Retirement Planning Blog

You need to pay attention to many aspects during the course of your retirement planning. There are several hidden risks that can spoil the entire process, if neglected. Some of the possible and such potent risk factors are inflation, health costs and stock market crash. Hence, when you are preparing for retirement savings, don’t forget to consider these important elements.

There is nothing to worry as you can tackle these situations with devoting little care and caution. Most of the people, who are on the verge of retirement, find inflation to be their main concern. This has been corroborated by the survey reports of Employee Benefit Research Institute and Mathew Greenwald and Associates as well. 58% professionals (on the verge of retirement) along with 71% people (already leading a retired life) fear that their savings and investment’ values may fail to tap inflation. However, you can alleviate your concern to certain extent by investing some amount in real estate, mutual funds and annuities.

According to 49% of retirees and 67% working professionals, meeting healthcare costs can be a challenge for them. You can deal with this situation by opting for Medicare. It would be ideal to sign up for this before you reach 65 years of age. In addition, 76% retirees obtain health insurance to make up for the area not covered by Medicare. Along with these, you need to take care of your lifestyle incorporating healthy diet in your routine. Regular exercises and prevention are the other two factors to be considered.

The other major concern is related to stock market. If you invest in stock markets during your retirement age, make sure that you have some emergency fund with you to be least bothered by poor market conditions. Many retirees prefer to opt for conservative investments for security reasons.

Recently, the Employee Benefit Research Institute conducted a survey to measure Retirement Confidence of the Americans. According to the survey results, 54% of Americans manage to pool less than $25,000 through their home savings and investment plans. The value of their basic home and other specified benefit schemes is not included in this. The shocking detail is that about 27% Americans can manage only $1,000 in their savings. And, only 11% reported to save over $250,000. Both young and old populace participated in this survey.

After seeing the above results, it has become evident that Americans need to opt for a different pattern for spending and savings in order to have an access to enjoyable living standards. There are various means by which the scenario can be ameliorated.

In case, you are entitled to a 401(k) scheme at work, you must start investing in this. The Bank of America Merrill Lynch believes this would help natives in improving their financial condition.

You are advised to up your investment in 401(k) plan. According to reports, employees invest around 7% of their earnings in a 401(k). However, it is believed that by adding 1 or 2% extra in the 401(k) scheme, you can increase your retirement savings wealth to a dramatic extent.

Another important point is that you must not withdraw your savings amount of 401(k) plan after changing your present job. In case of early withdrawals, you have to pay 10% fees plus tax on the amount that has been withdrawn.

We get so tied up in our retirement planning solutions regarding real estate, cars, housing and tax benefits that we entirely overlook a very simple yet important aspect. You must be wondering what it is? It’s the cost of food. It might appear to be a trivial task. But, once you sit down and ponder over your food expenses on weekly basis, you would realize how significant it is.

As food costs form a daily part of our expenses, we really can’t afford to omit it from the list of our consideration. If you also agree on this part, you must start your calculations right away. Begin counting your food costs on weekly basis, and, then move on to monthly and yearly calculations of the same.

Once you are done with calculating your food expenses for one whole year, you can multiply the available figure by 25 or 30, as many suggest. The final figures will reflect the amount of money you would be spending on food during your retirement phase. Well, this might not be one of the perfect solutions, but it’s undeniably a way out to make our retired life smooth and enjoyable. We must not forget that every step/ effort counts.

Life is fraught with difficult questions. Some can be resolved smoothly and some may require a great deal of effort. But, as per retirement planning is concerned, there are so many ways to secure our future that we really needn’t worry. The common problem in this realm is we don’t know how much money needs to be saved for that better tomorrow.

According to survey results, about 44% of the American professionals along with 29% of mature adults of the age group 55 and more hold that they don’t know what percentage of money should be saved for retirement. However, some of the people belonging to the age bracket of 55 and more opine $250,000 or may be less than this should be sufficient when they retire. Moreover, President of ShareBuilder Dan Greenshields holds retirement savings need to be pretty much higher as in old age an individual is more prone to illness which results in greater healthcare and medical expenses.

According to Mr. Dan Greenshields, an individual’s retirement savings should be around $500,000 and $1 million. However, it may vary depending on the living style of the person. To be more precise, he added “If you live in a low cost state you need less because the cost of living is lower” and “If you live in Washington DC, New York, or Los Angeles, you need more.”

It has been found that as much as 20% of the American population nearing their retirement age believes that saving $500,000 should be adequate while 13% aims at $750,000 retirement savings. The survey reports also reflect that about 20% of Americans are trying to save $1 million minimum and 6% aiming at $1.5 million savings before retiring. About 8% of the American population is striving to maintain $2 million in their bank accounts for the retirement.

However, it is interesting to note a large number of Americans do not calculate savings for retirement in actual terms.  Almost 47% of them indulge in guesswork to decide the amount of savings to be adequate in their retirement age. In contrast, 29% of the Americans believe in doing their own research, 9% take the advice of the financial consultants and another 9% rely on the retirement calculator. Those who calculate their retirement savings on their own consider factors like healthcare and living costs, inflation, income at retirement age and Social Security income.

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.

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.

You may be lucky enough to avoid losing your job in this economic down slum, but there may be some benefits that you may wish to take into account. Whether you have a high flying corporate career or you are working in some non profit organization, having some Employer sponsored retirement plans will add to your funds and help you to be financially stable in the post retirement period.

Of all the employer sponsored plans, the 401 (k) plans are the most preferred by the retirees. Most of the companies and organizations in the private sector offer the 401k plans. They provide you with compounded increase on your funds and also help you to enjoy a number of tax exemptions.

If you are covered under the 401 k plans, you can earn around $15,500 of pre-tax earnings. If you are 50 years or more, you can even around $20,500. Another advantage of the 401 (K) plans is that your contributions are tax deferred until you withdraw the money from the account.

401 (K) plans also includes the matching contributions. If your employer or company is offering you the match to your 401 (k) contributions, it is wise to accept it. Recent surveys say that Americans prefer these contributions to cope up with the present economic challenges. The limit on the combined matching contributions is $45,000 for every individual while it is $50,000 for those who are 50 or above.

However, the present recession has forced many companies to suspend their 401 (K) matching contributions. Recent surveys have showed that since 2008, around 90 companies have lowered or stopped their 401 k matches to cope up with their losses.

So what do we do in this present situation? Experts say that the best way is to play the waiting game. Invest carefully in the 401 k retirement plans and after the present down slum ends, you will really enjoy great benefits.

To get that financial stability and enjoy long term returns, you need to follow some basic retirement planning tips. Retirement is a vital decision in our lives and as such we need to make some proper planning in advance and later reap the benefits. Proper planning needs to be done to get the best benefits and be financially secure.

Savings are the key

Money is an important factor in the post retirement period. To get extra money and steady returns even in the post retirement period, you need to make proper savings. It is an important aspect of retirement planning. Experts say that you need to have at least enough savings that can support you for at least 6 months. To have proper savings, you need to cut down on your expenditure and add more to your savings account.

Invest in the stock market

Investing in the stock market is also an important part of retirement planning. However, you need to have a diversified portfolio which will help you create a balance between the profits and the losses. Usually, a diversified portfolio is a mixture of equities, short and long term bonds, stocks, debentures and other investment channels. A diversified portfolio is also not so affected by market swings.

Have a retirement account

Opt for a retirement account and get good benefits in the future years. There are lots of retirement plans that are available for the aged Americans and the retirees. By being covered in these plans, you can get better benefits and can also enjoy various tax benefits and exemptions. The 401k plans and the IRA or Individual Retirement Account plans are the most common among the retirement plans. In addition to these, there are also some other plans such as SARSEP, 403b plans, 457 plans, Keogh plans, Thrift Savings Plan and so on that you can get enrolled in. Those who are working in the state agencies and the federal agencies can also get covered under the various pension plans. Another very good option is to reinvest the dividends that you get from the direct re-investment plans or direct purchase plans. The municipal bonds can also be a wonderful choice.

Look for a good place to live

Through proper retirement planning, you can find the right accommodation that suites you. There are a number of retirement communities where you can enjoy an array of facilities and services. Lower income groups can opt for the Naturally Occurring Retirement Communities which provide good facilities at inexpensive rates.

So make your plans for retirement now and get the benefits in the long run.

Do I need to invest more?

Have I saved enough?

What are the kinds of expenses that I need to be aware of ?

What if I haven’t planned till now?

If these questions cross your mind often, then here are some quick tips for you:-

Determine how much you will need

This is certainly not easy but there are many retirement plannners, financial calculators that can assist you to get an idea about how much you need to save now in order to get a healthy retirement .These calculators also take inflation later in life, in account while calculating thus give you good approximation.

Get an Health Insurance Plan

As you grow old your medical cost is most likely to increase and a lot of your retirement funds would be required to meet them .Presently the two most popular health insurance plans available are Medicare and Medicaid. The amount you’ll be spending on health care each facilities year needs to be calculated and have to save accordingly.

Other Insurance Expenses to consider

You also need to plan for other kinds of insurances like Life , automobile, and disability insurance. Do a research on internet and find the best plans around at the best price. By doing all this you are preparing yourself for the unseen .

Start saving more

You need start saving from the time you start your retirement plan as this would surely help you in your future years.You can start contributing the maximum amount to 401K or IRAs or any other plan you might have.

Find a suitable retirement location

With the current economic conditions you need to find a retirement location which is economical and also meets all your requirement.You can also opt for a retirement community in case you don’t have much expenses.There are many good retirement communities available that are designed to meet all the senior’s needs.

Consult an Expert

There are many things you will come across while going through your retirement planning phase for which a Financial Advisor could be of great help.This is specialy true while calculating for taxes. A professional to get the best returns possible,from the money invested and will help to in choosing the right retirement plan for you.

The present recession has really hit the retirees and older adults hard. As most retirees and the aged have to depend on their savings, the economic down slum has left them helpless. Relax, proper planning can help you cope up with the recent down slum and enjoy benefits even in this falling stock market. You need to act with prudence and take wise decisions.

According to experts, one should keep his or her eyes open while dealing with the funds in the recession market. Prevention is always better than cure and as you need to have an idea where to use your funds. Do not invest all your money into the stock market. Although the stock market can give you more returns, they are always prone to market changes. To cope with the recession, you need to have a diversified portfolio. Diversification helps you to maintain a balance between your profits and losses. Usually, a diversified portfolio consists of stocks, short and long term bonds, debentures, equities and other relevant investment channels.

By having proper savings you can also prevent recession from hitting you hard. Recent surveys have proved that those who had retirement accounts have not been hit so hard by the current down market. To enjoy good and secure benefits on your benefits, you can opt for IRA or 401 (K) accounts. They are lucrative and are also liable to various tax benefits.

At times all these can be really confusing. You may not be able to make the proper retirement planning to sail through the tough market conditions. Some useful tips from the financial advisor can be handy at this time. The adviser can guide you to make the right planning and prevent recession from hitting you directly.

So take the best step forward now and enjoy the benefits!

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