user of IRA and 403(b) accounts? Well, according to a recent report by Government Accountability Office (GAO), you might be paying higher fees than 401(k) savers. As a user of 403(k) and IRA accounts, you might be investing in various products like retail mutual funds and variable annuities, which often charge more comparing to the other investments.

As an IRA and 403(k) user, you may also have fewer bargaining power to negotiate for reduced costs. Again, the 401(k) plan sponsors often pool the assets of the participants to negotiate lower fees on investments. As they account balances of the single IRA investors are too low, those don’t get eligible for volume discounts. As a result, the investors need to pay higher retail costs. On the other hand, it has also been observed that, the 403(b) plan sponsors often lack the required resources to hire retirement plan specialists as well. An able retirement specialist can guide you to reduce participant fees, which the 403(b) plan sponsors often get deprived of. On the other hand, a 401(k) plan can offer you bundled arrangements for fees, which in turn, reduces the costs for the participants.

It has been noticed that, the choices of investments also play a pivotal role in the savings of the account holders. While the 401(k) account holders often found investing in the group annuity products and institutional funds, on the other hand, IRA and 403(k) account holders often prefer individual annuities and various expensive mutual funds. As a result, they pay more than the 401(k) account holders.

Finally, at the time of leaving a job, employees do also have an option to roll over a 401(k) balance into an IRA. However, you need to consider it very carefully before you do so. Though in some cases it has been found that, moving assets from 401(k) to an IRA resulted in increment of investment fees, but all 401(k) plans may not give you the same result.

Come 2010 and the Roth IRA Conversion is going to play the most crucial role in investment decisions as never before. Starting next year, the existing requirements of $100,000 income test is going to be waived as everyone can convert their existing traditional IRA to a Roth IRA. Unlike the other Roth IRA Conversions, 2010 Roth IRA Conversions provide an unprecedented opportunity to hive up tax free retirement income to the retirees. You can now even pay the taxes due on a conversion as well as remove income limits. Due to some significant changes in the new Roth IRA Conversion rules, it has become pretty crucial for the investors to learn the rules clearly in order to take the full advantage of it.

Before we learn more about the 2010 Roth IRA Conversions, just take a look at the two different forms of IRA – the traditional IRAs and the Roth IRAs. It’s 1998 when the Roth IRAs were implemented for the first time. Many opted to convert from the traditional IRAs to Roth IRAs, where many others had to stay away from it due to income limits and some other restrictions. According to the existing Roth IRA Conversions rules, one cannot get converted to Roth IRAs from the traditional one if his/her modified gross income crosses $100,000 mark. There are several advantages of Roth IRS over the traditional one. You don’t get tax deduction for contributing to a Roth IRA. The contributions grow without taxes. And when you withdraw the amount, you don’t even have to pay any taxes. But, in spite of all these advantages, many had to stay away from it for some constraints. However, the 2010 Roth IRA Conversions have brought a wonderful opportunity to the tax payers to get converted to this.

So, where is the 2010 Roth IRA Conversion different from the existing one? To be very frank, it’s in several ways. The new Roth IRA conversion rule allows you to convert your traditional IRA to Roth IRA even if your adjusted gross income goes beyond $100,000. Moreover, you can spread the income tax due on 2010 conversion over next two years. It means, one can include the 2010 conversion amount as taxable income in 2011 and 2012.

Now the question is, who can take advantage of the 2010 Roth IRA Conversions? The golden rule is, learn the rule well. According to the new rule, anyone can convert an existing IRA to a Roth IRA, but it doesn’t imply that anyone can fund a Roth IRA. Good practice would be to start funding a traditional IRA. If you don’t qualify for making traditional IRA contributions or Roth IRA contributions on a ‘before tax’ basis, you can still qualify for making contributions to traditional IRA on an ‘after tax’ basis. If you have been investing in a non-deductible IRA since 2006 through 2010, you will be able to convert those IRAs to Roth IRAs next year as per the new rule.

It has been seen that many investors stay away from making non-deductible contributions to IRAs. There might be several reasons for this. First of all, these are not tax deductible; these also provide a minimal tax shelter. However, by converting these into Roth IRAs, you can easily overcome those drawbacks.

It is always good to be well-informed. And it is also true when it comes to Roth IRA conversions. A bit of knowledge can work wonder for your. Learn the new Roth IRA conversion rules and be prepared for an exciting investment journey.

Gone are the days when people used to get amazed while associating the term ‘retirement planning’ with ‘single’. There was a time when people considered retirement planning only for the couples. It’s a general conception that singles hardly need to have any retirement planning as they do not have any family or spouse to look after in the post-retirement days. The same emotion also get reflected in various books and articles on retirement planning as well, where you can find couples dreaming for a comfortable retired life. But the time is changing, so is the conception of human beings.

With each passing day, human beings get matured. They come to learn more about the life, its significance, values, and needs. The conception gets changed by the experience. Which was once considered for the couples, seems appropriate for the singles these days. People have come to realize that for a better retired life, it’s not only the couples who need a proper retirement planning, singles do also need the same. Being single doesn’t mean being neglected. The needs of the singles should be met with same importance as the needs of the couples.

With change of times, a growing number of singles are going for retirement planning these days. Let’s have a look at the available statistics. With the population touching 96 million mark, the singles make up 43 percent of adult population in the US. Among those, almost half are over 40 years of age. 13 millions of them never married. The number of divorce is also in the higher side. Thankfully, they all have come to realize the importance of proper retirement planning for a better future.

So, what should be the proper retirement planning for the singles? There can be many. However, the process must start from the psyche. As a single, you have to be more conscious while making your retirement planning. Singles have a tendency to spend too much of money, which often proves to be dangerous. The first thing that you need to do is to save a few bucks for your future days.

Once you have made the basic habit of saving money, you need to concentrate on the other aspects. Try to calculate your retirement income. You can use the traditional “three-legged stool approach”, which takes employer pension, Social Security and personal savings into consideration while doing the calculation.

Life is full of uncertainty and you never know what is in store for you for the coming days. Therefore, you always need to be prepared for any unwanted situations. Hence, your next job would be to get disability insurance for yourself. As a single, you won’t have anyone to look after you in your future days. Insurance can prove to be extremely helpful for you in those days. You should also make it a point to go for long-term care insurance.

Finally, do also make your estate planning. You may also need to do the extra planning to ensure who is going to get the legal rights to manage your assets.

Believe it nor not, it’s true! It has been observed that it’s quite possible for the school employees to get paid twice! Wondering how it became possible? Well, let’s start with the real-life story of Janice Collette.

It was June 30, 2003 when Janice Collette, the Personnel Director of South-Western Schools received a letter upon her retirement from the service from the district saying, “thanks and appreciation for your past service”. Interestingly, Janice got the letter at a time when the district had already decided to rehire her for future assignments. To be more precise, the district decided to bank upon her service for one more term just the month before her retirement. The end result – Janice, at 58, keeps on working for South-Western schools drawing an annual salary of $107,000 for her present assignment, while getting a pension of almost two-thirds of her $86,000 salary per annum at the same time for her past assignment. So, exciting enough, isn’t it? Well, at least for Janice.

According to the latest reports, in the last school year, the State Teachers Retirement System of Ohio had to disburse more than $741 million in pension benefit to 15,857 faculties and staff members who were still working for the system. It leads to a second retirement plan for thousands of employees. It has been found that, on an average, a retired re-hired professional earns a pension of $46,000 per annum, which is higher than the median household income of Ohio in 2007. To add with this, you include the present salary of the employee and the amount would surpass well ahead of $100,000 per annum in most of the time.

Since the enforcement of the law that allowed employees to rejoin their organization after retirement, a steady rise of the number of retired rehirees could be observed. If the current growth rate of 5 to 12 percent per year is maintained, by next year, the number of retired rehirees would become almost twice the number of 1999. Now the question is, where the number is heading for? Can it de-stable the system? Let’s see what the State Teachers Retirement System has to say on it.

The State Teachers Retirement System believes that rehiring retired personnel neither leads to early retirement of the employees, nor it costs the system more money. According to the rule, in order to retire, an employee either has to be 55 years old or should have served the organization for 30 years. According to the spokeswoman Laura Ecklar, the system is not allowing anybody any special privilege. They are only following the state statute. Moreover, according to her, the majority of retired rehirees get the opportunity to join in jobs that offer $20,000 a year or less, which are more like part-time jobs and hence it saves a lot of money for the system.

Whatever be the amount they earn while rejoining their organization, school employees get the unique opportunity to enhance their earnings by getting paid twice. And it also makes you wondered sometimes, isn’t it?