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cut. 29 percent of them have ceased to contribute to various investments like 401(k), IRA and others. 18 percent have withdrawn their funds from these accounts prematurely.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.

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.

One of the chief retirement plans available in the US, the 401k retirement plan provides retirees and older adults with high returns and financial stability. There are a number of 401k plans that you can choose from as per your needs and preferences. Among them, the Traditional 401k and the Roth 401k plans are the most preferred. Let us compare both the plans and evaluate the pros and cons.

Usually, both the traditional 401K accounts and the Roth 401k accounts are employer sponsored and so it the employee can decide whether to directly pay the contributions or whether they should be deferred to the account. Compared to the traditional ones, the Roth 401k plans are a blend of the traditional 401(k) and Roth IRA plan which makes it more useful for older adults who are dealing with any kind of investments.

In comparison to the traditional 401k , those who are 401k plan, those who covered under the Roth 401k can choose to make the contributions on a post-tax elective deferral basis. Usually, the combined elective deferrals of an employee can exceed $16,500 for a tax year if the employee is under the age of 50. One can contribute an added amount of $5,500 to the account if he or she is over the age of 50.

Compared to the traditional 401k account, the Roth version can be funded with after-tax dollars. In after tax dollars, the taxes for the funds are paid in the present year. An added benefit of Roth 401k is that it provides tax free distribution like the traditional version of the Roth plans.

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.

It may sound surprising but Social Security can provide you free loans. Under the present scenario, retirees can choose between various options like claiming the benefits at 62 and getting reduced returns or delaying claiming the benefits till 70 and enjoying full returns every month.

Now, in order to get higher lifetime benefits, you can use some unconventional strategies. One of them is known as the “Free Loan from Social Security” strategy. By applying this strategy, you can get some free loans from the social security accounts. For instance, if you claim Social Security at 62 years of age and reclaim the same at 70 years, you can receive a higher benefit. As you only need to pay back the principle loan amount, you can keep the interest and invest it in some other channel.

If you are of age 70 and adopt a Free Loan” strategy, you can first claim some benefits at 62 years of age and again reclaim it at 70 years. The interests that you receive provides you with the head-start’ on reaching the break-even age. In order to be break even, you need to live until you are entitled to the total benefits of social security.