Best Steps To Retirement Planning

Posted on January 26, 2012 by TheSmartRetiree
Getting Started In Financially Secure Retirement

One of the best books ever written on general financial planning information.

The best steps to retirement planning start with making a plan. Not earth shattering advice but this is the step most people get wrong. It’s like a ship sailing around a harbor without a destination; that’s how many plan for retirement. So male a plan so you have an end goal to reach.

The next step is to become a little savvy and understand what a retirement plan involves. No, we are not talking about becomes a world renowned expert on the subject; just understand what it is you are about to do. Going in to talk to a retirement planning expert is a great move but we recommend you don’t do this until; you have researched what is available and know how retirement planning works.

This is crucial in understanding your adviser. Picking the right one comes down to figuring out who has your best interests at heart. Retirement planners are a dime a dozen; finding one who actually puts your retirement first and is working for you without thinking of their fee can be another matter.

A short PDF treport at analyzenow.com we came across caught our attention because of the fact it outlines retirement planning strategies at three different stages leading up to the big day; 15, 10 and 5 years before retirement. Take notice of the point about not broadcasting your retirement day date to anyone in the last section.

Ensure that you are saving enough of your income. At the least, use a good retirement planning program such as one from www.analyzenow.com. (Consumer Reports, Feb, 2011, rated the Free Retirement Planner on that site as the best free program, better than Vanguard and Fidelity which were also in the top three.) See a competent Certified Financial Planner (CFP) as well.

If you are not already financially savvy, start reading some financial material, but keep in mind that much of it likely has a financial bias to sell financial products that benefit the source. If you’ve been dabbling in individual stock purchases, stop. Get into broad, low-cost index funds. I like the writing of Larry Swedrow and John Bogle. An excellent book for a beginner is Getting Started in a Financially Secure Retirement, Wiley, 2007.

10 years before retiring:

Same as above, but add the following:

Make definitive plans when you should downsize your home if your retirement plan requires that you get equity from your house. The earlier you downsize, the better off you are likely to be in retirement. If you are going to move to a new location in retirement, you need to make plans for lots of first-hand, up-close research…..

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Best Steps To Retirement PlanningThe best steps to retirement planning starts with making a plan and having an end target to reach. It is also about making adjustments along the way when needed and that’s what we liked about this report. It is not extensive, yet straight to the point and this is the type of stuff you can make a list from and talk to your retirement expert about.

Another great point in the report was to try living at least 12 months on the retirement budget you have planned and see how that works out. This could be at anytime and will give you a great insight as to what you can and cannot afford to do. Make sense?

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How To Prepare A Retirement Budget

Posted on January 24, 2012 by TheSmartRetiree
Retirement On A Budget

Learn how to maximize your retirement income and enjoy your retirement years in comfort.

One of the keys in knowing how to prepare a retirement budget is putting down on paper exactly what it is you want from retirement. Too many people listen to what others want and assume that’s exactly what they need in retirement. In most cases, it isn’t.

Some want to travel; others want to increase the time spent on their favorite hobby; some simply just want to relax and enjoy their time by catching up on their favorite TV shows. The fact is, if you have a preference of what it is you want in retirement then you need to declare it. Once you do, you can begin working towards making it happen.

The first thing people think of in retirement planning is finances; how much will you need to retire? That’s understandable. The best way to alleviate this concern is to prepare a retirement budget before you actually retire.

Make sense?

Don’t get a retirement budget confused with a day to day budget. We are talking about a savings plan for retirement. Something that will sustain you through possibly 30 years or more of life after you “hang up the work clothes”. So how do you create a retirement budget? The following set of tips on retirement planning at ehow.com are simple but effective. They can give you a starting point to get that budget up and running.

Planning for your retirement can make all the difference in how relaxed those years are. If you make sure you are covered and safe by the time you retire, you will be able to enjoy your free time rather than having to worry about meeting your expenses and debts. Having a retirement budget in place years before you actually retire is the first step to a successful retirement plan.

# 1 Think about changes that will impact your budget, both positively and negatively. For example, you may lose your health insurance once you retire or you may want to sell your home and move to a smaller place, thus saving in taxes and utilities.

# 2 Decide how much money you need to live comfortably. Don’t use your present salary as a guideline. Instead, think about the type of lifestyle you would like to have after you retire. Your salary may be enough now, but it will be different if you plan on traveling or pursuing a hobby once you are into retirement.

# 3 Think about payments or debts you will no longer have after retirement and plan your budget accordingly. Mortgage is the most obvious one, but car payments, college loans and even credit card debt may well change by the time you reach 60 years old.

# 4 Plan for a long retirement. Most people live in retirement at least 20 years. If you retire at 55, expect that number to be even larger. You need enough savings to last you for that period even before tapping into your retirement fund and your IRAs…..

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Prepare A Retirement BudgetDo you know how to prepare a retirement budget? Does the information in this article “ring a bell” with you? Are there any tips on retirement budgets you want to share with us? We’d certainly appreciate it.

The last point is extremely important. It mentions stepping up your plan at least five years before you retire. We suggest if you are close to retirement step it up as soon as possible. Five years is just a guide and we feel it doesn’t really matter when you decode to step it up but at some point you will want to.

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What Is A Retirement Planning Calculator?

Posted on January 23, 2012 by TheSmartRetiree

What Is A Retirement Planning Calculator?We have discussed retirement calculators and their effectiveness many times at TheSmartRetiree.com but still people ask on a regular basis what is a retirement planning calculator? Or, how does a retirement calculator work? Or even is a retirement calculator worth it?

The truth is, a retirement calculator is only as good as the information you put in it but we believe strongly in them for one very good reason; they seem to get some urgency going within people who can suddenly see where they are retirement-wise and how much work they need to do to get their retirement planning nest egg up to the level that will support them comfortably in retirement.

What they cannot do is predict life and show you if there are unexpected surprises in your future. A good retirement calculator will allow for inflation but we never recommend using them as you one and only tool to get a handle on what you need to do to reach your retirement goals.

Click here for our list of favorite retirement calculators.

Retirement Planning CalculatorMeanwhile, retirement calculators would fall under the financial calculator banner and it’s amazing how many peoiple are now using these tools. No longer do you need to use your own manual calculation or a physical calculator. Now, the proliferation of financial calculators, retirement calculators included, online is staggering.

A report at sfgate.com highlighted this in no uncertain manner. The days of manual calculations are gone and as far as physical calculators are concerned, now a smart phone takes care of that. Most have calculators but if you need one of the financial or retirement calculators mentioned in this report you simply find one online.

The math teachers of the world may not want to hear it, but having to manually compute anything is a thing of the past, especially when it involves money and finance. Thanks to the internet, there is a financial calculator for nearly every financial decision you have to make. Here are a few that fall outside of the normal loan calculators.

Should My Spouse Work?

If both you and your spouse are working, more money is coming in. That’s the wisdom behind the decision to join the workforce, but once you factor in expenses like child care, transportation and work clothing, how much net income is really finding its way to your bank account? Bankrate has a calculator that helps you decide if having a working spouse is substantially increasing your income.

Pay Your Debt or Invest?
Never live in debt! That’s what the financial experts believe to be the best advice for consumers, but do the numbers add up? It may not always be in your best interest to pay down debt especially if you can make more money by investing the funds. Yahoo! Finance wants to help you figure that out with its calculator…..

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How often do you use financial calculators? Are you A fan of retirement calculators? What is your favorite? Just remember, retirement calculators are not meant to be the be all and end all for your retirement planning calculations; they are meant to get some urgency going in your planning and when you know what you need to do then see a retirement planning expert and simply get it done.

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How To Increase Your Retirement Income In 2012

Posted on January 19, 2012 by TheSmartRetiree
How To Increase Your Retirement Income In 2012

Ready to increase your retirement income this year?

Want to know how to increase your retirement income in 2012? It’s not as hard as you might think even if you are almost stretched to the limit financially. That is, if you are already making the maximum contributions you can spare.

The truth is, many people think they can’t afford to spare more for their retirement investment accounts however, as we pointed out in a recent article on this topic, you’ll be amazed at just what you can afford when you start to cut back on excesses in your spending.

We’re not saying you need to go into hibernation and completely cut yourself off from the rest of the world and not go out and do things like eat at restaurants or catch a movie every now and again, but take a look at where you are spending your money and then decide if it’s something you really need.

You also need to ask yourself if it would be better to invest even an extra $100 on your retirement security or on something materialistic that will give you a boost for a short time but quickly wanes.

Remember our post a few weeks ago on making new year retirement planning resolutions? Well, we saw a terrific post at money.usnews.com recently which is along the lines of resolutions for 2012 but is a set of retirement planning tips that will improve the bottom line of your retirement readiness like you wouldn’t believe.

And it doesn’t take investing a large amount to improve your retirement nest egg bottom line.

There are some new developments that could help you save more for retirement in 2012, including a higher 401(k) contribution limit and better access to 401(k) fee information. Of course, your ability to save and invest will largely determine your retirement success. If you’re aiming to improve your finances in the new year, try to incorporate a few of these tips into your retirement plan. Here are 12 ways to get better prepared for retirement in 2012.

Save $500 more next year. Consider resetting the automatic contribution to your 401(k) to include an extra $42 per month. The contribution limit for 401(k)s, 403(b)s, and the federal government’s Thrift Savings Plan will increase by $500 in 2012, to $17,000. And workers age 50 and older will be able to contribute an extra $5,500 next year.

“Always allocate a percentage to your retirement account from your paycheck before you spend, even if it is a tiny amount,” says Elaine King, a certified financial planner and managing director of wealth planning at Lubitz Financial Group in Miami. “It is the discipline that counts.”…..

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Retirement Planning TipsIt’s hard to know where to start when looking at these tips for retirement planning so we suggest you go down the list and start from the top working your way down.

If you don’t really understand them then take one of the last tips about getting retirement advice from someone who is competent in this area. Yes, even talk to people who are retired and making this work.

How to increase your retirement income in 2012? The beauty of making slight adjustments to the amount you add to your contributions is that it can grow into a torrent by the day retirement age arrives. Even if you are close to retiring, talk to your retirement expert and present them with this list and then check off the ones that can benefit you. This could be the smartest thing you do in preparing to be ready for retirement day.

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The Retirement Planning Mistakes People Make

Posted on January 18, 2012 by TheSmartRetiree
So You Want To Retire

"So You Want to Retire" is a practical, easy-to-read guide to retirement planning. Just avoiding one mistake can make all the difference between an enjoyable retirement and a struggling one.

So, what are some of the retirement planning mistakes people make? Well, we could spend the rest of the day highlighting them and explaining what you need to do to avoid them. But we are going to be brief today because we want to to understand that these are real mistakes people make in planning retirement.

An article at retirement-income.net highlights seven of them and we figure they are pretty much the top culprits and the ones too many folks will take for granted.

Right now, top of the list is one many would consider a good thing…longer life. Underestimating your life span is a crucial retirement planning mistake which sees a lot of folks come up short in finances when the golden years start. In fact, it’s estimated that people are living at least thirty years past their retirement day. That’s almost half a lifetime!

Although many Americans have spent years on their retirement planning, many of them have made fundamental flaws which comes to light upon retirement; specifically, that there are some problems that simple mathematics and time won’t necessarily solve. If you are at or close to retirement age, here are a number of typical errors that you can avoid.

• Underestimating your life-span
A generation ago, it was probably safe to presume that males would live to approximately age 70, and females to perhaps 75. But advances in healthcare science have pushed those ages up at least fifteen to 20 yrs. Realistic retirement planning forecasts today should most likely assume that at least
1 partner will live to age 90 or beyond. The retirement age of 65 is now “middle aged.”

• Thinking that you will be able to retire whenever you want at an early retirement age. Early retirement is a illusion for many people and lots of older employees plan on working into their 70s–until sickness, incapacity, or simple fatigue makes them to reconsider.

• Neglecting to properly consider health-care costs in your retirement planning-failure to get this done can be disastrous, especially if long-term care treatment is required. And do not count on the authorities to get the bill for you either. Ensure that your coverage of health is adequate and that you have a strategy to include additional elder care requirements. While may are wholesome at the retirement age of sixty five, you need to make plans for when you are 80+.

• Deciding for low investment earnings-do not let your fear of risking principal leave you with a guarantee of not having enough cash too early. You cannot have a sound retirement strategy depending on obtaining 2% at the bank. Sensible resource allocation will substantially lower the dangers of investing, which includes the chance that your cash won’t grow enough to meet your requirements…..

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Retirement Planning Mistakes That People MakeNow the purpose of this article is to just point out to you the retirement planning mistakes people make; not how to avoid them. This is best left up to a retirement planning expert and we strongly suggest you sit down with one soon if you are making one or more of the mistakes listed.

Another mistake we want to point out is taking Social Security too early. Many folks prompt for age 62 and that’s fine and we understand that if you need the money then for many, there’s no option. But delaying Social Security payments until 66 or even 70 means thousands of dollars difference each year. You don’t get more; you just shorten the time frame for collecting it but increase the payments if that makes sense.

So if you can hang tough for an extra four years at least, then this should make a big difference to your annual cash flow. This is something you might want to discuss with your retirement expert.

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When Is It Right To Retire?

Posted on January 17, 2012 by TheSmartRetiree
When Is It Right To Retire?

Thinking about retirement day?

So, when is it right to retire? When is it too late to retire? Is there a right time when we should we retire? The truth is, retiring is up to the individual; there is no set time when you should hang up the work boots and start your golden years but the reason why these questions are being asked more than ever is that we are in uncertain times right now and to be honest, the retirement line which used to be between 62-65 has all but disappeared.

How many times have you heard of people talking about a retirement date? It’s usually around 65. Now, people are delaying retirement in great numbers. There has also been a great fear that the “system” wouldn’t be handle the mass retirement of the baby boomer generation. Well, that’s happening now and yes, there is a lot of fear.

But it’s more about the uncertainty for many baby boomers who are facing a low real estate market and volatile economy as they try to settle into a life of retirement.

One other fear that is affecting many boomers is the fact that many are worried about how much money is needed in retirement. Many are relying on Social Security and whether they still have enough time to save enough to supplement Social Security.

The Retirement Revolution series is one we have been meaning to present to you and today is as good a day as any. Paula Zahn looks at this issue in a report at wttw.com and offers some practical advice. This special report also looks at how to use your home equity into income for your golden years, how to make sure your retirement years are secure financially with retirement investment tips and how working into retirement is an option that shouldn’t be ignored.

This is a report that runs about twenty minutes but it might just be the best twenty minutes you spend online today.

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When Is It Too Late To Retire?Every time we hear someone ask “when is it right to retire” we know instantly that they are confused about whether they are able to retire or need to continue on in the work force. They are not alone. We trust the information in the report made you feel more confident about your retirement years even if you haven’t done a lot in investing for it.

Let us know if the information has eased your fears any and what stage of the report resonated with you. Are you a baby boomer uncertain about retirement and whether you can afford it?

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How Much Do I Need For Retirement Savings?

Posted on January 16, 2012 by TheSmartRetiree

How Much Do I Need For Retirement Savings?

How are your retirement savings holding up?

How much do I need for retirement savings? This is one of the most asked questions when it comes to retirement planning no matter where you are in the world and we have looked at it quite a number of times here at TheSmartRetiree.com. And the answer is usually pretty much the same; about 70-80% of your current income.

That is, whatever you are earning now, you will usually bank on about requiring 70-80% of that to live in retirement. Does that still ring true today? Actually, we’re not so sure anymore. In fact, things have changed a lot and an article we saw at canada.com provided possibly the best answer we’ve seen in the past twelve months.

They are saying there’s too many variables now to give a definitive answer. It depends on each person’s circumstances; some may require 95% of their current income while others may need just 55%. And now, there is the working in retirement factor. The percentage of of people who are now choosing to continue to work in retirement is growing by the day.

The traditional answer has been 70% of your pre-retirement income but there are far too many variables for this to apply to all situations. Some make by on as little as 50% or less while one respected commentator is now saying better to aim for savings that will give you 95%! The actual number will depend upon your lifestyle, current and future savings, sources of income in retirement and longevity.

Recent studies have confirmed that retirees are going into retirement with more debt (primarily mortgage) than ever before. At today’s interest rates their payments are likely to be manageable. Tomorrow, who knows – but plan for them to go higher.

The Canada Pension Plan was designed to provide approximately 25% of your income in retirement. Recent changes have been made for those that wish to continue to work past 65 to increase their benefit due to increased longevity. Old Age Security is a non-contributory program that is available to all Canadians that meet certain residency requirements…..

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Retirement SavingsSo, how much do I need for retirement savings? Are you any the wiser after that post? Have you got a figure in mind and are you on target to reach it?

Knowing exactly how much you need to live in retirement is one thing; predicting what will happen in life is another. You can calculate how much money you need when you retire based on current factors but unless you have a crystal ball to determine what will happen along the way or if any unforeseen circumstances will arise that will affect this figure, is hard to determine.

And it’s no different in other countries other than the USA such as Canada, Australia, England…people are not not saving enough for retirement; and the message needs to be continually pushed out that they need to make sure they are maximizing their retirement savings so they will benefit when they hang up the work clothes.

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Is A Retirement Planning Professional Worth It?

Posted on January 13, 2012 by TheSmartRetiree
Is A Retirement Planning Professional Worth It?

What's stopping you from seeing a retirement planning professional?

So, is a retirement planning professional worth it? Good question and one we can only answer with a resounding yes. The truth is, retirement has changed; once upon a time someone would pick a day to retire and go out with a little fanfare. Or they would sell their home and head somewhere sunny and warm. That is quickly changing.

Today’s retiring baby boomers are being faced with some tough decisions once they get close to retirement age. The option of selling their home to move somewhere else has all but dried up because of the desperate situation which exists in the real estate market. Selling for most would not make much sense and while many have their homes paid off, they would be virtually “giving” them away.

The projected price of their homes would have been factored into their overall retirement savings package. So again, is it worth seeing a retirement planning professional? And again the answer is yes? Things are a lot different now when it comes to planning for retirement.

Whether you are just starting out or even near retirement and worried about your nest egg a competent retirement planning professional should be your first consideration especially if you don’t understand or no where to start planning.

The changing face of retirement planning is explored in an excellent article at sfgate.com which looks at the way retirement was approached to the way it’s being approached now. There is a stark difference and by reading the article, this could be the best use of your time today.

Indeed, the traditional retirement – leaving work at 65, moving somewhere warm and spending your golden years winding down – is quickly becoming a thing of the past. For example, among employed males age 64, the likelihood of retiring at 65 was recently shown to be only 7% for those born between 1943 and 1947. For this group, which is around retirement age right now, the chance of actually being retired at 65 is much lower than the 56% probability for men born between 1913 and 1917, according to a July 2010 Urban Institute report.

Why do Americans have the tendency to retire later? There are a lot of reasons, like a tough economy, which can derail anyone’s retirement plans. But it often comes down to a lack of preparedness – a big issue with Americans well before the economy went sour. In an October 2011 study done by LIMRA research, 41% of pre-retirees between the ages of 55 and 64 said they were saving nothing for retirement. While 21% were saving less than $100 a month.

On the other hand, other studies suggest many Americans are choosing to retire later. They’ve gradually changed their view of retirement from a winding-down period to a new chapter in life, where they take on new challenges. In a 2011 study done by SunAmerica Financial Group, on average Americans say they’ll put off retiring until age 69, and two-thirds plan to stay productive, interspersing periods of leisure with periods of work…..

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Retirement Planning ProfessionalHow do you feel about seeing a retirement expert? Is it worth seeing a retirement professional in your opinion? Have you spoken to one recently about your retirement plan?

We need to clarify though; not all retirement professionals are created equal. Getting references is crucial. We suggest looking for someone who actually has your best interests at heart and who is not just looking at his or her bottom line. You need to be diligent in your search for one and getting references is an excellent way to narrow down the field in search of someone who will be on your side.

Have you had to change your retirement plans recently to adjust to the current economic climate? Were you planning to sell your home to move elsewhere but were thwarted in your plans because of the real estate crisis? Please leave a comment as we appreciate your feedback.

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Retirement Planning Tips For Baby Boomers

Posted on January 12, 2012 by TheSmartRetiree
The Investment Answer

The Investment Answer distills the investment process into just five decisions--five straightforward choices that can lead to safe and sound ways to manage your money.

Retirement planning tips for baby boomers have been coming thick and fast since the first of the biggest spending generation in history began hanging up their work clothes three years ago. Baby boomers have been the most innovation group in history; they have been responsible for every major trend over the past 60 years and now they are retiring in droves.

It’s interesting though to see retirement tips for baby boomers surfacing when they are due to retire. Wouldn’t it have made more sense to have been heard giving them tips when they were younger? Well yes and they were but you see, if you have been living “under a rock” then things have really changed economically during the past few years which has affected the nest eggs of many boomers.

The real estate market is one area that has hurt and as of now, is still “in the sink” while investments in long term nest eggs have also been impacted. That’s just two areas.

But there is no use in sitting down and “crying over spilled milk”. Things are still looking good for retirement and the following retirement tips for boomers can help you get the most out of your retirement from a financial perspective. One area is social security and how to maximize your returns. This is stuff you need to read.

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 age, 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…..

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Retirement Planning TipsThat’s a solid set of retirement planning tips for baby boomers which will really help you maximize revenue when you retire. We like the last point which talks about planning for your new life. Did you catch the part about looking for a new part time job. This doesn’t necessarily mean going to a physical type job but perhaps looking for something working from home.

Curious?

Well, we are going to be looking at work from home opportunities for baby boomers in coming weeks and we want to warn you; going into this can be like negotiating a minefield and it is fraught with with danger. If you are keen to hear more about what you need to do to avoid problems then leave a comment below.

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