MY RETIREMENT HELPER

Should You Put Retirement on Hold?

2011-09-09T06:55:00.000-07:00

By Jason Alderman

Senior Director, Global Financial Education, VISA
One indicator that our economy is still hurting is that more and more people are postponing retirement. According to the Department of Labor, the number of people over 55 still working has increased steadily since the recession began – 28.9 million at last count – and some surveys show more than a third of employees expect to work past age 70 or never retire.

A perfect storm of negative factors have forced many people into this position:

They’ve had to tap retirement savings early to cover bills or tide them through unemployment – just when retirement account values had been decimated by the market crash.

Plunging home values have diminished or erased the equity many had hoped to draw on in retirement.

They’re unable to afford – or qualify for – health insurance they’ll need until Medicare kicks in.

And many boomer parents have put their own savings on hold while helping their kids struggle through the recession.

If you’re hoping to retire in the next few years, consider the following:

How much will you need? Financial planners often suggest people may need 70 percent or more of pre-retirement income to maintain their current lifestyle, but it’s difficult to generalize. For example, some people downsize housing or retire to less expensive areas and thus need less. Others can expect increased medical, utility and other bills to outpace earnings on their savings.

Crunch the numbers. Start estimating your retirement needs by using online calculators, including:

Social Security’s Retirement Estimator, which automatically enters your earnings information from its records to estimate your projected Social Security benefits under different scenarios, such as age at retirement, future earnings projections, etc. You can also download a more detailed calculator to make more precise estimates.

Check whether your 401(k) plan administrator’s website has a calculator to estimate how much you will accumulate under various contribution and investment scenarios. If not, try Bankrate.com’s 401(k) calculator, or their other calculators for estimating monthly retirement income, retirement shortfall and more.

AARP offers a retirement calculator to help determine your current financial status and what you’ll need to save to meet your retirement needs.

Consult a professional. After you’ve explored various retirement scenarios, consider paying a financial planner to help work out an investment and savings game plan. If you don’t have a personal referral, good resources include the Certified Financial Planner Board of Standards, the National Association of Personal Financial Advisors and the Financial Planning Association.

Social Security issues. To make ends meet, many people begin drawing reduced benefits from Social Security before reaching full retirement age (65 for those born before 1938 and gradually increasing to 67 thereafter). This can have several financial consequences:

Your monthly benefit will be reduced by up to 30 percent. (Conversely, if you postpone benefits until after reaching full retirement age, your benefit increases by 7 to 8 percent per year, up to age 70.)

Although many states don’t tax Social Security benefits, they are counted as taxable income by the federal government. So, depending on your overall income, you could owe federal tax on a portion of your benefit. IRS Publication 915 has full details.

If you begin drawing Social Security while still working, your benefit could be significantly reduced depending on your income. Read How Work Affects Your Benefits for more details. Rest assured, however: Those reductions aren’t truly lost since your benefit will be recalculated upward once you reach full retirement age.

If you’re still working when you begin drawing Social Security, your benefit could be significantly reduced. The benefit reduction formula is rather complicated and depends of whether your income exceeds certain levels as well as on when you reach full retirement age.

Other tax implications. Even if your income drops significantly after retirement, chances are you’ll still be taxed on a portion of it, including withdrawals from regular IRAs and 401(k) plans. And, depending on where you choose to retire and your income sources, you’ll probably also face additional taxes on everyday purchases, real estate, capital gains, inheritances – the list goes on.

The Retirement Living Information Center features breakdowns of the various kinds of taxes seniors are likely to pay, state by state, including taxes on income, sales, fuel, property, inheritances and other items. For more on taxes in retirement, read my previous blog, Taxes Follow You Into Retirement.

One last suggestion: Once you’ve settled on what you think will be a sufficient retirement budget, try living on it for a few months first before retiring to make sure it actually works.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

Source

When Inflation Could Interfere with Your Retirement

2011-05-20T09:32:00.000-07:00

When inflation is up 3.2 percent from a year ago, retirement seems like it will never come or that it could be more of a challenge than anything. And since oil prices seem to always be on the rise that means other necessary items like food and gas are rising too. So what do you do when you want to retire but inflation makes the dream a hardship? Well here are some tips from Forbes that could help.

Do you own your home? Though the prices of homes are low right now, it is usually a trend that when the cost of living rises so does the price of housing. However, if you’re looking at downsizing maybe weigh your options before putting your home on the market. If you own your current home and can afford to stay in it, when the market returns to a healthy state you could gain from a sale.

Think about what gold can do for you. Gold is always going to be of value, but prices and appeal rise during tough times. Think about investing in it, though it is a risky move since “the quadrupling of prices over the past decade will draw out a multitude of new sources,” according to Forbes.

Delaying your Social Security payments could pay more than you think. If your delay your Social Security benefits to age 66 the payments may last longer. In some cases the payments could last up to age 94! In this situation you would need to speak with and work out the specifics with your spouse because this plan works best if one of you keeps collecting while the other defers. If this is the route decided upon, there are few major risks involved.

Overall, retirement should be a time of relaxation and enjoyment, and despite inflation, it should also be attainable. Click to read more information about inflation and other tips on how to combat it.

Sources:
New York Times
Forbes.com

NEW RULES FOR SOCIAL SECURITY MAY 1

2011-04-29T11:42:00.000-07:00

BOSTON, MA − Beginning May 1, 2011, elders, veterans, and the disabled can rest a bit easier as a new federal rule kicks in that will limit creditors’ ability to seize funds from Social Security, Social Supplemental Income (SSI), VA, and other federal benefits held in bank accounts in favor of direct deposit or prepaid cards. New rules making the Direct Express® prepaid card the default method of issuing federal payments and limiting the use of other prepaid cards and paper checks will also be in effect May 1.

If a bank receives a garnishment order, the bank will be required to determine whether an account contains electronically deposited federal benefit payments, and if so, the bank will be obligated to protect two months of those payments from seizure to satisfy garnishment orders. To protect funds deposited before the two-month time period, or deposited by check the recipient will have to follow the state procedure for claiming exemptions.

“This regulation will provide a much-needed protection for exempt federal benefits. We are enormously grateful to the U.S. Treasury Department for its leadership in resolving the difficult issue of how to protect federal benefits in bank accounts from illegal seizure,” said Margot Saunders of the National Consumer Law Center. “We also appreciate the Treasury Department’s efforts in the new prepaid card regulation to protect recipients from overdraft and pay-day type loans attached to these new payment devices.”

The U.S. Treasury recently took a hard-line approach regarding elimination of paper checks. Effective May 1 of this year, new applicants filing for all federal payments including Social Security, Supplemental Security Income (SSI), veterans benefits and wages will receive their payments electronically, unless they qualify for one of a very few exemptions. If recipients do not provide information to the federal payment agency regarding a bank account or prepaid card into which they want their payments electronically deposited, they will be provided the federal government-issued Direct Express® card. The Direct Express card is likely to be the best option for recipients who are unbanked, but pursuant to a new rule, they may also choose privately branded prepaid cards to receive their benefits. Additionally, most current recipients will be required to receive their federal benefits electronically as of May 1, 2013.

The Direct Express® prepaid debit card, issued through the U.S. Treasury, is the best prepaid card available. Direct Express® cards have considerable protections for recipients, including limits on fees, legal protection against unauthorized charges, and requirements for free access to funds. They are likely to be substantially less expensive than other prepaid cards.

Nevertheless, if a federal payment recipient wishes to have funds deposited to a prepaid card other than the Direct Express® card, only certain cards are eligible. The most important conditions are that (1) prepaid cards cannot receive federal payments if they are attached to a line of credit or loan agreement that is automatically repaid upon deposit of the federal payment, and (2) the card must comply with consumer protections required through the Electronic Funds Transfer Act (EFTA). Importantly, the EFTA limits overdraft fees for ATM and one-time debit transactions unless the person opts in for such coverage (opting in for overdraft protection may not be beneficial for the recipient). The EFTA protections against unauthorized charges, billing errors, and disclosure of fees will also be in effect for these cards.

Current benefits recipients have until March 1, 2013 to choose an electronic payment option. After that date, no payments will be issued via check, unless the person qualifies and is approved for an exemption.

To continue receiving paper checks, recipients must be approved by the US Treasury for one of the following exemptions:

• Aged 90 years or older, as of May 1, 2011 (no wavier required)
• Mentally impaired
• Live in a remote geographic area lacking the capability to support an electronic financial transaction

Effective March 1, 2013, both new applicants and current recipients who do not choose another option (and have not been granted a wavier) will automatically receive their payments on the federal government’s Direct Express card.

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National Consumer Law Center® (NCLC®) is a non-profit organization specializing in consumer issues on behalf of low-income and other vulnerable people. Since 1969, NCLC has worked with legal services and nonprofit organizations as well as government and private attorneys across the United States, to create sound public policy for low-income and elderly individuals on consumer issues.

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A Homeowner With No Savings, but Some Options

2011-03-28T10:30:00.000-07:00

If you’re worried that you haven’t saved enough for retirement, you’re probably right. Most of us haven’t. In fact, the Employee Benefit Research Institute found the majority of American workers had put away less than $25,000 for their golden years.

But even those people are in better financial shape than Susanna Wilson, 70, who saved nothing.

Her only dependable income is a Social Security check of about $900 a month.

“I can never retire,” she said, her voice trembling as she stared at the floor of her living room in Grass Valley, Calif. “Probably about every two weeks when the bills are due, that’s when I get really worried. I think ‘How am I going to pay this one?’ ”

It should never have come to this. Ms. Wilson attended the University of California, Berkeley, in the late 1950s, though she left before graduating to move to New York and marry her college sweetheart, the Minimalist sculptor and sometime rock musician Walter De Maria.

Ms. Wilson spent her prime earning years engaged in various creative endeavors in New York, mostly as a designer. Her clothing line, O’Susanna, found a home in the late 1970s at Saks Fifth Avenue and Bloomingdale’s. Glamour and Seventeen magazines featured Perfumes by Susanna, including a popular fragrance called Strawberry Love.

In her 40s, Ms. Wilson moved to California and became a publicist. At her peak, she made around $65,000 a year, she said, and not a penny of that made its way into a retirement fund. “One thing kind of led to another,” Ms. Wilson said. “I’ve always put all my money into my businesses. And I always thought the business I was in was going to be a great success.” She also raised a daughter, Corie, 36, who lives in Los Angeles with her two children and is not in a position to help her mother financially.

Now twice divorced and living alone with her Shetland Sheepdog, Rooney, Ms. Wilson subsists on those government checks, plus a one-day-a-week job at a local jewelry store that pays $12.50 an hour. She received no alimony from either divorce. Ms. Wilson also makes little girls’ dresses under her O’Susanna label, at a vintage Singer Featherweight sewing machine in her dining room. But she sells only about six a month for around $200.

Grass Valley, an old gold mining town of 12,300 residents in the foothills of the Sierra Nevada, near Lake Tahoe, isn’t an expensive place to live. But Ms. Wilson isn’t the only one struggling. Her friend Molly Fisk, 55, a poet and teacher, was visiting the house and joked that her retirement planning was “all tied up in MasterCard futures. Sad but true.”

Ms. Wilson would probably manage on her current income, though not without sacrifice, were it not for the debt she had accumulated. All told, she averages about $1,400 in monthly income, including Social Security (adjusted for one of her former husbands’ earnings). A third of that goes toward fixed expenses like utilities. She pays $300 toward a mortgage balance of $5,477. She inherited the house, fully paid off, from her parents, but took out the mortgage a few years ago to pay for repairs.

The balance of her income goes toward the monthly minimum payments on $9,000 in credit card debt, racked up for daily living expenses. “I think I might just have to declare bankruptcy,” she said. “I just can’t live with that.”

Before she takes that drastic step, Ms. Wilson should consider some other options, said Elizabeth Rutter Baer, a certified financial planner in Lansing, Mich. She worries that Ms. Wilson is “extremely close” to the edge and isn’t getting anywhere with her debt payments because she keeps putting more expenses, like food, on her credit cards.

Yes, she could try to find other income, Ms. Baer said. But that’s a short-term solution. At some point, despite her excellent health, Ms. Wilson may not be able to work. “Bankruptcy is possible, but my advice is, let’s liquidate assets and get those debts paid off,” Ms. Baer said.

To that end, Ms. Baer recommended something she said she had never before suggested: a reverse mortgage. Such mortgages allow homeowners to tap existing home equity to receive a lump sum or monthly checks. Unlike a home equity loan, however, borrowers don’t have to make any repayments until they no longer live in the home. The strategy can be risky, with high fees and sometimes poor counseling for borrowers. Reverse mortgages are available only to homeowners 62 or older.

“Susanna is the ideal candidate,” Ms. Baer said. “This is one instance where it could work.”

The house is valued from $150,000 to $200,000. Ms. Baer said Ms. Wilson should work with a bank to see if she could wrap the current mortgage into a reverse and then take cash out. Ms. Wilson is already making phone calls to explore the idea.

Ms. Baer also noted that Ms. Wilson was part owner, with her two brothers, of several tracts of timberland in northern California. The land’s value has dropped because of the economy, but Ms. Baer said that shouldn’t stop them from selling it.

“Whatever the purpose of this land was before, today’s the rainy day,” she said. “It may not be that much, but at this point $25,000 would change her life, totally.” Ms. Wilson said she was discussing this with her brothers and a real estate agent.

Ms. Baer, who is 67 and single, said there were particular financial difficulties facing single people as they aged. Even people in a relationship should make financial plans that can work even if they were to be single during retirement, she said, adding, “Nobody knows who’s going to be there at the end.”

Ms. Wilson agreed with that assessment. “I have friends, and they’re two people together, and it’s a lot easier.” At that point she again spoke through tears. “My Mom would say, ‘Why don’t you just go and get married?’ and that’s just not me,” she said. “I believe you have to love somebody.”

Ms. Baer’s advice provided a push for her to explore some options she had already thought about, but hadn’t followed through on, Ms. Wilson said, because she had been paralyzed by the fear of what might happen if she could no longer generate extra income. Overcoming that fear will be key to recovering her financial health. And she’s confident that will happen.

“I don’t want to be a Pollyanna,” Ms. Wilson said. “But tomorrow is another day.”

Source

What to Do With Your W2...

2011-02-01T09:00:00.000-08:00

In the last few weeks, many Americans received their W2 tax documents. So now what? While the April deadline may seem light-years away, it's never too soon to get a head start on your taxes.

Here are a few reasons why.

More time, fewer mistakes. A journalist would never turn in an article before editing and proofing it several times, and the same goes for filing your taxes. The more time you give yourself, and your CPA, to look over your information, the more likely you are to notice mistakes or forgotten deductions.

Get your refund sooner. It's simple. The sooner you file your taxes, the sooner you'll be able to reap the benefits of your refund. And setting your refund up for direct deposit can expedite the process even more, in addition to saving you a trip to the bank.

Consider setting up your refund to be deposited directly into your savings account; this will give your savings a boost before you have a chance to spend your refund.

Beat the rush. While many plan to file their taxes early, there's always the mad dash of filers come April. Starting and filing now means you'll avoid the craziness at the end and the possibility of having to file for an extension if the unexpected happens.

Filing for an extension means more paperwork, and who wants to be stuck inside filling out forms when spring rolls around?

Whether you prepare your taxes yourself, or have someone do it for you, starting early and having more than one set of eyes review your documents is always a good idea. So, whip out your W2 and get started on your taxes today!

Click here for tips on starting your tax return.
For more information on creating an investment portfolio, click here.

Visit http://click.bsftransmit1.com/ClickThru.aspx?pubids=6698%7c9374%7c9435&digest=YcgbPeqSZ39%2f8WwQMX%2fKrA&sysid=1 or http://www.debthelper.com/ for more money-saving tips.

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Source © 2010 American Institute of CPAs

Accounts You Need for Your Retirement Savings Plan

2011-01-04T05:30:00.000-08:00

In addition to planning for retirement, other needs such as healthcare, possible unemployment, and other emergencies require that you save more money for your retirement savings plan with accounts that can optimize how much you put aside or stabilize the state of your nest egg. If you do not have these accounts yet, it is high time that you revisit your financial strategies and use them in the years to come.

Emergency Savings Accounts

The largest obstacle to accumulating enough savings for retirement is the lack of a savings routine. To get into the savings habit, you will need to pay yourself a certain percentage of your regular paycheck or investment profits. Bolster the process further with direct deposits from your monthly salary or checking account into a dedicated account solely for your emergency savings fund. You can also save money for retirement while simultaneously paying down your debts. Automatic savings methods such as this help you reinforce the routine, as you will not be tempted to spend the money that goes directly into the emergency savings account. This account can also help you take care of unexpected expenses that can threaten the stability of your overall savings, with the savings balance only a month or so away from being replenished.

High-yield Savings Accounts

High-yield savings accounts may seem impossible to find in this day and age, as many accounts only generate a dismal amount of profit for the holder via interest. Choose a stable bank with the highest possible interest to get the most out of your money, and make sure that you can access your savings at any time. There must be no investment risk involved in the account, and you have to get returns that boost your purchasing power and buffer it against the effects of inflation.

Free Checking Accounts
An ill-chosen checking account can take hundreds of dollars out of your funds per year, with the average checking account that bears interest charging monthly fees of about $13, and has a maintaining balance upwards of $3,800 at negligible interest rates if you want the fees out of the way. What you can do is look for an account that does not come with monthly or transactional fees, as well as no maintaining balance. Community banks, online banks, and credit unions are just some of the banks that that offer this type of checking account where one of the accounts you need to incorporate into your retirement savings plan.

Articles Source

About the Author:Katherine Smith is an author who specializes in financial topics concerning seniors. Puritan Financial Group gives you access to reliable investments and expert financial advice. For more information on how Puritan Financial Group can help you, please visit our website at http://www.puritanlife.com.

9 tips for sticking to a holiday budget

2010-11-01T06:35:00.000-07:00

As reported by CreditCards.com, October 29, 2010: Here's one way to make 2011 a happy new year: Rein in holiday spending. To do that, create a holiday budget and stick to it.

"Think of a budget as a financial GPS," says Cate Williams, national spokeswoman for Money Management International, a nonprofit credit counseling agency with offices in 24 states. Drawing up a soup-to-nuts budget helps safeguard cash, without quenching the holiday spirit: "It makes us a cheerful giver because we're not spending money that should go to another expense," Williams says.

Holiday budgeting takes time, buy-in from the entire family and discipline. Here's a nine-step plan to make, and keep, a holiday budget.

1. Decide how much you can spend. Holiday money must come from your current disposable income. If you plan to spend money you don't have, prepare for a credit card bill that could take years to pay off. The National Retail Federation predicts consumers will spend an average of $688.87 on holiday-related expenses this year. If that amount is on a credit card with an 18 percent annual percentage rate (APR), and you pay the minimum payment of 4 percent due each month, it will take you three years to pay off the charges, and you'll pay an extra $203 in interest. (See our CreditCards.com payoff calculator to see how long it will take to pay off your credit card balance.)

Ideally, you've saved some holiday money. If not, cut back on extras such as movies, dinners out or coffee drinks until the holidays are over. "There are always things in a budget you can trim back," Williams says.

2. Budget for everything. "There are a lot of things people don't think about," says David Jones, president of the Association of Independent Consumer Credit Counseling Agencies, a Fairfax, Va.-based accrediting agency for counseling firms. Gifts, the cost of shopping (gas, parking), decorations, food and drink for parties, greeting cards, postage for cards and out-of-town gifts, travel expenses, holiday-related apparel and charitable contributions should all be in the budget.

3. Make a complete gift list with the entire family present. The list should include everyone -- relatives and friends, piano teachers and mail carriers -- who must be acknowledged during the holiday season. And don't forget the office gift exchange.

4. Decide who's getting what. For each person, set a firm "no more than" purchase price for that gift. Be realistic: $50 might be enough for a terrycloth bathrobe from Sears, Williams says, but not for triple-ply cashmere.

If disposable income is tight, Jones suggests designating half the list "card-only people" and specifying "make or bake" gifts -- cookies, pumpkin bread, handmade ornaments -- for 40 percent of the remaining recipients. Such "from the heart" gifts are welcome, especially if children make them, he says.

5. Set expectations with family members, especially children. If gifts will be minimal, Williams advises telling children now, to bring their expectations in line and absolve parents of gift-giving guilt. Now is also the time to discuss reasonable and economically feasible gift-giving tactics with family and friends, such as grab bags, name exchanges or skipping gifts altogether. "Open up the dialogue," she says.

6. Start shopping now. Late November and December bring sales, but they also bring crowds and pressure to get shopping (and wrapping and mailing) done.

Donna Thomas-Rodgers, 37, a leadership consultant who lives in Birmingham, Ala., expects to finish her shopping well before "Black Friday," the Friday after Thanksgiving, the day the winter holidays traditionally begin. Thomas-Rodgers is shopping now and getting bargains. "Right now, so many items are on sale and nobody's really thinking about it," she says. One example: She bought her daughter a new bedspread, originally $50, for $19.97 at Target.

To stay within her $1,000 holiday budget, Thomas-Rodgers signs up for e-mail alerts from retailers to get a heads-up on big sales. She saves money and time and reduces stress by not wrapping gifts. And seven years ago, when her daughter was born on Dec. 12, she stopped giving gifts to family members. "I told them, I'm a parent now and my daughter is my priority,'" Thomas-Rodgers recalls. "They understood."

7. Check your emotions at the store door. "Gift-giving deals with emotion, and emotion and spending don't go hand in hand," says Ornella Grosz, the Atlanta-based author of "Moneylicious: A Financial Clue for Generation Y." To keep the feelings out of shopping, Grosz suggests keeping a list of other financial obligations -- credit card debt, car payments, mortgage payments -- on a slip of paper in your wallet. When tempted to overspend, remind yourself of what you owe.

Grosz also suggests shopping when pressed for time; less time in a store usually means fewer purchases. Shopping with a trusted friend who will firmly guide you away from the sale tables, and shopping with cash only can also help curb impulse purchases.

8. Work sales, don't let them work you. If a gift on your list is on sale, buy it. If it's not, "you're buying stuff not on the list and you'll go over budget," says Joseph Montanaro, a certified financial planner at USAA, a San Antonio-based financial services firm.

9. Keep track of spending. "Cash is king," Montanaro says. "It's very easy to stretch the budget with credit cards." He and others suggest "the envelope trick," giving each household member her or his holiday budget in cash, in an envelope: When the money's gone, it's gone.

If you use credit cards for convenience, hold a weekly reckoning with yourself, your spouse and your credit card receipts to make sure nobody's going overboard.

Montanaro suggests paying off holiday credit card debt quickly, in three months if possible. Yes, you'll still pay interest, but it won't be egregious. Consider the following: paid off over three months, $750 on a credit card with 18 percent interest will cost a total of $772.60. (Use the CreditCards.com payoff calculator to calculate your own scenarios.)

Your best bet: Pay it off in one lump sum. "Don't handicap yourself as you go into the new year," Montanaro says. "It's all about putting yourself in the position to be financially successful."

10 Reasons Not to Tap into your 401K

2010-08-26T07:09:00.000-07:00

A recent report by a major retirement plan provider revealed an uptick in the number of investors dipping into their 401(k)s through either loans or hardship withdrawals.

If you really need the money and cannot access credit elsewhere, then borrowing from your 401(k), or taking a withdrawal, might be your best option.

But there are several good reasons to keep your retirement savings intact if at all possible. Before tapping your retirement savings consider the following:

Loans

1.The money you withdraw will not grow if it isn't invested.

2. Repayments are made with after-tax dollars that will be taxed again when you eventually withdraw them from your account.

3.The fees you pay to arrange the loan may be higher than on a conventional loan.

4. The interest is never deductible even if you use the money to buy or renovate your home.

5. If you leave your job you generally must repay the entire balance within 90 days of your departure, otherwise the remaining loan balance may be considered a withdrawal. Income taxes would be due on the full amount, and if you're younger than 59½, you may owe a 10 percent early withdrawal penalty, too.

Hardship Withdrawals

6. Your employer's plan must permit hardship withdrawals—not all do.

7. The amount you withdraw cannot be repaid, and your future savings will be subject to a waiting period as well as 401(k) contribution limits.

8. You'll owe income taxes on the amount withdrawn, and your employer will likely deduct 20 percent up front.

9. You could be subject to a 10 percent tax penalty if you withdraw before you are 59½ years old.
10. Your employer might require that you first exhaust all other available sources of funds, such as borrowing from your 401(k) or taking a commercial loan.

Source: FINRA
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What happens to credit card debt after death?

2010-08-26T05:55:00.000-07:00

The state, terms dictate who owes, what must be paid

By Dana Dratch

You can't take it with you, but do credit card bills follow you into the grave? Does that debt die with you? Or can it come back to haunt those left behind?

There's no one-size-fits-all answer. A number of factors, including where you live and who applied for the card, can radically alter the situation.

Here's the simple part: If the card was yours alone, with no joint account holders, the debt is yours alone, too.

When you die, your estate is responsible for paying off the balance. If the estate goes through probate, your administrator or executor will look at your assets and debts and, guided by law, determine in what order bills should be paid. Remaining assets will be distributed to heirs by following your will (if you have one), or state law (if you don't).

Sometimes, the credit card company loses.

If the assets don't cover the bills? "If there isn't enough money, credit card companies would have to, as my students say, 'suck it up,' " says Doug Rendleman, law professor at Washington and Lee University.

Creditors are notified that the estate is insolvent. They write off the bills, and often that's the end of it. Children, friends, or relatives can't inherit debt. A card company can't legally force someone else to pay.

If there is enough money, the Credit CARD Act of 2009 requires the executor of an estate to be informed of the amount quickly, and requires credit card issuers to stop tacking on fees and penalties during the time the estate is being settled. That portion of the law went into effect in February 2010.

One situation in which someone else could end up shouldering your credit bill: If you share the account. If a spouse, family member, or business partner signed the card application as a co-signer (joint account holder), then that person could be liable for the balance on that card, along with (or instead of) the estate.

If that second cardholder is merely an authorized user (didn't sign the application, isn't liable for bills, and merely has charging privileges), then he or she isn't responsible.

Source

2010-08-11T08:15:00.000-07:00

Earlier this week, I read the thought-provoking post at Get Rich Slowly, What Is Retirement? J.D. wrote about a recent camping experience with a few buddies and shared some of their conversation on the subject of retirement. One of the friends pointed out that he already thought of J.D. as “retired,” since he left his corporate job a couple years ago and now worked on his blog full-time. While J.D. does enjoy some schedule freedom, he still “works” at his writing craft. It does make you rethink the definition of “retirement” though, doesn’t it?

Shifting Views on Retirement

When I was a kid, my personal view of retirement was skewed significantly by the fact my grandfather retired from the Marines at 47, my grandmother was mostly a homemaker (particularly in her later years), and my mom was a single mom working 50+ hours a week in corporate America with no retirement in sight.

As I got older, I had friends whose parents were teachers, nurses and factory workers who had dedicated most of their adult lives to a single employer and retired from their chosen occupation. It wasn’t long before I recognized that was becoming the exception.

As our economy shifts away from manufacturing (something I personally find very sad), and into service, I think people will be more likely to change jobs dozens of times in their lifetime. I’m a bit of an exception to the rule myself. I’m in my 30s, but have worked for only two employers in my adult life (with a bunch of part-time gigs at different companies before that).

How Does this Relate to Personal Finances?

With all this job-hopping, the emphasis on personal responsibility for your financial future cannot be emphasized enough. Add in the question of social security’s solvency, the disappearance of the corporate pension, and the possibility of state bankruptcies, and you can easily see we are walking a financial tightrope with no safety net.

Younger generations must be more engaged with their finances than the “set it and forget it” generations before them. It used to be acceptable to plow all your money into 401k mutual funds and company stock. Ever heard of Madoff, Enron, or those target-date retirement funds with overly-aggressive allocations for soon-to-be retirees?

Forty year-olds with five previous employers may be sitting on five different 401k plans with bad administrators cutting into their profits with costly administrative fees. Rolling all those 401ks into an IRA might make sense, but the process can be overwhelming. And there’s always the temptation to cash out when you leave an employer – something that looks appealing, but can easily cost you nearly 40% in taxes and early withdrawal penalties. Ouch!

I’m not against 401k plans, particularly those that offer a matching contribution from employers, but if I had to choose, I’d much rather invest in a Roth IRA. Roth IRAs offer more freedom in terms of investment elections, and they offer the advantage of tax-free growth on earnings (you can even withdraw your Roth IRA contributions any time, penalty-free, in a pinch). And because Roth IRAs may be opened and maintained independent of your employment status with a particular employer, they make a lot of sense for younger generations of workers likely to bounce around the employment world before needing retirement funds.

Do I Even Want to Retire?

Back to the post from J.D; is he really retired if he still works several hours a day? I don’t think so. Has J.D. chartered a course of more personal freedom, rather than being chained to a desk eight hours a day, five days a week? Absolutely.

Perhaps we should change our definition of retirement. Or, maybe we should just expand our definition of self-employed. Were it not for a need to earn additional income, I’d say a full-time writer is mostly financially independent. That is, they no longer need to work for money to cover basic life expenses.

I believe most of us will enter a stage of semi-retirement when we get a little older. We’ll live off a combination of savings and part-time earnings, and be able to afford it by getting out of credit card debt and paying off the mortgage well before exiting full-time employment. Couple that with a frugal existence, and it wouldn’t take all that much to enjoy a lifestyle of more personal freedom.

Imagine getting to travel when most people are working. Imagine spending more time with your kids and grandkids – perhaps even homeschooling them if that is something that interests you. Imagine taking up a new hobby during the day, or volunteering more of your time. It’s all achievable, but not without some sacrifice up front.

I remind my kids, and any other young person I meet, to avoid making the big financial mistakes early on. If you do, you’ll have limitless opportunities to enjoy the next few decades of your life, while your peers will be paying for their mistakes.

Source

10 Retirement Planning Moves to Make Now

2010-08-04T14:19:00.000-07:00

There is no one-size-fits-all solution for retirement planning. Most people have unique situations regarding their finances and living arrangements. But there are some steps everyone can take to improve their financial situation. These ten steps can help you get on track to a secure retirement.

1. Get out of debt. The number one killer of retirement dreams is debt. Debt payments destroy cash flow and tie up resources you could use for a better standard of living. Eliminating debt should be your number one financial priority.

2. Earn more than you spend. Most people will advise you to spend less than you earn. But you can only cut back so much before there are no more expenses you can reduce. Reducing your expenses is always recommended, but so is increasing your income. You can do this by asking for a raise, finding a new job, or taking on consulting or part time work. Living paycheck to paycheck won't cut it if you want to save and invest enough for retirement.

3. Save for a rainy day. Once you have a little extra cash flow, save it. Don't invest it, fix up the house, go on vacation, or do anything else with it. Save it in an emergency or rainy day fund. The purpose of this fund is to serve as cash reserves for unexpected expenses such as home or auto repairs, medical expenses, or anything else that pops up without warning. This preparation can go a long way toward protecting your assets. Once you are comfortable with the size of your emergency fund you should move to the next step.

4. Invest. Utilize tax-advantaged retirement accounts offered by your employer and individual retirement accounts. Don't know where to start? Consult with your human resources representative to begin a 401(k) or check out some of the best IRA companies to get started on a personal plan. Once you max out investments with tax advantages, start investing on your own. Mutual fund houses and discount brokers are great places to get started.

5. Manage your personal risks. Insurance is one of the most unappreciated parts of a retirement plan. Insurance can save you thousands of dollars, and more importantly, provide peace of mind. Make sure you have adequate coverage for health, life, and long-term care in addition to the standard home and auto insurance.

6. Manage your investment risks. Proper asset allocation is a good way to mitigate your investment losses during market corrections. You should review your investment portfolio at least once per year and with every major life event.

7. Estimate retirement cash flow and determine if you need more. Cash flow is your best friend once you reach retirement age. Common sources of retirement income include Social Security, pensions, and individual investments. If you don't have any retirement income already lined up, start thinking about ways you can increase your cash flow. Real estate, dividends, and other investments may also be good ways to create retirement income.

8. Create an estate plan. Creating a will and estate plan will save your heirs countless hours of heartache and frustration. Depending on the complexity of your estate, these documents could potentially save a lot of money. Visit with a lawyer who specializes in estate planning to determine your needs and the best estate plan for your situation. Your survivors will thank you.

9. Estimate your retirement needs. If you are only a few years away from retirement, you may have a good idea of how much you will need to maintain your quality of life. Spend an evening going through your investment portfolio and determine if you are on track. If you are far away from your retirement date, take a look at your current progress and determine if you are on track based on back of the envelope estimates. The further away you are, the more flexibility you have.

10. Meet with a professional financial planner. Anyone can benefit from a second set of eyes looking over your retirement plan, especially from someone who does this for a living. You should meet with a professional even if everything appears to be on track because you may have missed an important part of your retirement planning. If everything is going well, then you can be more relaxed knowing your retirement plan is on track.

Source

Deferring Your Benefits Could Pay Big!

2010-07-15T13:12:00.000-07:00

Retirement is something all adults look forward to, and one of the benefits that comes with retirement is collecting Social Security. However, holding off on collecting Social Security could really reap its benefits in the long run.

For example, if you are in good health and believe you could live past age 78 or have a significant amount of savings, deferring your payments until age 66 may be a good idea.

A more specific example would be the following: a retiree has $200,000 in savings with a five percent return. If this retiree waited until age 66 to collect, the benefits could last until age 94. If they started collecting at age 62, however, the benefits may last only until age 87.

In addition, deciding whether to defer your payments or not may depend on your marital status.

If you are married, and one spouse is still working, it would be better that the working spouse defer their payments and the unemployed spouse begin to collect.

It would also be a good idea if one spouse has more savings. In this case, the partner with the higher savings that they defer and their partner begin to collect.

An additional reason to defer would be if one spouse passes away before the other. In this case, the living partner’s payments increase because they receive the deceased partner’s returns.

There are several instances in which deferring payments may not be the best decision, however.

This is applicable if, by postponing payments, there is a chance you may go into debt. If that’s the case then don’t defer and start collecting when you are eligible. Also, if you are not in the best health then collecting when you are able would be the best decision.

To see the difference in the amount of benefits you could receive, click on this New York Times chart.

Fore more information on Social Security Benefits visit Analyze Now!
and to calculate your benefits, try the Benefit Calculator.

Source:
New York Times

Building a Retirement Nest Egg

2010-06-30T06:28:00.000-07:00

For many young adults, planning for retirement is something that is not necessarily in the forefront of things. In fact, a large number of these individuals tend to take this for granted with the belief that there will always be time for this later on in life. Reports show that three-fourths of the 600 eighteen to thirty-four year respondents surveyed in 2008 were in debt. Today, this number is still alarmingly large, add to this the downturned economy in the past few years.

There are many reasons why many people put aside planning for their retirement. For one, they are limited by present day realities, such as paying off student loans. At this age, one also tries to make good investments for the future, such as buying a home and various properties. Another reason, perhaps a somewhat inexcusable reason for getting in debt, is the spend-thrifty attitude many of us have, especially when it comes to making unnecessary upgrades of technology.

While the mindset “enjoy it while you can” is something we cannot really completely dismiss, it is important to be reminded that planning your retirement has to start sometime. However, changing lifestyles and habits that have been deeply ingrained to our systems may make this transition somewhat of a challenge.

What exactly is retirement planning to begin with? As I’ve mentioned, many probably do not even think about it. Perhaps the only reference to retirement in their minds is anchored only on a vague understanding of their 401(k)’s, pension benefits and nothing else.

Retirement planning is basically allocating funds or finances for retirement. This can include setting aside money in a time deposit , making financial investments, and obtaining assets that can provide a steady source of income when one reaches his or her retirement. Basically, retirement planning aims to allow you to become financially independent so that you can live comfortably during your golden years, or even earlier should that be your desire. This also relieves you of the burden that an unstable economy, social security and pension, especially as the world economy continues to change continually.

The first step to building that nest egg and effectively getting on your retirement plan started must be to eliminate debt as soon as possible. Keep in mind that the larger the debt, the larger the sum of money that is lost in interest and other charges. By simply reducing debt to a bare minimum, one can save a whole lot of money that can be earmarked towards a retirement fund.

Secondly, getting to know your retirement benefits and make the most of your 401(k). It would be highly beneficial for one to be able to understand and maximize these benefits. After all, you are working hard for this anyway.

For those who do not really know how to start going about planning for their retirement funds, consulting a professional or utilizing online financial software can help clarify issues and concerns. This will allow you to efficiently and realistically create a retirement plan. These planners or software can also help you assess your present finances and make realistic allocations for savings. It also helps calculate your funds based on taxes and various hypothetical situations that will allow you to make informed choices.

Lastly, for a good plan to work, there must be execution. After planning the lifestyle changes you are willing to make and setting goals for your retirement nest-egg, sticking to it is key. Without a follow-through to plans, you will have just wasted your time and effort into nothing.

Essentially, living for today is a good thing, but making sure you have a good, comfortable future is equally important.

Marina Chernyak is the co-owner of 1001Shops LLC, a one stop shop of unique imported products like Walking canes, Music boxes and many more.

Source

Retirement

2010-05-14T08:29:00.000-07:00

Be sure you're saving enough for retirement
Better to find out now whether you're falling short of your target while you still have time to boost your savings.
Ingredients:
• Internet access.
• General estimates of how much you have already saved.
• Your projected Social Security benefits.
• How much you expect from a pension.
• When you expect to retire.
Instructions:
• Go to this retirement savings calculator.
• Fill in information about your salary, accumulated savings and future sources of retirement income.
• The calculator will estimate how much you need to save each month to reach your goal.
If that amount is more than you are currently saving, consider boosting your 401k contribution. Ideally, you should strive to save 15% of your gross salary (including employer contributions) over your career. If you get a late start, you might have to boost your savings to 25% or more of your pretax income, postpone your retirement date or both.
For 2010, you can contribute up to $16,500 to your 401k or similar employer-based plan or up to $22,000 if you are 50 or older.
Total time: five minutes.

Set up a great retirement savings plan at work
You'll cut your taxes and maybe get free money. And you can rebalance automatically to take the emotion out of your decisions.
Ingredients:
• Your 401k enrollment form.
• A plan for divvying up your assets.
Instructions:
• Choose the type of 401k plan you prefer. For an upfront tax break, elect the traditional 401k. If you prefer deferred gratification, choose the Roth 401k if your plan offers it.
• Select your investments.
• Don't neglect to fill out the part that asks you to name beneficiaries, so your money someday falls into the right hands.
Total time: seven minutes.

Calculate your future Social Security benefits
You'll know how much you can expect as a basic income stream in retirement.
Ingredients:
• Internet access.
• Social Security number.
• Date of birth.
• Mom's maiden name.
Instructions:
• Go to the Social Security Administration's Retirement Estimator and provide the information requested.
• The Retirement Estimator calculates your benefits based on your actual earnings history. Estimates are given for early reduced benefits at age 62, full benefits at your normal retirement age and maximum benefits available at age 70.
You must be younger than 62 and not currently receiving benefits to use the estimator.
Total time: two minutes.

Leave your cash to the ones you love
The beneficiary designations on your mutual fund and brokerage accounts supersede those in your will. If the information is out of date, the wrong person could inherit your money. Most brokerages and mutual fund firms make it easy for you to change your beneficiary.
Ingredients:
• Internet access.
• IDs and passwords for your accounts.
• New beneficiaries' Social Security numbers, dates of birth and addresses.
Instructions:
• Log in to each account, and navigate to "beneficiaries" to make sure the names and contact information are up to date.
• As necessary or desired, change the names of beneficiaries or reallocate the shares of the account they will inherit.
Total time: five to 15 minutes, depending on the number of changes.
Source

Homeowners Tips

2010-05-14T08:07:00.001-07:00

Update your homeowner’s policy -
Your home may be worth more than it's insured for.
Ingredients:
• Internet access.
• Year your home was built.
• Size of living area.
• Size of attached features.
Instructions:
• Visit AccuCoverage.com to verify the current replacement value for your home of up to 5,000 square feet and containing up to four units.
• Fill in a worksheet to create a report ($7.95) based on your information and the reconstruction-cost data that the insurance industry uses.
Total time: 15 minutes.

Snap digital photos of your household belongings -
The images will help back up an insurance claim if your possessions are destroyed or stolen. A little bit of work now can save you a lot later.
Ingredients:
• Digital camera.
• USB flash memory drive.
• Computer.
Instructions:
• Take pictures of the significant items in your house.
• Download the images to the flash drive or upload them to the Web so you can access them off-site. Consider saving the images in a safe deposit box. DO NOT LEAVE THEM SAVED ON YOUR HOME COMPUTER, it may be stolen or destroyed.
• Ideally, the images will be the starting point for a complete household inventory, in which you itemize your furniture, jewelry and collectibles, and record details such as purchase price. Visit the Insurance Information Institute's Know Your Stuff tool to maintain an online record.
Total time: 14 minutes for a four-bedroom home (time will vary according to number of possessions).

This is also a good idea if making a Last Will & Testament.
Source

7 ways you may be hurting your 401k

2010-05-13T08:30:00.001-07:00

The typical 401k balance rebounded in 2009. Above-average market returns and continued worker and employer contributions caused the average 401k balance to climb from $57,150 in 2008 to $70,970 in 2009, according to a recent Hewitt Associates analysis of 3 million employees at 120 large companies.
But average balances were still below the 2007 peak of $79,570. And many employees continue to make 401k choices that may not get them to a secure retirement.
Here are seven 401k mistakes too many workers continue to make.
1. Missing the match
A 401k match is part of your compensation, but you give it up when you fail to participate fully in your retirement account.
About 28% of 401k participants do not contribute enough to their 401k's to receive the full employer matches, Hewitt found.
2. Favoring company stock too much
Among workers offered stock options, the average allocation to company stock was 19% in 2009, up nearly 4 percentage points from 2008. About 13% of these workers had half or more of their 401k balances in their employers' stock.
It's generally best to diversify your nest egg beyond the company you work for.
3. Making early withdrawals
More than a quarter (26%) of employees had an outstanding 401k loan in 2009, up from 23% in 2008. And 7% of participants took an early withdrawal. 401k distributions before age 55 for retirees or age 59-1/2 for current employees carry a 10% penalty on the amount withdrawn in addition to regular income tax due.
4. Ignoring the Roth option
While traditional 401k's give you a tax break in the year you make the contribution, income tax is due in retirement. A Roth 401k allows you to pay the tax upfront and take retirement withdrawals tax-free.
5. Blindly accepting the default investment
More than half (58%) of the large employers surveyed automatically enroll workers in retirement accounts unless the employees specifically opt out. The majority of these companies (69%) use target-date funds as the default investment.
6. Neglecting to rebalance
Market appreciation boosted the amount of equity employees held in their 401k plans from 59% in 2008 to 67% in 2009. Investors wishing to maintain a specific proportion of their portfolios in the stock market need to shift some of their money back into more conservative investments in years when stocks do well and transfer money into equities in years when the market falls.
Failing to participate
Workers were able to recover some of their 2008 losses simply by continuing to save more in their 401k plan. But just over a quarter of workers who have access to a 401k don't participate.

Source

Oops, I Forgot to Save for Retirement!

2010-05-12T11:27:00.000-07:00

Maybe you cared more about Woodstock than shares of stock. Perhaps you spent more time on disco than on buying -- or shorting -- Cisco. Or it could be that you kept a better eye on your favorite VJ at MTV than on your 401(k).

Whatever the reason, you've put off saving for your retirement -- until now. But now, you worry that you're too late. That you'll never amass enough money. That your retirement dreams will stay just dreams.

If that's you, then I have something to tell you. Put your ear close to your monitor so you can hear it loud and clear:

It's not too late!

Regardless of your age, your income, or your hair count, it's not too late to plan for retirement and make your future more comfortable. Here are three ways to get your retirement plan rolling; stay tuned for a way to get eight more ways to supercharge your retirement.

1. Save like mad

Want a half-million dollars? Sure you do. Think it's too late to have that much before you retire? Perhaps not. Start saving $1,000 a month right now, and in 20 years, you could have a portfolio worth more than $500,000, assuming you earn an average annual return of 8%.

Don't think you can save that much? You might be wrong: Saving $1,000 doesn't necessarily mean you have to cut your spending by that much. If you contribute to a tax-deferred retirement account -- such as a traditional 401(k), 403(b), 457, or other employer-sponsored plan -- every dollar you contribute reduces your taxes, since contributions are essentially tax-deductible. So if you're in the 25% tax bracket, for example, a dollar deposited in your retirement plan cuts your tax bill by $0.25. Put another way, you have to reduce your spending by only $0.75 to save $1.

And the news gets even better if your employer matches your contributions. To add $1,000 a month to your account, you may have to contribute only $500 to $700 (depending on the matching formula). Your employer will make up the difference.

2. Spend smart

So where will you get that extra money? You'll stop spending cash` on things that aren't very important to you. You'll get super-basic cable -- or cancel cable altogether -- instead of paying $70 to $100 a month for 300 channels you never watch. You'll cancel that gym membership you never use. You'll bring your lunch to work, stop buying beverages that are too sugary and expensive, and stop smoking. You'll call around to see whether you can get better deals on your home and car insurance. You'll get videos from the library for free, instead of from Blockbuster or Netflix. You'll cancel the cell phone service that isn't worth $100 a month -- that's $1,200 a year! You'll have picnic dinners by the lake or on the beach, instead of going to expensive restaurants all the time.

There are hundreds of ways to reduce your spending without significantly reducing your quality of life. I can guarantee you that if you look at where every one of your dollars goes, you'll find expenditures that could just have easily been savings, without changing the quality of your current life. So act now to improve your future life by spending smart. Even investing $500 a month for 20 years could result in almost $300,000 of retirement potential. Just start saving!

3. Choose a better life

If you're thinking about retirement, it might be because you don't like your current job. Yet if you haven't saved much, you'll have to keep working for a while. So why not consider a career change? Unless your lifelong ambition is to be the next NFL Rookie of the Year or Lady Gaga, it's not too late to be what you want when you grow up. Most professions don't have age restrictions, and anyone can go back to college and earn a degree.

Don't just think about how you'll retire, but consider what you want to do with the rest of your life. Is there a job you always wanted to try? A business you always wanted to start? A hobby you could turn into at least supplemental income (which could become additional savings)? Really, if the prospect of working for another 10 to 20 years gives you the heebie-jeebies, spend a few minutes thinking about what kind of work you'd actually enjoy. Go ahead, we'll wait.

[Tap, tap, tap ...]

[Whistle ...]

[Scratch ...]

OK, have some ideas? Good. Spend some time this week investigating what it takes to get that kind of work. And while you're at it, look for employers that offer the best benefits -- a retirement plan match, tuition reimbursement, perhaps a traditional pension, maybe even health care for retirees.

Putting it all together

Even if you can't save $1,000 a month, or if you can't bear the thought of working another 20 years, it's not too late to improve your situation. Saving what you can right now, and combining the eventual income your portfolio will provide with Social Security and maybe a pension, could allow you to retire part time. And that's a lot better than having to work full time forever

Source

Retirement Savings Strategies for Late Starters

2010-05-04T06:55:00.000-07:00

Most people aren't putting nearly enough into their retirement accounts to fund a secure retirement. The median value of retirement accounts, including IRAs and 401(k)'s, for workers between ages 65 and 74 in 2007 was $77,000, according to the Federal Reserve's survey of consumer finances. What's more, 42 percent of workers age 45 and older have total savings and investments of less than $25,000, according to a recent Employee Benefit Research Institute survey. Still, you may not need to delay retirement indefinitely if you have saved practically nothing for retirement in your 50s. Although far from painless, it's still possible for late starters to save enough for a reasonably comfortable retirement. Here are some strategies to ramp up your retirement readiness:

Become a super saver. It's feasible to accumulate a large 401(k) balance within a decade if you do some serious saving. For example, a 55-year-old who has no retirement savings and earns $80,000 a year could accumulate $444,610 by age 65, according to recent T. Rowe Price calculations. To achieve these results this retirement saver would have to save 27.5 percent of pay each year, earn a 3 percent annual raise, collect a 3 percent employer match, and reap 8 percent compounded annual returns. "There is hope and there are ways to do this," says Christine Fahlund, a T. Rowe Price senior financial planner. "You are going to need to cut back on your current lifestyle and continue to do that in retirement."

Take advantage of tax incentives. Workers age 50 and older can contribute up to $22,000 to a 401(k) in 2010, $5,500 more than younger workers. Older workers within certain income limits can also contribute up to $6,000 to an IRA, Roth IRA, or a combination of the two this year. Traditional retirement accounts allow you to avoid taxes on contributions in the years you're saving, but you must pay tax on withdrawals in retirement. Roth accounts don't provide immediate tax benefits, but withdrawals in retirement from accounts at least five years old are tax free.

Consider delaying retirement. You can get by saving less each year if you're willing to delay retirement. Consider a couple, both age 50, currently earning $75,000 annually who estimates they will need $55,000 worth of income each year in retirement. They will receive $35,000 annually from Social Security, but will need to come up with the other $20,000 annually on their own. To reach that retirement income goal, the couple will need to save 18 percent of their income until age 70, or about $13,500 annually, according to calculations by Chris Long, a certified financial planner for Long & Associates in Chicago. However, if the couple is willing to delay retirement until age 75, they could achieve the same retirement income by saving 12 percent of their income annually, or about $9,000 each year. His calculations assume an 8 percent rate of return and 3 percent inflation. "The longer you wait to start saving, the amount you need to save to be able to retire at all increases tremendously," Long says. "You will need to save a lot more because you don't have as much time to compound the growth."

Maximize Social Security benefits. You don't need to save enough to finance retirement entirely on your own. Social Security benefits provide a base for your saving to build upon. Get an estimate of your future Social Security income at ssa.gov. Also, consider delaying the age you sign up for Social Security benefits. Social Security payouts increase for each year of delay between ages 62 and 70. A $750 monthly check at age 62 could be boosted to $1,320 by waiting until age 70 to claim your due.

Downsize retirement expenses. Another way to make up for a lack of savings is to downsize your retirement expenses. Paying off a mortgage before retirement can significantly cut your housing costs. Some retirees also downsize into smaller homes or condos and pocket the extra cash, curb or sell one of their cars, or employ other frugal strategies to significantly decrease their cost of living in retirement. But watch out for new expenses in retirement including travel, leisure activities, and increasing health care costs as you age.

Factor in a part-time job. If you're willing to work part time in retirement, you don't need to save as much, assuming you can find and keep a job. Just over a quarter of Americans between ages 65 and 72 were still working in 2008, according to the Census Bureau. Some 60 percent of the older workers were employed full time and 40 percent worked less than 35 hours a week.

Don't chase returns. Some people who haven't saved enough for retirement try to invest their way to their retirement goals. But the risk of failure using this strategy is high. "You really shouldn't take on additional risk and try to make it up that way," says Long. "There's no way you are going to be able to make some smart investment and play the game really well and make up for not saving." Chasing returns generally hasn't paid off for investors over the past decade, according to recent Fidelity 401(k) data. What has boosted 401(k) account balances is long-term participation in a retirement account, a diversified portfolio, and obtaining an employer match.

Source

How Divorce Affects Retirement Benefits

2010-04-26T08:42:00.000-07:00

Divorce after age 50 can severely disrupt your retirement plans. Access to pensions, retirement account balances, and Social Security benefits are all impacted by both marriage and divorce. U.S. News asked Janice Green, a family law attorney in Austin, Texas and author of the new book Divorce After 50: Your Guide to the Unique Legal and Financial Challenges, how a late-life divorce typically affects retirement assets. Excerpts:

What should you do before a divorce to make sure you are still able to retire?

The first important thing to do is to get a summary plan description of the employment-related retirement plans and see what those say about the pension and 401(k). The next step, after you know what you’ve got, is you’re going to have to value it. Let’s say husband has $100,000 in his 401(k) account and it’s all marital property and he’s 55 years old. That money is obviously not the same in value as $100,000 in a CD somewhere or in a money market account because you can’t get it without penalty and paying taxes on it. But we don’t know when you’re going to take it. We don’t know what tax bracket you are going to be in. The closer and the older people are the less speculation there is in reducing that 401(k) by some factor of estimated income taxes that you would owe if you were to pull that money out.
How do ex-spouses typically split 401(k) and IRA balances?

You can award it all to one spouse or you can divvy it up. If a husband has been paying into that 401(k) or IRA prior to marriage then his separate estate would have a claim to part of that retirement account. In some states they look at the balance on the date of the marriage as his property and everything after that is subject to the division. It’s really wise to divide them by percentages so that it’s not dollar divisions. If you divide it by dollars and the market takes a plunge after the time you reach an agreement, that split is going to be affected. Let's say the value of that account was $500,000 when they reached an agreement and dropped to $350,000 at the time it was divided up. If you have made an award to the wife of $250,000, the husband is going to get nailed because he is sitting there with $100,000, not $250,000. That can make people very unhappy. If there is an upswing in the market, in value, then you may want to allocate that.
What if you started saving for retirement before marriage?

If a husband had put in some money prior to marriage, contributed during marriage, and then there was a divorce, his separate estate has an interest in that retirement plan. You have to carve that out and value that part. It may not be that his entire account is marital property. There can be some tracing out of separate property within that pension plan. He may be putting in work time after the divorce before he reaches retirement age and that could be his separate estate’s interest.
What happens to a pension plan when you get divorced?

A spouse can buy out the non-participant spouse or give them a share of the benefits. Let’s assume the husband has earned the pension through his employment and the wife does not have her own pension. You could place a value on the pension and give it all to the husband and let the wife receive property of equal value. The usual way to achieve a value is though an actuarial analysis of all the elements of the pension plan. Or you could divide the pension by a court order that is 50/50 or some other division. She gets a percentage of whatever his benefit is. You are taking how much of the work time in that pension plan was linked to time during the marriage. A lot of people will opt for dividing the pension equally to avoid having to do an actuarial evaluation.

How does divorce affect spousal Social Security benefits?

They have to be married 10 years for one spouse to avail themselves of the other’s Social Security, if the spouse doesn’t have work credits that exceed half of her ex-husbands. If you’ve got a couple where they have been married for nine and a half or nine and a quarter years, I certainly would be unhappy if I were a spouse and missed getting eligibility for those types of benefits and I needed those benefits. I have slowed down divorces to ride out that eligibility time. I have had situations where the court allowed continuances. It is no skin off the Social Security check of the person that the work credit was created by. In the case of death, the benefit that you can claim is 100 percent of what the now deceased former spouse’s retirement check would be. It’s not limited to the most recent spouse or current spouse. If the guy had serial marriages of 10 year spans and none of his three wives have benefits that exceed his benefits, all three of them can withdraw 100 percent survivor’s benefits.

Source

Ways to cut expenses in retirement

2010-04-12T11:46:00.000-07:00

1. Downsize your home. Once your kids move out of the house, you no longer need a multiple-bedroom home near a good school district. It's not just the mortgage but all the maintenance.

2. Ditch a vehicle. Eliminating a daily commute is one of the biggest perks of retirement. Couples may no longer need two vehicles when they don't travel to separate offices. Ditching a car also will cut your insurance and car maintenance bills. Some retirees who can't or don't want to drive can even go carless.

3. Take required minimum distributions. Those ages 70½ or older must take required minimum distributions from retirement accounts each year. The withdrawal amount is calculated by dividing your individual retirement account and 401k balances by your life expectancy, as determined by the Internal Revenue Service. The penalty for failing to take out the correct amount from your retirement accounts is steep: a 50% tax penalty, plus income tax on the amount that should have been withdrawn.

4. Scrutinize investment fees. Fees and expenses diminish investment returns. Even after you retire, it can pay off to seek out investment options with lower expense ratios and fewer fees.

5. Spend taxable accounts first. You don't have to pay income tax on the money in your 401k's and IRAs until the money is withdrawn. But many types of gains outside retirement accounts are taxed each year. Minimize your tax bill by spending money outside your retirement accounts first. Also, consider strategically spacing your retirement account withdrawals throughout retirement to control your tax burden.

6. Sign up for Medicare on time. Seniors can sign up for Medicare during a seven-month period beginning three months before their 65th birthday.

7. Delay signing up for Social Security. Workers may sign up for Social Security benefits beginning at age 62. But benefit checks are reduced by 20% to 30% for workers who claim their checks before what the Social Security Administration calls the full retirement age. Soon-to-be retirees born between 1943 and 1954 must wait until age 66 to claim their full entitlement. For those born after 1954, the eligibility age for full benefits gradually increases, finally reaching 67 for Americans born in 1960 or later.
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Keep your home safe from burglars

2010-04-12T11:32:00.000-07:00

Develop good security habits. Roughly one-third of all burglaries occur through unlocked doors and windows. You should establish a routine to follow before you leave home, such as making certain that all doors and windows are locked and alarm systems are turned on. In addition, don't hide house keys in obvious places, such as under doormats or on top of the doorframe.

Make sure exterior doors are strong. The doors to your home should be made of metal or solid hardwood and be at least one inch thick. It is also important that your door frames are constructed equally well and that doors fit in their frames securely. A weak door or door frame renders a good lock useless. Add an extra lock for sliding glass doors to prevent them from being forced open or lifted off of their tracks.

Deadbolt locks offer the best protection. The cylinder (where the key is inserted) should be "pick resistant." Some deadbolts are locked with a key from the outside and a thumb turn on the inside. Others, known as double-cylinder locks, require keys on both the outside and the inside. If you install a double-cylinder lock, keep the key within reach of the door in case family members need to leave quickly due to a fire.

Lock your windows. You should lock your windows with key locks or other devices. It is also possible for you to pin the sashes of a double-hung window together by using a removable bolt.

Consider a burglar alarm. Security systems vary in cost, but often the price can be at least partially offset by discounts in your homeowner's premiums. So before purchasing an alarm system, check with your insurance company to see which alarm systems will get you a discount.

Keep your home well lit. When you go out for the evening, leave a few lights on in the house, and leave the outside lights on, too. Place outdoor motion-activated floodlights high out of reach so they can't be easily tampered with. Before going away overnight, put lights and a radio on automatic timers.

Vacation time means extra precautions. You don't want to signal your absence with a pile of newspapers on your stoop and an overflowing mailbox. Temporarily stop your newspaper and have the post office hold your mail until you return. In the spring and summer, have someone mow your lawn, while in the winter, have someone shovel snow from your driveway. If possible, you should ask a trusted friend or neighbor to stop by and check on your home while you're away.
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Most Americans Unprepared for Retirement

2010-04-06T08:13:00.000-07:00

You have probably seen several news reports quoting statistics from the 2010 Retirement Confidence Survey by the Employee Benefit Research Institute. Some of the more interesting figures from the survey are that 43% of Americans have less than $10,000 in retirement savings and 27% say they have less than $1000 in savings. Also only 16% have confidence in their ability to save enough for retirement.
These statistics may not be as bad as they seem. The statistics do not include the value of primary homes or defined-benefit pension plans. Also, you need to consider that some of the survey respondents are still in their 20’s and haven’t had much time to accumulate much in savings.
Even taking these factors into account though it is clear that most Americans need to be doing more in preparation for retirement. They survey showed that many people are unaware of how much they need to save for retirement or how to calculate how much they need to save for retirement. I think it is also clear that without the safety net of Social Security there will be millions of Americans that are never able to retire. These are interesting facts to keep in mind when planning for retirement.
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When to Access Retirement Savings

2010-04-05T13:52:00.000-07:00

The best time to access retirement savings is once you have retired, and do not have a regular paycheck that would otherwise support you. Retirement savings are meant to serve as a main source of income when you are done working.

But even if you don’t need to start withdrawing funds once you have retired, there are rules that require you to do so. You must start withdrawing from employer retirement plans, traditional IRAs, and 401(ks) at the age of 70 ½, and you must take a minimum amount each year. There are no restrictions on when you withdraw funds from a Roth IRA.

How much money should you access? Successful retirements are not just about when to access savings, but how much of the savings to access. You’ll want to take enough to live on, while at the same time preserving assets for growth. You may decide to take more in years you’ve planned travel and gifts, and less in years you’ve planned to live leaner. You’ll want to plan for inflation and increases in the cost of living, and also for the growth of your savings over time. In other words, many factors go into determining your withdrawal rate from your retirement savings. In general, a retirement withdrawal rate somewhere between 4% and 6% is a widely used target.
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21 Ways to Cut Expenses in Retirement

2010-03-24T12:52:00.000-07:00

Few Americans are saving enough to finance a retirement that could last 30 years or more. Workers who haven't accumulated enough to maintain their current standard of living have two choices: delay retirement or learn to live on less money. Those willing to put in a little effort to downsize big and small expenses may be able to get by just fine with a smaller retirement stash. Here are some frugal strategies retirees can employ to stretch their nest eggs:
Downsize Your Home

Once your kids move out of the house, you no longer need a multiple-bedroom home near a good school district. "It's not just the mortgage but all the maintenance," says Jane Young, a certified financial planner for Pinnacle Financial Concepts in Colorado Springs, Colo. "A lot of people like to move into a townhouse where they no longer have to take care of a huge yard." Consider downsizing to a smaller home or condo and padding your nest egg with the extra income.

Ditch a Vehicle

Eliminating a daily commute is one of the biggest perks of retirement. Couples may no longer need two vehicles when they don't travel to separate offices. Ditching a car also will cut your insurance and car maintenance bills. Some retirees who can't or don't want to drive can even go carless.

Take Required Minimum Distributions

Those ages 70 1/2 or older must take required minimum distributions from retirement accounts each year. The withdrawal amount is calculated by dividing your individual retirement account and 401(k) balances by your life expectancy, as determined by the Internal Revenue Service. The penalty for failing to take out the correct amount from your retirement accounts is steep: a 50 percent tax penalty, plus income tax on the amount that should have been withdrawn.

Spend Taxable Accounts First

You don't have to pay income tax on the money in your 401(k)'s and IRAs until the money is withdrawn. But many types of gains outside retirement accounts are taxed each year. Minimize your tax bill by spending money outside your retirement accounts first. Also, consider strategically spacing your retirement account withdrawals throughout retirement to control your tax burden.

Scrutinize Investment Fees

Fees and expenses diminish investment returns. Even after you retire, it can pay off to seek out investment options with lower expense ratios and fewer fees. "A lot of times index fund expenses are every low--half of 1 percent," says Robert Krakower, a certified financial planner in Huntington Beach, Calif., and author of Redefining Retirement for a New Generation. "If you have a mutual fund that is changing you 2 percent, try to narrow your expenses." Also, take care to avoid banking fees in general, including trading fees and ATM or overdraft charges on your checking account.

Sign Up for Medicare on Time

Seniors can sign up for Medicare during a seven-month period beginning three months before their 65th birthday. Fill out an application right away to avoid a Medicare Part B premium increase of 10 percent for each 12-month period of delayed enrollment. Seniors who are still working and receive health insurance through their employer after age 65 need to enroll within eight months of leaving the job to avoid the penalty.

Find the Best Medicare Part D Prescription Drug Plan

Every year the premiums, deductibles, and cost-sharing provisions of Medicare Part D prescription drug plans change. Retirees should go to medicare.gov and compare expected out-of-pocket costs for necessary drugs under all the plans available in their area. Seniors can switch plans once a year during the open enrollment period.

Delay Signing Up for Social Security

Workers may sign up for Social Security benefits beginning at age 62. But benefit checks are reduced by 20 to 30 percent for workers who claim their checks before what the Social Security Administration calls the full retirement age. Soon-to-be retirees born between 1943 and 1954 must wait until age 66 to claim their full entitlement. For those born after 1954, the eligibility age for full benefits gradually increases, finally reaching 67 for Americans born in 1960 or later.

Exit Expensive Cities

When you are no longer tied to your job, you are also no longer tethered to an expensive city with a high cost of living. Consider moving to a locale where your retirement dollars will stretch further. "There are a lot of cities that are much cheaper than the major metropolitan areas," says Young. "When people live in New York or California, you can save a huge amount of money by moving to the Midwest or South." Even moving to a low-cost location in the same state can have some benefits. Look for places with lower taxes, more affordable housing, and plenty of amenities for seniors, such as great healthcare facilities and affordable recreation.

Travel Smart

Many working Americans do most of their traveling during weekends and national holidays. Seniors have the luxury of being able to travel on weekdays and off-peak times and taking advantage of last-minute deals.

Ask for Senior Discounts

One of the greatest perks of getting older is qualifying for senior discounts. Some businesses, including Kohl's Department Store and Hyatt Hotels and Resorts, offer well-publicized senior discounts. In other cases, companies provide discounts only to those who ask. Cash-strapped retailers may increasingly be willing to negotiate on price with repeat customers. AARP also negotiates discounts on behalf of its members.

Find Age-Related Tax Breaks

Some states exempt pension income from state income tax. Other locales offer age-related property tax exemptions or deductions. Contact the state department of revenue or a local tax expert to find out about tax breaks for seniors.

Ditch Your Land-Line Phone

Paying for both a cellular phone and a house phone is a redundant expense. Pick out the type of phone service that is most useful to you and cancel the other.

Get Rid of Cable TV

Many people are cutting back on the hundreds of TV channels they hardly ever watch. Consider reducing the number of channels you pay for, making do with broadcast TV, or watching free TV programs over the Internet.

Find Free Entertainment

Sometimes seniors actually increase their spending on entertainment in retirement because they have more free time. "They have an extra 2,000 hours a year to fill, and it can potentially cost money and you need to be wary of that," says Jill Hollander, a certified financial planner for Financial Connections Group in Corte Madera, Calif. Come up with a plan to volunteer, garden, or play golf before you retire, and try not to take up expensive new hobbies.

Resist Your Grandchildren

New grandchildren are money magnets. It's often difficult to resist buying them an expensive toy or top-of-the-line stroller. "On an emotional level, you want to give, but on a financial level, you certainly don't want to become dependent on your children and grandchildren at the end of your life," says Hollander. Instead, offer your baby-sitting services. You'll get to know your grandchildren better, and the parents will appreciate some time to themselves.

Eat Out for Less

Seniors are famous for taking advantage of the early bird discounts many restaurants offer to customers who dine before peak dinner hours. "Share meals at a restaurant and go to happy hours," recommends Young. Also, bring your own wine to establishments that don't charge a corkage fee. And consider filling up at home and purchasing only appetizers or dessert.

Learn to Cook

Busy employees often don't have time to linger over meals, and many lunches and dinners are rushed and thrown together. But home-cooked meals often taste better and are more budget-friendly than convenience food. Invite a few friends over and make preparing a meal together part of the evening's entertainment.

Buy Used

Almost all consumer goods, including books, DVDs, and furniture, can be purchased used for a fraction of the retail price. Sometimes you can even afford higher-quality products if they were first lightly used by someone else. Check out online message boards, auction sites, and community bulletin boards before making your next purchase.

Comparison Shop

There's no excuse in retirement not to comparison shop, haggle, and negotiate for the best prices on everything from your credit card interest rate to your latest haircut. "You have the time to budget and plan and think about how you spend your money," says Young. Try to buy items you use frequently in bulk, wait for sales, and clip coupons.

Eliminate Debt

Pay off as many debts as possible before retirement. "Most folks should really plan to have their mortgage paid off at the point of retirement. Then you have eliminated a fixed expense," says Phil Fragasso, president of investment advisory firm I-Pension in Newton, Mass., and author of Your Nest Egg Game Plan. "There is never a good reason to carry credit card balances, but especially so in retirement." Eradicating your mortgage, car payment, and credit card balance gives you more money to spend in retirement.

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Three Tips to Help Planning Retirement

2010-03-23T07:45:00.000-07:00

Thinking about retirement is not usually on the top of our list of things to do. Then suddenly we reach the point in life when retirement is close to becoming a reality. At that point, you really need help in planning your retirement. Sure, we think about it from time to time, but never take any action on our thoughts. Don't let lack of action destroy your retirement, and leave you working well into your seventies. Use these three tips to help plan your retirement and to get started today.
1. Be Realistic about Retirement. Most people don't take the time to sit down and figure out how much money they will need for their retirement. Here is an easy way to plan what you'll need for retirement. Take the amount of money you are now living on per year, and subtract the amount of money you can save once the kids move out, and you downsize to a smaller home and car. Take that amount and multiply it by how many years you think you will need to live on your savings. The average life expectancy is 80 years.
2. Make a Budget. This will be one of the biggest helpers for planning retirement finances. Take out a sheet of paper and write down all your monthly expenses. Include your utilities, credit cards, groceries, and everything that you spend money on through the month. Make sure that you add a set amount for retirement savings. The next step is to subtract this amount from your take home income. Do you have anything left over? If you do, that is excellent. You can use these savings for a rainy day account.
3. Cut Back on Expenses. You already knew this was coming. You have a budget, and know what you are spending; now it's time to see where you can cut back so you can put more money into your retirement account. You don't have to cut out all the luxuries in your life, but you might find that by renting movies more often, rather than taking the family to the theater will let you enjoy more luxuries when you retire.
These three tips will help you get started saving for your retirement. Of course, there are many resources available to help planning for retirement. There are many aspects of retirement to consider as well- your health, your social life, your leisure activities and hobbies. By following these three tips, you will be taking action to help you plan for the best retirement possible.
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5 fixes for retirees' broken nest eggs

2010-03-16T07:01:00.000-07:00

Recent retirees with withered 401(k) plans have been the hardest hit by the recession. They still need growth to finance 20 or even 30 years of retirement, but they also need to protect their principals, because there's no income from work to help recoup losses. Declining balances mean many retirees need to re-evaluate their income strategies.

Diversify and rebalance
One way to weather the recession is to rebalance into a reasonably diversified portfolio: perhaps 50% in stocks, 40% in bonds and 10% in cash. That generally means reallocating more money to stocks during bear markets and shifting money into bonds or cash during bull runs in order to maintain the same percentages.

Shift slightly more conservative
The recession has many people re-evaluating the level of risk they can live with, and some are seeking greater safety. "You could become more conservative in terms of your overall asset allocation and still have your assets last when you combine that more conservative portfolio with several different lifestyle changes -- such as a reduction of overall expenses and not taking any cost-of-living adjustments on withdrawals for a five-year period," says Ken Hevert, the vice president of retirement-income product management for Fidelity Investments, about switching to an asset allocation of 50% bonds, 20% stocks and 30% cash in retirement.

Leave the market until it stabilizes
Some retirees don't have the stomach for the wild swings in the stock market that have made headlines over the past several months. "Going all to cash for a two-year period and then rebalancing to the 50% equity portfolio also proved to work well," Hevert says. "You are giving up the potential for gain in equities in the short run, but it still improves the overall longevity of your money."

Convert to all cash and bonds
While cash investments preserve principal, most don't pay enough interest to stay ahead of inflation, which will eat away at your spending power in retirement. "Going all to cash, while it may feel safe in the short run, in the long term, that's where the real risk is for retirees," Hevert says. "The strategy that is the hardest to make work is if you go to an all-cash position for the remainder of your retirement."

Fix it and forget it
Some retirees want to put their diversified retirement investments on autopilot and can't be bothered to rebalance and re-evaluate investments every year. But this strategy is unlikely to help your savings last through 30 years of retirement, especially if that retirement began during a recession.
"You cannot just diversify and wait in this market," says Mark Kollar, the CEO of Kollar Financial Strategies in Rosemont, Ill. "That works great in an up market, but unfortunately, people will be devastated by doing nothing."
Source

Car Repair Tips

2010-03-16T06:30:00.001-07:00

When you're shopping for a reputable mechanic, look for certification, experience, warranties and reasonable repair costs.
Talk to Friends
Ask your friends and family for places they can recommend — and places to avoid. There is no substitute for a thumbs-up from someone you trust.
Seek Certification
Check to see if your mechanic has an Automotive Service Excellence (ASE) certificate. Also look for trade school diplomas and advanced course work certificates.
Ask About Warranties
Parts are always under some sort of warranty, but there are no standard warranties for labor. A labor warranty should be at least 30 days, although three months is preferable.
Get It in Writing
Don't authorize work to be done without a written estimate that details both parts and labor charges.
Beware the Upsell
While preventative maintenance is a smart defense against future repairs, don't feel pressured into an upsell on the spot. If you're not sure, tell the mechanic you need a few hours to do some research before you decide.
Check Costs
If you need a minor repair, get several estimates. This will help you find a solid mechanic when time is not an issue. Try to get at least three estimates with as much detail as possible.
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Money in your 40's

2010-03-09T06:47:00.000-08:00

In your 40s, there's one figure you need to keep in mind: $1,157.50. That's the average monthly Social Security benefit received by retired workers as of April 2009. Those collecting based on a spouse's earnings history received an average monthly benefit of $570.50.
So if you're a married couple and can get by on $20,000 or so a year, you may not need to worry about saving much for retirement. For everybody else, though, retirement savings need to be a priority.

It should have been a priority all along, of course, but the 40s is a crucial decade for building wealth. It's likely that your income is higher and your net worth is expanding, but your money may not seem to go far because you're grappling with such big expenses: homeownership, your children and their educations, paying down debt.

Credit card balances are ticking up. A majority of people in their 40s carry credit card debt, and the median balance is $3,800, sharply higher than the $3,000 carried by households in their 30s. The percentage carrying big balances is up as well: 14% of people in their 40s have more than $10,000 in credit card debt, compared with 6.4% of people in their 20s and 12% of people in their 30s.
Source

Your Retirement Depends On You!

2010-03-09T06:11:00.000-08:00

As unemployment nears 10 percent and with no end in sight for the worst downturn in the job markets since the Great Depression, a structural change is occurring in the American workforce that is forcing many of us to become more self-reliant on matters of retirement.

The reality is that the U.S. economy is not simply going through a cycle but is undergoing a structural change that will alter for years the employment picture.

Companies are becoming conservative in their hiring practices, and managers are constantly looking for ways to stay lean in their employment practices.

What we are seeing is a shift towards an era of relying more on contract workers, part-time employees, and consultants to make up the bulk of the workforce rather than full-time employees.

And many of these workers will not be provided any retirement benefits.

The changing dynamics of the workforce is forcing individuals to pay more attention to their retirement plans.

Workers who are not employed with full-time benefits will now need to set aside an even greater percentage of their income for retirement through disciplined savings.

Traditional pension plans will become a less dependable way to build future income. And with Social Security facing future funding problems, future retirees are, more than ever, on their own.

The steps towards a retirement strategy are straight forward but require thought. Do the following as a start:

1. Add up your assets that are available to fund retirement

2. Determine how much you can save each year

3. Make assumptions about rates of return and inflation rates

4. Decide how much inflation adjusted income you need in retirement

5. Assess where you are (and what you will do if you have less than you need)

If you find that you have less funds than you need, you will need to make some hard choices.

You may choose to take more risk in your investment portfolio to gain greater returns.

But more risk means more possibility of loss.

You may find that your past goals simply need to be adjusted; not a pleasant realization to be sure. But its important that you confront the truth. A successful strategy looks at reality and moves forward from there.

The time is now to put your plan in place.

In the world we live in today, it is clear that you must count on yourself and not others for that comfortable retirement you hope for. Company pensions are a help, but not a guarantee. Social Security can provide assistance but who is to say what that will look like in the future. Develop a plan and execute.

You have control over your future; rely on yourself to make your dreams a reality.

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Preparing for Retirement: Involve a Financial or Credit Counseling Service

2010-02-26T06:48:00.000-08:00

Getting to retirement is the goal that many people work towards for their entire lives. You've worked hard and saved money while putting the kids through school and now you plan on taking some time off for yourself and enjoying the golden years. But before you do this, there is one last thing that you need to do: you need to make certain that you've taken steps to protect your finances.

A problem that many retirees have with being retired is grappling with the fact that they now make less money. The money given out by Social Security and retirement benefits does not equal the amount earned in most full-time jobs. As a result, many people who retire have to change their lifestyles in order to insure that they don't run into debt issues.

As a retiree (or someone who is close to retiring) you must be certain that of two major things: A) that you are aware of your many financial options (401k(s), Roth IRA's, pensions, etc...) and B) that you can design a sustainable budget for yourself and/or your spouse to comfortably live off. If you fail to do this there are ways to salvage your financial situation (such as attaining credit counseling or debt management services from a credit counseling agency such as debthelper.com), but it is always better to avoid those kinds of situations in the first place.

According to a Forbes article,

"The area where the most near-retirees seek advice [in] is regarding how to invest their retirement savings... The two issues about which near-retirees say they believe it is most important to receive advice, however, are how to manage assets and draw income from their savings in retirement and how to pay for health care--challenges sometimes overlooked in advisor consultations"

As a retiree, you will be eligible for a whole slew of new benefits, exemptions, and financial options that were previously unavailable to you. The field is complex and difficult to navigate, with "...only 10% of near-retirees feel[ing] confident about handling their retirement financial affairs on their own". If you feel like you are in over your head, then worry a little- but you don’t have to feel overwhelmed. If you feel like you are sinking in a stormy sea keep this in mind: many other people are in the same boat as you and as the old adage says, 'many hands make for light work'.

But if you just cannot figure things out and the boat looks like it's starting to capsize (or if you just want to be certain that it won't) you should seriously consider contacting a professional individual or organization in the field of personal finance for advice. Counseling sources are around for a reason, so use them when you have the chance. According to the Forbes article, "Evidence indicates that near-retirees who receive advice on these two subjects are more focused on them and boast higher perceived readiness" while people who receive it while they are retired feel safer and reassured.

So keep your head up, your eyes open, and figure out what would be the best decision that you can make. Like the character Ethel suggested in the movie “On Golden Pond”, life doesn't end after retirement. “Life marches by, Chels. I suggest you get on with it”.

Take that trip to Europe or Florida in celebration of your newfound freedom or stay in your neighborhood relaxing– just be sure that everything is squared away and that the light on the stoplight is green for go.
Additional Sources:

Forbes Article on retirement advice: Article

NY Times Article on professional financial planning and advice: Article

NY Times Article on 401k(s), Roth IRA's, and additional financial complications: Article

Non-Profit debt help and credit counseling agency: debthelper.com

Setting Up a Retirement Income Stream Is Not a Simple Task

2010-02-25T06:19:00.000-08:00

As retirement nears, there is more to think about than just which custodian we will use to roll over our retirement account once we leave our employer. Our retirement nest egg must not only supplement Social Security and any other streams of income we may have available, but it must also last the duration of our retirement years.

Retirement lasts a long time

Retirement has changed over the years. A period of life that used to be brief, retirement now lasts about 30 years for many people. The retirement period is almost as long as the time spent working.

With that in mind, planning an income stream in retirement requires careful consideration. It is not as simple as moving the funds out of the employer’s account and into a bank savings account or CD. Inflation will quickly erode the spending power of the nest egg.

While we don’t want to be overly aggressive in investing our retirement nest egg, we still should use a somewhat conservative combination of investments to help the income stream last the course.

Income streams for different needs

During our retirement period, we find that our cash flow needs change. Usually the earlier years in retirement require larger cash flow. There may still be a mortgage and/or car payment. Travel and vacations are usually more frequent as well.

Once the mortgage is paid off, expenses may decrease. However, there is still the possibility of additional health care expenses in the later years.

Income streams for different time periods

Another consideration when planning retirement income is the market volatility. If all funds are invested with the same asset allocation, a terrible market, like 2008, can greatly impact a retiree’s ability to fully fund all of their retirement years.

With that in mind, funds should be separated so that monies being used in the near future are invested less aggressively, and more securely, than cash that will be needed 10 or more years from now.

Multiple options for current needs

Current cash flow needs can be funded in a variety of ways. Options include, but are not limited to, CDs, mutual funds that invest in dividend-paying stocks, bond mutual funds, and single premium annuities.

CDs are currently not paying high interest rates, but it may be possible to get better returns than a regular bank savings account without taking on much additional risk. While it may not be the best choice for a large portion of retirement funds, it can work for a small portion.

Mutual funds that invest in either dividend-paying stocks or bonds will provide larger gains and higher interest rates than what is presently available with a CD. Since returns will fluctuate, this option should also be used for a portion of the portfolio.

Lastly, annuities are a great vehicle for creating a guaranteed income stream. There are many ways to set it up, depending upon the retiree’s goals. While they are great for short term, investors should be careful about tying too much up in one investment.

A financial professional can help a retiree create a long term action plan for their retirement income needs. Remember that there is a difference between a registered representative and an investment advisor. If we choose to seek out the assistance of a financial professional, we should find one who is able to offer financial planning and investment advice.

Source

Losing a Loved One — Survivor's Checklist

2010-02-18T06:49:00.000-08:00

After the death of a loved one, there are many details to handle. This checklist can help you identify information you may need and outline steps to accomplish.

1. First Steps
-Make arrangements with a reputable funeral home as soon as possible.
-If your loved one was a veteran, you may want to contact the Department of Veterans Affairs at 800-827-1000 to inquire about possible burial arrangements. Your state's department of veteran’s affairs may also provide burial support or benefits.
-Obtain 10-15 certified death certificates. You will need to send one to the various agencies and companies to make claims or finalize accounts.

2. Locate Critical Documents
-Legal documents, such as last will, letter of instruction, trust documents and all deeds and titles.
-All insurance policies and contracts.
-Recent bank statements, bills, receipts and organizational memberships.
-Last year's tax returns and documents.
-Defense Department Form 214, if your loved one was in the military. If you cannot find the original, you ay request a copy by calling 800-318-5298 or by going to the National Archives website and following the link for veterans and their families.

3. Contact Various Organizations
-Social Security Administration, 800-772-1213, to report the death and apply for any available benefits.
-For civil service employees and retirees, Office of Personnel Management, 888-767-6738, to report the death and check on any benefits if the deceased was retired.
-Life insurance companies to start the claims process.
-Current and past employers for group life insurance benefits or pension plans.
-Fraternal organizations and associations for assistance they may provide and possible group life insurance.
-Banks and credit unions to transfer ownership of accounts.
-Creditors to check for credit life insurance or accidental death life insurance.

4. Contact Various Veterans Assistance Organizations
-For active-duty service members, work with your casualty assistance officer for guidance regarding military benefits and entitlements.
-Tragedy Assistance Program for Survivors, 800-959-TAPS. This group provides a support network for the surviving families of those who have died in service to America.
-For military and family support services, Military OneSource, 800-342-9647, can provide information and links to the American Red Cross and other military emergency resources.
-For retired service members, Defense Finance and Accounting Service, 800-321-1080, for settlement of military retired pay and to start the application process for survivor annuity benefits.
-Department of Veterans Affairs, 800-827-1000, to settle any veterans insurance.
-Your state's department of veteran’s affairs to see if they provide any additional assistance and benefits.

5. Initiate the Estate Settlement Process
-Identify the executor and begin taking inventory of the estate.
-Consider getting the assistance of an attorney and financial planner.
-Ensure all tax returns get filed.

6. Determine All Income Sources and Expenses
-Complete a budget to determine if current expenses will be covered by your income sources.
-Review your finances and consider meeting with a financial planner if you received an inheritance.
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A Do-it-yourself Pension

2010-02-10T11:40:00.000-08:00

If you were hoping to breathe a sigh of relief once you stop working and saving for retirement, brace yourself. Managing your nest egg during retirement can be even trickier. "Once you retire, the math gets harder and the stakes get higher," says June Walbert, a CERTIFIED FINANCIAL PLANNER. An income annuity gives you the power to transform your savings into steady income that's guaranteed to last your entire lifetime — or even over the lifetimes of you and your spouse. Offered by life insurance companies, annuities can be purchased with money from any source, including employer retirement plans, proceeds from the sale of a home, life insurance proceeds and IRAs.

So why aren't they used more often? One particular misperception plays a big role: Many people think that if they die after receiving one payment, they'll forfeit everything left to the insurance company. "Actually, there are many ways to structure an income annuity. You can even guarantee that every penny paid in will eventually be paid out — if not to you, then to your heirs," says Walbert. So how much is enough? "For a truly confident and secure retirement, I like to see that members have enough income to cover all of their basic needs," says Walbert. Recognizing that some of those needs may already be covered by income from other sources, here's how Walbert recommends approaching the annuity decision:

1. Calculate how much you'll need to support your ongoing living expenses — basic essentials such as food, mortgage payments, property taxes, utilities and insurance premiums.

2. Add up all the income that you'll receive from other guaranteed sources, such as Social Security, civilian pensions or military retired pay.

3. Subtract your income from your basic needs. If there's a gap, fill it in with an income annuity.
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Preparing For the Future

2010-02-02T11:51:00.000-08:00

Last fall, the AARP did a focus study of about 42,000 boomers that showed virtually every boomer, regardless of their income bracket felt ill-prepared to maintain their current level of lifestyle into the retirement years. This is an issue that affects all classes. I found this very interesting. Below is a great article written by author Carol Orsborn regarding a conference she went to.
“A few weeks ago, I was invited to speak at an event attended by many of the country’s top philanthropic leaders, who happen to be women. They are CEO’s of their companies, their names are brands, they are familiar faces on television and they’ve authored multiple books. Many of these women were from urban markets, well-traveled and educated. And many of them are, indeed, concerned about the future.”

How do these concerns play out?

The second wife of the multi-millionaire who worries that when he passes, the kids who share inheritance of the company, will combine their pieces to dominate and expel “the woman who broke up the family.”
The CEO of a major company who devoted her life to her career and now faces turning 60 without husband, children or friends. “I may have plenty of money, but who is going to take care of me when I’m no longer able? Who will make the decisions? Visit to make sure things are okay?”
The minority shareholder of a major clothing company that bears her name who has put her savings on the line to litigate against her partner, who has put his son in as president and who is edging her out. She seriously worries about “ending up a bag lady.”
The big-living entrepreneur has made a lot—but she’s spent a lot, too. She’s running so fast and hard, she hasn’t taken time to compare the columns of assets versus debts. In fact, she knows she’s in denial.

Turns out that beneath the facades of the rich and famous, there are major cracks. Maybe this is why so many retire in other, less expensive countries, like Malaysia. Retirement is something on everyones mind.

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Women and Retirement

2010-01-20T06:29:00.000-08:00

This is a guest post from Robert Brokamp of The Motley Fool. Robert is a Certified Financial Planner and the advisor for The Motley Fool’s Rule Your Retirement service. He contributes one new article to Get Rich Slowly every two weeks.

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I don’t know about Get Rich Slowly readers, but I can tell you that the majority of Motley Fool readers are guys, and that’s true of most financial publications.

That men are more likely to be consumers of investment information could explain the gender gap in financial literacy — especially among older Americans — that some studies have uncovered. I don’t mean to demean the better-smelling sex; in fact, some studies have found women deliver better investment returns than men do. But the deficit in financial literacy is especially troubling given the other challenges women face in retirement planning. Some of these challenges are faced by all women, while others pose particular problems for women who are or were married, especially if they put their careers on hold to raise a family.

The Troubling Statistics

Here are some stats to put it in perspective:

•Women, on average, earn 76% of what men earn, resulting in an average lifetime earnings differential of $250,000.

•Women leave the workforce for an average of 12 years to raise children or care for relatives, resulting in a loss of $550,000 in wages over their lifetimes.

•The average woman lives five years longer than the average man. Sounds good, but it means women have to stretch their retirement savings longer.

•Some of the biggest health-care costs are incurred in the year prior to death, which reduces financial resources left to surviving family members. Those survivors are most likely to be women, since wives tend to outlive their husbands.

•Women of the baby boom generation are more likely to be divorced than women from other generations and to have fewer children to rely on in their old age.

•A couple must have been married 10 years before an ex can claim spousal Social Security benefits. But most divorces occur within the first seven years.

In addition, here are some sobering facts from the Center for Retirement Research:

•As employers drop defined-benefit plans (pensions) for defined-contribution plans (401(k)s), divorced women may suffer. According to the center’s director, Alicia Munnell, “Traditional pensions give wives an automatic claim on their spouse’s benefits, but 40l(k) plans usually do not.”

•Despite being an average of three years younger than their spouses, wives usually retire when their husbands do. This can cut short their careers, savings, and retirement benefits.

•Among single women 65 and older, 28.2% are considered poor or near poor, compared with 22.7% for non-married men and 8.1% for married people in the same age group.

•A married couple’s combined Social Security benefit is reduced by one-third to one-half when one spouse dies. Also, payments received from a defined-benefit pension might be reduced or eliminated.

What’s a Woman to Do?

The solution for all women — single, married, widowed, or divorced — is to take control of their financial futures. It stands to reason that since women live longer, they should consider retiring later. Postponing retirement can mean a larger nest egg and Social Security benefits. Note that Social Security benefits are based on your highest 35 years of earnings. If you worked fewer than 35 years, those no- and low-earning years might be used to calculate your benefit. By working a few more years, you can increase your benefit. Also, non-working spouses can contribute to a spousal IRA, allowing for more tax-advantaged savings.

For married couples, both spouses should be involved in the day-to-day management of the finances. If one person handles the finances and the other doesn’t want to take over after he or she becomes widowed, assemble a list of trusted advisors who could assume those duties.

Remember that a married person can receive a Social Security benefit based on his or her work record or their spouse’s work record, whichever is greater. Because of their lower lifetime earnings, approximately two-thirds of wives receive benefits based on their husband’s record. But if the husband applies for Social Security benefits early — and thus receives a reduced monthly payment — the survivor benefit will also be lower.

For this reason, husbands should consider postponing the application for Social Security benefits as long as possible. The same principle generally applies to defined-benefit pensions, so be sure to consider the benefit to the surviving spouse when you’re deciding when to receive your pension and in what form.

Thinking About Moving to a Retirement Home? Try an Overnight Stay First

2010-01-15T08:49:00.000-08:00

In order to combat the recession, retirement homes are adapting to change. No longer can they only be found in places like Arizona and Florida; states such as Minnesota and Oregon have retirement homes of their own. And not only do more states have retirement homes, but they have good ones. The question, though, is whether you should consider moving into such a facility after you or your spouse retires.

The surprising answer is not that you should consider it, but why you should. For several years now, retirement homes have been offering to allow prospective clients to stay for several nights for a lower fee than it costs to stay in a hotel. The retirement home will often give prospective clients full access to its fitness, entertainment, and dining facilities during their stay in order to allow them to get a feel for the environment. In order to compete and thrive in today's market, it seems that many retirement homes are adopting resort like atmospheres and practices.

Some of the facilities offered are actually quite good, and there is a variety of retirement home types currently on the market. They can range from the traditional homes that many are familiar with to vibrant and personalized communities. For example, the facilities at Wake Robin (located in Vermont) offers its residents houses available to purchase on a fishing lake. Others, such as one located in Oregon, offer free art and language lessons for interested residents.

In short, if you're retiring, consider moving into a new retirement home. Try an overnight stay, and see if it works out for you. At worst, you will have spent a short and inexpensive vacation somewhere new. And at best, you might find a new place to live.

Related Links

Ontario Retirement Communities Association Overnight Stays Guideline

New York Times on Overnight Stays: Article

New York Times on Senior Centers: Article

Earthquake Relief in Haiti

2010-01-14T07:01:00.001-08:00

In an effort to help those who have been affected by the earthquake in Haiti, and their continuing tragedies, Credit Card Management Services, Inc. d.b.a Debthelper.com is now a collection center to help those in need.

Your gift will help distribute relief supplies to children and families impacted by the earthquake and aftershocks in Haiti.

Anything you are willing to provide will be greatly appreciated and invaluable to the families you will be helping. The immediate need is dry foods such as rice, beans; can foods, tents and army type cots, blankets and medical supplies.

Where: 4611 Okeechobee Blvd. Suite 114 WPB, FL 33417

Time: Mon – Fri: 9:00am – 8pm; Sat: 12:00pm – 5:00pm

Information: (561) 472-8000

Debthelper.com

Losey: Retirement Resolutions for Your 50's & 60's

2010-01-07T06:20:00.001-08:00

Question: My husband and I (age 62 and 57) want to make some resolutions to sure up our retirement picture in 2010. Any thoughts you could provide would be greatly appreciated. Bea, Stamford, CT

Answer: Bea, here’s a checklist to get you on track in 2010!

1. If you haven’t maxed out your 401k/403b contributions at work, you are eligible to take advantage of what is known as the catch-up provision. In essence, if you haven’t saved as much as legally possible every year you’ve been working, you are able to contribute an extra $5,500 per year (over and above the legal limit - $16,500) into your retirement plan in 2010.

2. If you have a spouse, family and assets to protect, I think you should investigate long-term care insurance. Long-term care protects you and your family from the emotional, physical and financial pain that a health issue can have on them. Take advantage of 10-pay plans which allows you to pay the entire cost of the policy off in 10 years, while you still have earned income, a job.

3. Start paying down your non-deductible debt such as credit cards and auto loans. Try to be debt free, perhaps with your mortgage being the only exception, by the time you retire. If you can pay off your mortgage too, more power to you. This can free up a lot of cash flow and keep your expenses low in retirement.

4. Review your investments and asset allocation. Make sure you're NOT too heavily invested in equities (no more than 50% to 60%) or your own company stock (no more than 10%).

5. Consider accumulating up to three years worth of income in savings, CDs, money markets or treasury bills. This is where you should start taking money from when you retire. I use this “safe-money” benchmark strategy with my retired client so the money they need is in the safest yet lowest yielding investments where their principal is protected. It helps to weather the ups and downs of the stock/bond markets where the rest of their long-term money is allocated and diversified properly.

6. Finally, review your estate plans with an estate planning attorney and consider reducing and eliminating unnecessary insurance coverage to free up cash flow for income in retirement.

Bill’s Bottom-line: Take action today AND Happy New Year!

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Retirement Tips for Individuals

2009-12-31T11:09:00.000-08:00

Set a Goal - "I think I can save $25 a paycheck." It's easy to procrastinate so set up a "painless" payroll deduction for saving. It doesn't matter if the money goes into a 401(k) plan, an IRA or into a plain, old-fashioned savings account, just start saving. You can start with a small amount and increase it whenever your circumstances allow - like when you get a raise, your car payments end or you get a bonus. Pay yourself now, you'll thank yourself later.
Open an IRA - IRAs are easy to get, easy to contribute to and easy to save with. Most Americans can set up an IRA - whether it's a traditional IRA or a Roth IRA - and save on taxes. Find out more about IRAs from your bank or financial institution or the resources below.

Learn About Your Employer's Retirement Plan - If you are covered under your employer's retirement plan, your employer is required to give you a plain language explanation of the plan called a "summary plan description." It describes your rights under the retirement plan. To get a summary plan description, ask the plan administrator or your employer.

Review Your Individual Benefit Statement - Your individual benefit statement shows your total plan benefits and the amount that is vested, or fully owned by you. To get an individual benefit statement, ask your plan administrator or employer.

Sign Up for 2009 401(k) Contributions - If you are covered under a 401(k) plan, you may have to designate the amount of money you want taken out of your salary and contributed to your 401(k) account by the end of 2009. The 401(k) limit is $16,500 for 2009 ($22,000 if you are 50 or older in 2009).

Take Your Required Minimum Distributions - If you are 70-1/2, you are generally required to receive a required minimum amount from your qualified retirement plan or IRA by year-end.

Review Your Social Security Statement - The Social Security Administration likely sends you a Social Security Statement each year about three months before your birthday. This statement is your personal record of earnings on which you have paid Social Security taxes and a summary of estimated benefits you and your family may receive as result of those earnings. These benefits include retirement benefits and protection in case you become disabled or die before retirement age. For more information and to request a Social Security Statement, go to www.ssa.gov.

Learn About Your Spouse's Retirement Plan - Many retirement plans provide benefits for spouses. For example, your spouse's plan may provide that you will receive an annuity unless you consent to distribution in another form. Before signing, read and understand any waiver or consent forms for your spouse's retirement plan distributions.

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Live Within Your Own Means, Not the Means of Others

2009-12-16T06:58:00.000-08:00

It's very easy to slip into “keeping up with the Joneses” mode. Your friends have a new TV, or maybe they traded in their old car for a new one. Or perhaps you want to get a nice big house like they have, and take advantage of the homebuyer tax credits at the same time.
From personal experience, I can tell you that it’s not worth the stress and hassle of trying live within other people’s means. My husband is a frugal and savvy buyer, so he when he buys something, he thinks long and hard about it. Me? I’m a bit more impulsive, so living within our means has been harder for me. Fortunately, I’m learning to tune out ads as well as the preferences of others, and am thus more able to focus on what I really want and need.

Cell phones, TVs, and other electronics

It’s easy to get excited about the latest cell phones, MP3 players, game consoles, and flat screen TVs. New models come out so fast that you may quickly lose interest in what you already have. As long as it does the job, however, I’m happy with my electronics. Even though we have some nice items, we’ve thought carefully before making these big purchases.

My husband shopped for at least 6 months before he purchased his new cell phone and plan. Why? Because whenever he makes a purchase, he looks for long term value. He’s the type of person that weighs the pros and cons of the monthly plans as well as the specs for the phone. We bought our last set of phones three years ago, and they’ve served us well.

By planning our purchases carefully, getting a good deal, and not relying on debt, we’ve been able to make guilt free purchases.

Keeping up with cars

I have to admit that I’ve been a victim of car envy. After buying two cheaper cars with cash, I wanted to get a better (in my opinion) car. My friends have had some nice cars, and I wanted to fit in. In the end, I wound up borrowing money at 14% to buy a fancier car. The purchase price was already at the limit of my budget, and the high interest rate was a huge burden.

I would’ve been much better off if I had simple taking the few thousand dollars I had in my savings account and bought a more reasonable car with cash. The resulting car payments were a big strain on my finances, and the money we spent on the car could’ve definitely been used more wisely.

With my husband’s help, we took whatever spare money we could find and used it to pay down that car loan. In the end, it took me four years to pay off my KUWTJ problem!

Buying a house

We made numerous spreadsheets to see if buying a house was better than renting. In the end, we decided that it was a good move to buy (the tax credit was a bonus, not a deciding factor), and we focused on picking the right place for us. While we were house hunting, our friends were also looking for places to buy, but we were careful not to let their preferences influence our own.

When we looked at places, we stayed well below the amount our bank was willing to lend us. Instead, we looked at what our budget would comfortably allow. We carefully analyzed every place that we seriously considered, compiling a spreadsheet of the total costs for each. We included things like the mortgage payment, property taxes, homeowners insurance, home association fees, and a buffer for unforeseen expenses.

When our house deal fell through, we were disappointed, but not devastated. Within a week, we had another list of places that interested us because we realized that we’re buying a house and not a home. We’re planning on taking our time and not feel rushed just because many of our friends are taking the plunge.

Be honest with yourself

Instead of emulating the lifestyles of those around you, try being honest with yourself. Is buying more stuff, driving a fancier car, or living in a bigger house really going to improve your life? Or are you just pressuring yourself to adopt a lifestyle that someone else finds desirable, rather than doing what’s best for you?

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Roth IRAA Contributions and Early Withdrawals

2009-12-14T07:44:00.000-08:00

Did you know contributions to a Roth IRA may be withdrawn at any time, without penalty? It’s a little-known fact about the popular retirement savings vehicle. It is also one that I do not plan to take advantage of, but knowing it is there makes maxing out Roth IRA contributions a little easier. Here’s why.

Let’s say you are still working to build a fully-funded emergency fund, but only have one month of expenses. You manage to scrape up a few thousand dollars to save near the end of the year (a bonus, an inheritance, whatever), and would like to open a Roth IRA. If you are like I was, the thought of locking that money away in a retirement account terrified me. What if I have a big emergency two months after I open my Roth, and before my emergency fund is fully funded?

Never fear. If you do have a big emergency soon after contributing to your Roth you can simply withdraw your contributions without penalty. The rules here are different from other tax-deferred retirement savings plans because the money you invest in a Roth has already been taxed. However, the earnings in your Roth IRA have not been taxed, and therefore must be left untouched, unless you meet one of a few exceptions for withdrawing earnings tax and penalty free. Here’s the language from the IRS.gov website, Publication 590, related to making early withdrawals of your contributions from a Roth IRA:

Are Distributions Taxable?

You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s).

So there you have it; straight from the horses mouth. Withdrawals of regular contributions made to your Roth IRA are not counted towards your gross income. Does knowing you can withdraw Roth IRA contributions early without penalty make you more likely to max out your Roth IRA contribution for the current tax year? It did for us. For the first time in our married lives we maxed out my Roth IRA contribution (currently $5,000), as well as my wife’s spousal IRA (another $5,000).

In the event of an emergency larger than our emergency fund could handle, that $10,000 would be available to us (assuming the market doesn’t tank again). And that is something to consider. I would not suggest using a Roth IRA as your only source of emergency funds, because chances are your investments inside the Roth are exposed to more risk than traditional emergency fund savings.

However, Roth IRA funds could certain supplement your emergency savings, or some other savings goal, such as parking money to be used for a down payment on a first home (by the way, this is one of the qualifying events for which you can withdraw Roth IRA earnings tax free, assuming the account is over five years old).

With compound interest being such a close personal finance ally, the sooner you start investing in retirement funds, the better. Remember, you cannot go back and invest in a Roth IRA for previous tax years. It’s now or never. So go ahead and set aside some money in a Roth, and try your best not to withdraw those contributions. But remember they are there if you absolutely need them.

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For Older Workers, a Reluctant Retirement

2009-12-09T06:12:00.000-08:00

Linda Conti isn't ready to hang up her business attire just yet at age 64. But the unemployed trade association executive isn't sure she has much choice in the matter.

"I feel like I've been forced into retirement," says the former director of membership for a construction industry group in Southern California. "And I'm not ready to retire."

Ms. Conti is among a growing legion of unemployed older workers who say the recession is leading them on a path toward early retirement -- whether they like it or not. Many are relying on financial resources, like Social Security payments, previously reserved for later in life, putting their future well-being into question.

Linda Conti, 64, lost her job before she felt financially ready to retire. She hopes to find new employment and avoid tapping Social Security benefits for now.

Even though the U.S. labor market is showing signs of improvement, with a slowing number of job losses and a drop in the unemployment rate to 10% in November, conditions for older workers continue to deteriorate.

The number of unemployed workers ages 55 to 64 has nearly tripled since the recession began, to about 1.6 million of the nation's 15.4 million unemployed as of November, according to the Labor Department. By comparison, the number of jobless workers of all ages has roughly doubled.

The share of people age 55 to 64 who are employed -- which has been trending down for the past 18 months -- sank to 59.9% in November, an eight-year low for that month and down from 60.3% in October. The rest either want jobs and can't find them or aren't able or interested in working.

The drop in employment for older workers follows a period of nearly three decades in which a greater share of individuals approaching retirement age had jobs. At the peak of the boom, employment among those age 55 to 64 topped out at nearly 63%. At the time, workers were seeking to keep up with the rising cost of living, while employers were more willing to hire older workers in a tight labor market.

While it is difficult to quantify just how many Americans are retiring earlier now amid weak job prospects, recent work from two Wellesley College economists, Courtney Coile and Phillip B. Levine, suggests the effect is large. In a new working paper, they estimate 378,000 workers will be pushed into retirement as a result of the weak labor market -- almost 50% more than will end up working longer because of stock-market losses.

Some unemployed workers nearing retirement age are dipping into their savings accounts to make ends meet. But savings for most people have taken a hit in the economic downturn. Others are taking advantage of Social Security, the government-sponsored pension program people can tap as early as age 62. But for most people to get full benefits, they have to be at least 65 years old, depending on their date of birth. By law, that age will rise to 67 by 2022. And drawing on Social Security is equally fraught, since the earlier retired workers begin to withdraw their benefits, the lower their monthly payments will be -- for life.

The policy is meant to encourage people to keep working and fund the Social Security system. Already, higher penalties are being imposed on those who start withdrawing their benefits early.

That is why Joan Campagna planned to wait until age 70 to retire.

"I'm worried," said Ms. Campagna, who lives in Fort Myers, Fla., and was 64 years old in April when she lost her job as an executive assistant at a small public-relations firm. In June, she began withdrawing her Social Security benefits, six years earlier than intended. As a result, she is receiving $1,417 per month, about $600 less than if she waited until age 70. "I want to be sure that I can support myself," she says of her unplanned early retirement. "That's my biggest concern."

The U.S. Social Security Administration, which was established in the wake of the Great Depression under President Franklin D. Roosevelt, saw a 21% surge in applications for retired worker benefits for the fiscal year ended Sept. 30. Only about 15 percentage points of that was expected from a surge in baby boomers and working women reaching retirement age, according to Stephen Goss, the agency's chief actuary.
Ms. Coile and Mr. Levine's research indicates that many of those who retire for lack of work are less educated, earned lower incomes and were less likely to have investments or other sources of income, meaning they are more reliant on Social Security payments during their retirement, and more adversely affected when those payments are reduced.

The end result, said Ms. Coile, is that "it leaves workers forced into retirement by a late-career layoff with lower income and a higher risk of poverty."

That effect is already being felt by food pantries, homeless shelters and people like Guy Kelley, director of the Merrimack Valley Community Service Corps based in Lawrence, Mass., who said he has a waiting list of 15 to 20 applicants for the 50 or so slots in his "foster grandparent" program, which pays a meager hourly stipend of $2.65.
"There are people clamoring for these positions," Mr. Kelley said. "That basically means people either can't find work or have given up and are desperate for anything right now."

Among 55- to 64-year-olds, unemployment was 7% in November, up from 6.6% in October, despite a decline in overall unemployment. That is more than double the rate when the recession began, and the highest seen in November since the Labor Department's records began in 1948.

And these unemployed jobseekers say it is even more difficult for them to find work because of what they see as age bias.

"Employers think that I can barely check my email," says Bob Bellin, a 55-year-old unemployed executive in Cleveland who describes himself as tech-savvy. The former chief executive of a billboard-advertising company has been job hunting since early 2008. "My fear is that by the time the economy improves, I'll be a guy who's 58 and out of a job for three years, and...that guy probably doesn't have much of a shot."

An economic recovery is unlikely to quickly restore the jobs lost by older workers -- and some might never return. In Goshen, Ind., part of a metropolitan area that has seen one of the sharpest jumps in unemployment in the nation, Jack Cook, 65, was laid off in September from his job as a sales manager for a manufacturer of rubber gaskets.

He hasn't had any luck finding another position, and began withdrawing his Social Security benefits in November, amounting to about $1,800 a month. He is hoping it will be a temporary fix, but job prospects, particularly in his industry, where he has spent the past 27 years, look bleak. "There used to be eight or nine rubber companies in the area," he says.

Ms. Conti, who lost her job in June, says she is hoping to find work and avoid tapping her Social Security benefits for the next few years, but she already is digging into personal savings to help pay her rent of $1,200 a month. Her current unemployment benefits run out next June. Without a job, she says, her situation feels precarious.

"Right now I'm healthy, but you never know what tomorrow is going to bring."

Write to Kelly Evans at kelly.evans@wsj.com and Sarah E. Needleman at sarah.needleman@wsj.com

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Retirement Planning Mishaps

2009-12-07T12:55:00.000-08:00

By Tom Lauricella

We all make mistakes. The key, of course, is catching them early and correcting them before the damage is irreversible.

Retirement planning, with all its moving parts -- finances, families, health care and legal issues -- presents lots of opportunities to get things wrong.

Marc Rosenthal

.With that in mind, we asked some pros to talk about the more common mistakes they see these days from clients walking in the door.

1 Misreading Bonds

Lawrence Glazer, at Mayflower Advisors in Boston, meets with retirees who are hesitant to own stocks because they don't want to lose money. But they don't have the same concerns about bonds.

"It's a fallacy to think you can't lose money in bonds," he says.

A bond is basically a loan to an issuer who promises to pay interest on the loan, and ultimately return the principal to investors. One risk is credit risk -- that the bond issuer won't make its interest payments, or even be able to return all the borrowed money.

As investors in Lehman Brothers debt found out last year, outside of government-backed debt, defaults can and do happen.

A more common risk is that bond prices fall, most commonly as interest rates rise. The degree to which bond prices rise or fall depends not just on the kind of bond but also on the maturity. Longer-term bonds are generally more prone to price swings than short-term debt.

With interest rates so low these days -- a U.S. Treasury two-year note yields just 0.7% -- many investors are stretching for higher yields on debt with longer maturities and greater credit risk, such as junk bonds.

In a rising-rate environment, losses on even "safe" debt such as U.S. Treasurys "may come as a shock to investors," says Mr. Glazer.

2 Overspending

"People show up, in their 50s, with no retirement plan and $500,000 saved up and think they are going to retire and spend $5,000 per month," says Ronald Myers, a financial planner in Fort Lauderdale, Fla. But even if they earn 8% a year on their investments, at that rate they would run out of money in 10 years.

Part of the equation is having a realistic spending budget and matching that with a sustainable withdrawal rate. Most financial advisers recommend a 4% annual withdrawal rate.

But Mr. Myers says retirees often don't factor in two other variables. The first is inflation. "At a 4% inflation rate, your expenses are going to be double in 20 years," he notes. Medical costs -- a big expense for retirees -- are rising much faster than the overall rate of inflation.

Second, retirees often don't allow cushions for unexpected big expenses or hefty investment losses. "You'd better understand what's going to happen if your accounts go down in value," Mr. Myers says, "and whether you're going to be able to adjust on the fly."

3 Forgetting Names

A big concern for many retirees is ensuring that when they die or are incapacitated their property and savings go to the intended recipients and that decisions are in responsible hands. That means keeping a will, health-care proxy and the beneficiaries on retirement accounts and insurance policies up to date.

But many people wrongly assume that a will takes care of all those things, says New York attorney Philip Bouklas. In fact, the laws and regulations are much more complicated. For example, parents will often add one child to their bank or investment accounts for convenience. But irrespective of what it says in a will, when the parent dies the account passes to just the child whose name is on the account.

Another common misstep Mr. Bouklas sees is not naming a beneficiary on a retirement account.

When the account holder dies without a designated beneficiary, the account is distributed to the estate and passed on according to the will. But to do so, the estate has to take the distribution from the account in a lump sum and pay income taxes. That's less beneficial to the heirs. If they were named as beneficiaries, heirs would be able to draw down the account slowly over their lifetime.

4 Failing to Talk

"People don't like to talk about their own mortality and their own infirmities," says Bernard Krooks, a New York attorney who specializes in elder law. "I have a bunch of clients who say they're not going to die," he jokes.

It's not just what will happen in the event of death that families should discuss, but also long-term health-care plans. People often assume that they'll have plenty of time to make arrangements for long-term care or discuss care-giving plans with their children. But a stroke or accident can happen at any time.

These discussions should even include unpleasant conversations, such as a parent explaining to a child why a sibling is getting a bigger share of an inheritance. It may not be an easy conversation, "but it's less likely to result in problems after the fact," says Mr. Krooks.

Write to askencore@wsj.com

Source

Recession tales: The price of growing old in a lousy economy

2009-12-03T07:01:00.000-08:00

Jennie L. Phipps
I just bought my airline ticket for my friend's 100th birthday party, which she's anticipating with considerable excitement. Life has been quiet since she gave up competitive ballroom dancing at 85. Planning a party spices things up.

The oil wells that my friend's husband left her have kept her lifestyle comfortable – until the last couple of years when she developed a need for 24-hour care after the car she was riding in was broadsided.

Even a couple of active oil wells don't gush enough money to cover all the expenses of extreme aging. My friend and her children, who are old enough to be contemplating their own retirements, can see the day when it is all going to run out. If mom's still around – and the doc says she very well could be – longevity is going to be an expensive problem.

Retirement isn't what it used to be, particularly for those of us contemplating it without oil wells or pensions or big 401(k) savings accounts.

A history of retirement by Joanna Short, associate professor of economics at Augustana College in Illinois, points out that one of the most significant changes in the American labor market over the course of the 20th century was the virtual disappearance of older men from the labor force.
In 1880, 76.7% of white men and 87.3% of black men were what the U.S. Census called, "gainfully employed." By 2000, 17.8% of white men and 16.6% of black men met the gainfully employed standard. (These figures don't include women because until World War II, very few of them worked outside of the home.)

Short concludes that a combination of factors made it possible for so many men to enjoy a leisurely retirement, including better healthcare, company pensions, Social Security and tax-advantaged savings accounts like 401(k)s.

Today, everything seems shaky. Even good health is threatened by the rising cost of healthcare. My husband and I used to laugh that if all else failed, we were going to buy a doublewide overlooking the Pennsylvania Turnpike where we could always get a cheap meal at the truck stop and hitch a ride on an 18-wheeler. That seemed like a joke, but these days, considering our hard-hit retirement accounts, it may be one of our better options.

Of course, being baby boomers, we've never done anything that we didn't do in a crowd and retiring without much money – or working until we drop – is going to be one more experience that we share with millions.

The U.S. division of Sun Life Financial Inc. last month released the latest edition of its Unretirement Index, which reveals 65% of American workers will delay their retirement by at least one year – an 11% increase since the end of 2008. The Index also indicates 27% of Americans now believe they will need to work at least five years longer than expected because of the current economic environment.

More than 55% of those surveyed say they will work full- or part-time at 67, and another new high of 28% of US workers across all age groups are planning to work full time past the age of 67.

Only 28% of working Americans are confident that they will have sufficient retirement resources. In addition, only 22% are very confident that they will be able to take care of medical expenses and only 40% are very confident that they will have enough money for basic living expenses in retirement. Overall, fewer than 25% of workers are confident they will be able to live the kind of life they want in retirement.

Meanwhile, I've been trying to decide what to buy my friend for her 100th. Given the state of things, maybe I should be letting her do the buying. After all, I don't have any oil wells.

Source

Retirement Guide for 60-Somethings

2009-12-01T07:09:00.000-08:00

Workers in the final stretches toward retirement have had a rude awakening: The seemingly well-laid plans that they saved for during their working years probably won't pan out in their post-working ones. In fact, given the double-digit losses incurred in 401(k)s, as well as rising health-care costs, many fear that they won't be able to retire at all.
However, there are ways to salvage your retirement. While you may not recoup all your losses or get to retire exactly as you planned, you can lessen some of the pain that’s been inflicted on your retirement savings.

After all, most people in their 60s still have some working years ahead of them or, at the very least, have enough savings to get them by for a few years until the market rebounds, says fee-only certified financial planner Sheryl Garrett.

Here are five steps people in their 60s should consider to bolster their nest eggs before they retire:

Continue Working

Sure, you've been dreaming of ditching the daily commute as soon as possible, but it makes a lot more financial sense to postpone those plans and punch the clock for another five years or so, says Garrett.

The added salary will allow you to cover your living expenses -- and prevent you from dipping into your nest egg. Plus, you can continue to add to that savings while allowing it to recoup its losses. “The key is to give your nest egg more time to grow,” says Christine Fahlund, a senior financial planner at T. Rowe Price (TROW: 49.01*, +0.08, +0.16%).

Another perk: You won't have to pay for pricey health insurance. (Should you retire before age 65, in most cases you’ll need to fill in the gap between your employer’s insurance and Medicare, most likely by buying private health insurance, which can be extremely costly.)

The added savings could also help you wipe out any existing debts before retiring. Paying off debts is crucial at this point, especially considering that high-interest credit cards and even car loans can cost retirees some $1,000 each month, says Garrett.

Maximize Social Security Benefits

Hold off on collecting Social Security past the age of 62 and you'll have a lot more cash in your pocket further down the road. For each year you wait to dip into that savings, your annual benefits will increase by about 8%, says Fahlund.

For example, a senior who could have started earning $17,772 in annual Social Security payments at age 62 could earn annual payments of $24,468 if they wait until age 66 to collect, according to T. Rowe Price.

Of course, it may be necessary for you to start taking your benefits at 62. If that's the case and you're married, dip into the benefits of just one qualifying spouse while leaving the other’s untouched until their full retirement age. Click here for more on maximizing Social Security benefits.

Adjust Your Asset Allocation

Once you reach your early- to mid-60s, it’s time to start getting more conservative with your retirement investments. In doing so, consider your risk tolerance and time horizon, but generally speaking, the proper asset allocation at this age in a retirement portfolio should break down to about 45% in intermediate- to short-term bonds and a maximum of 55% in equities, says Fahlund. (Use our worksheet to help pick the right asset allocation for you.)

Set Up an Emergency Retirement Fund

So what happens if the market doesn’t recover until 2012? Or worse, even later? That's where an emergency fund comes into play.

Ideally, such a fund will cover three to four years of living expenses, says Garrett. Start stashing cash into relatively low-risk and liquid accounts like a short-term CD or money-market account. Although rates are far from spectacular – rates on one-year CDs currently average 2.15% while rates on money-market accounts average 1.49%, according to Bankrate.com -- you can still find several that offer up to 3% returns. Those returns will look a lot more appealing if the market keeps falling by double-digit percentages.

Take Consistent Withdrawals

If you absolutely must start withdraw from your nest egg, try to keep the amount of money you take constant for the first few years.

T. Rowe Price's 2009 retirement-income study found that new retirees who suffered a 30% decline in their portfolios in their first year of retirement have a much higher chance of their assets lasting over 30 years by holding their withdrawals constant – meaning they're not taking annual inflation adjustments – for the next five years. (Typically, retirees take a 3% inflation adjustment each year for withdrawals, says Fahlund.) By refraining from taking the inflation adjustment for the first five years, they’ll increase the chances that their savings will last by 40% to 60% (assuming a portfolio with 55% in stocks and 45% in bonds).

Source: Smart Money

Establishing a Budget

2009-11-25T09:08:00.000-08:00

Do you ever wonder where your money goes each month? Does it seem like you're never able to get ahead? If so, you may want to establish a budget to help you keep track of how you spend your money and help you reach your financial goals.

Examine your financial goals

Before you establish a budget, you should examine your financial goals. Start by making a list of your short-term goals (e.g., new car, vacation) and your long-term goals (e.g., your child's college education, retirement). Next, ask yourself: How important is it for me to achieve this goal? How much will I need to save? Armed with a clear picture of your goals, you can work toward establishing a budget that can help you reach them.

Identify your current monthly income and expenses

To develop a budget that is appropriate for your lifestyle, you'll need to identify your current monthly income and expenses. You can jot the information down with a pen and paper, or you can use one of the many software programs available that are designed specifically for this purpose.

Start by adding up all of your income. In addition to your regular salary and wages, be sure to include other types of income, such as dividends, interest, and child support. Next, add up all of your expenses. To see where you have a choice in your spending, it helps to divide them into two categories: fixed expenses (e.g., housing, food, clothing, transportation) and discretionary expenses (e.g., entertainment, vacations, hobbies). You'll also want to make sure that you have identified any out-of-pattern expenses, such as holiday gifts, car maintenance, home repair, and so on. To make sure that you're not forgetting anything, it may help to look through canceled checks, credit card bills, and other receipts from the past year. Finally, as you list your expenses, it is important to remember your financial goals. Whenever possible, treat your goals as expenses and contribute toward them regularly.

Evaluate your budget

Once you've added up all of your income and expenses, compare the two totals. To get ahead, you should be spending less than you earn. If this is the case, you're on the right track, and you need to look at how well you use your extra income. If you find yourself spending more than you earn, you'll need to make some adjustments. Look at your expenses closely and cut down on your discretionary spending. And remember, if you do find yourself coming up short, don't worry! All it will take is some determination and a little self-discipline, and you'll eventually get it right.

Monitor your budget

You'll need to monitor your budget periodically and make changes when necessary. But keep in mind that you don't have to keep track of every penny that you spend. In fact, the less record keeping you have to do, the easier it will be to stick to your budget. Above all, be flexible. Any budget that is too rigid is likely to fail. So be prepared for the unexpected (e.g., leaky roof, failed car transmission).

Tips to help you stay on track

•Involve the entire family: Agree on a budget up front and meet regularly to check your progress

•Stay disciplined: Try to make budgeting a part of your daily routine

•Start your new budget at a time when it will be easy to follow and stick with the plan (e.g., the beginning of the year, as opposed to right before the holidays)

•Find a budgeting system that fits your needs (e.g., budgeting software)

•Distinguish between expenses that are "wants" (e.g., designer shoes) and expenses that are "needs" (e.g., groceries)

•Build rewards into your budget (e.g., eat out every other week)

•Avoid using credit cards to pay for everyday expenses: It may seem like you're spending less, but your credit card debt will continue to increase

The 360 Degrees of Financial Literacy Web site offers general information for managing personal finances and does not recommend specific financial actions. For financial advice tailored to your situation, please contact an expert such as a CPA or a personal financial advisor.

Feed the Pig

Lip Service Popular Retirement Planning Strategy

2009-11-19T08:10:00.000-08:00

Two new commandments came down the retirement planning mountain over the past year: Work Longer. Save More.

Okay, maybe they aren’t exactly new; let’s just say newly appreciated as the soundest strategy for playing catch-up after the bursting of two bubbles in seven years left many of us way behind in our retirement planning.

Actions Speak….

The weekly drip of “retirement expectations” surveys filling my inbox indicates we’re on board with the working longer solution; invariably two thirds to three quarters of folks surveyed say they plan on working longer.

As for Saving more? Not so much.

According to the Wells Fargo 2009 Retirement Fitness Survey the majority of pre-retirees aren’t saving more today than a year ago:

• 23 percent increased their 401(k) contributions.

• 9 percent increased their IRA contributions.

And it’s not because everyone was already hitting the maximum annual contribution limits in 2008 and thus didn’t have room for improvement:

• 35 percent contributed the maximum to their 401(k) in 2008

• 24 percent contributed the maximum to their IRA in 2008.

Even among high-asset individuals ($250,000+ in assets, excluding real estate) only 46 percent maxed out on their 401(k) contribution and 27% on their IRA contribution.

The Emergency Explanation

My first thought when I saw those stats was to assume people weren’t saving more for retirement because in the year of the Great Recession they were justifiably scrambling to build their emergency reserves.

Not exactly. Only one quarter of pre-retirees kicked up their emergency savings in 2009; while one-fifth cut back on their savings.

So much for putting money where mouth is.

A year into the new normal and it seems we really haven’t changed much. Or as much as we need to. (Wells Fargo reports pre-retirees have an average of $300,000 set aside for retirement, but anticipate needing $800,000.)

Making a concession to working longer is easy. It costs you absolutely nothing today to say you expect to work longer. And I bet most folks would admit to secretly hoping/praying that some new bubble will make up their shortfall in the ensuing years so they don’t really have to suck it up and work longer.

But when it comes to the other crucial aspect of fortifying the nest egg-saving more-we’re still not exactly on board with the delayed gratification model of putting money aside today for a benefit that is a decade, or two, or three away. We give good lip service to the new realities of retirement planning. It’s our execution that’s lacking.

Source: Moneywatch.bnet.com

8 Ways you waste money

2009-11-12T08:11:00.000-08:00

JONESBORO, AR (KAIT) - We're always showing you ways to save money now how about some ways you can waste your money? It is money we spend every day or every month and you may not even think about it. A few cents here and a few dollars there the next thing you know you're wondering where it all went.

Here are eight places where you may be wasting your hard earned money.

Call it what you want: gluttony, being wasteful, or whatever. Those extras add up. Number one: keeping a balance on your credit card.

"The interest is a huge waste of money,” said Wells Fargo financial advisor Mark Rowe.

Most of us have at least one credit card.

“If you pay them in full it can be a real convenience because you don't have to carry a lot of cash,” said credit counselor Garry Patterson.

If you owe money on your credit card and don't pay it off every month that interest adds up. The best thing you can do is to keep your balance paid off.

Number two: paying for things you can get for free.

"We don't buy books. The kids and I go to the library,” said Karli Miller.

The library is more than just books. You can check out DVD’s and CD’s and there are also computers with Internet service for free.

Rebecca Orr and her two kids, 7-year-old Charlie and 5-year-old Abby are regulars at the local library.

“There's no way that I could go buy books, movies, tapes, and CD's for all the subjects that we're studying,” said Orr.

Number three on our list: impulse shopping. We all do it. You see something on sale or something you have to buy.

“You see kids’ clothes on sale and you think, “Oh, I should buy that for next season,” and that's $50,” said Miller.

“There's almost always regret shortly after we buy something on impulse,” said Rowe.

Experts say the best advice is to weigh your options sleep on the decision then decide to buy or keep shopping. That leads us to the fourth way we all waste money: buying things you don't use. A lot of us clip coupons or get excited by a big sale but is it really a sale if you don’t need it?

"You sometimes think well I'm saving money by getting it half price but if you don't need it you're not saving anything you're spending,” said Patterson.

"If something is a good deal or on sale sometimes we'll buy five of an item when we only need two,” Rowe.

That brings us to number 5: paying for unnecessary services. Do you really need to have all those extras on your phone? Many of us don't have to have them and they can also take a bite out of your bank account.

“We don't have Internet at my house. I have it on my phone rather than at the house,” said Miller.

Services like satellite TV, or Tivo and luxury items like video game systems are all unnecessary.

Consider what other things you're giving up by paying for those items.

Another way you waste money is funding your bad habits like overeating, drinking and smoking. These habits can all cost you in the end. In addition to the thousands of dollars you can spend over a lifetime these habits can also lead to health issues in the future.

The seventh way a lot of us waste money: buying brand name instead of generic.

“I usually do choose a generic over the name brand just because I've found that most of them are just as good,” said Orr.

“Often times it’s the same product if you look at the ingredients,” said Patterson.

The eighth way you waste money: eating out. How many times have you been driving home from work and picked up dinner?

“Dining out is just a habit we get into because time is precious to us,” said Rowe.

If you eat out everyday for lunch and spend on average of $5 a day that's $1.275 a year but if you cut out one day you will save over $250!

One thing to remember is some of us will find these as a waste of money, others a necessity, or a way to way to get away from everyday life. Experts say what is important is that you take a second look at how your spending your money.

Source: KAIT8

Don’t have a 401(k) plan at work? Do a ROTH IRA.

2009-11-09T07:14:00.000-08:00

Currently about 50% of American workers have employers that offer some form of retirement plan, whether it be a 403(b) plan, a 401(k) plan, the thrift savings plan or even a Roth 401(k), but there’s still a significant percentage of people that don’t have any form of employer sponsored retirement plans.

Employers that do offer a 401(k) plan often mandate that their employees make contributions at some level. Often employers will also provide a match and increase your overall level of contributions. Although these techniques can be a bit heavy handed, they do force consumers to be disciplined and save for retirement when they otherwise may not have.

There’s a potential danger with 401(k) plans. Often employees have their 401(k) plans tied up in their employer’s stock, which leaves the employee’s ability to retire at the mercy of the success of the company that he or she works at. There are also employers that automatically put their employee’s retirement savings by default into ultra-safe holdings which won’t keep pace with inflation over time. Employers will often take a conservative approach to avoid being litigated against for choosing investments that are too risky if the employer’s investment choices don’t pan out.

If you find yourself working for an employer that doesn’t offer a 40(k) plan or if you are self employed, you have to plan for your retirement on your own. Self employer individuals have options to set themselves up on a simplified employee pension (SEP) retirement plan. Almost everyone can set themselves up with an IRA or a Roth IRA. Typically most investment advisors will suggest that investors choose the Roth IRA option because it allows for decades of tax free growth.

There are many mutual fund providers that offer Roth IRA retirement accounts and can be opened for as little as a few hundred dollars. Some of these companies include Vanguard, Fidelity and T Rowe Price. Charles Schwab even offers an option where one can open up a Roth IRA for just $100.00

The day of the pension plan where your employer simply takes care of you when you retire is over. You’re responsible for your own retirement and making sure you can spend your golden years in comfort.

Source: American Consumer News

6 Simple Steps to $1 Million

2009-11-06T07:26:00.000-08:00

Let's face it; we all don't make millions of dollars a year, and the odds are that most of us won't receive a large windfall inheritance either. However, that doesn't mean that we can't build sizeable wealth - it'll just take some time. If you're young, time is on your side and retiring a millionaire is achievable. Read on for some tips on how to increase your savings and work toward this goal.

Stop Senseless Spending

Unfortunately, people have a habit of spending their hard-earned cash on goods and services that they don't need. Even relatively small expenses, such as indulging in a gourmet coffee from a premium coffee shop every morning, can really add up - and decrease the amount of money you can save. Larger expenses on luxury items also prevent many people from putting money into savings each month.

That said, it's important to realize that it's usually not just one item or one habit that must be cut out in order to accumulate sizable wealth (although it may be). Usually, in order to become wealthy one must adopt a disciplined lifestyle and budget. This means that people who are looking to build their nest eggs need to make sacrifices somewhere - this may mean eating out less frequently, using public transportation to get to work and/or cutting back on extra, unnecessary expenses.

This doesn't mean that you shouldn't go out and have fun, but you should try to do things in moderation - and set a budget if you hope to save money. Fortunately, particularly if you start saving young, saving up a sizeable nest egg only requires a few minor (and relatively painless) adjustments to your spending habits.

Fund Retirement Plans ASAP

When individuals earn money, their first responsibility is to pay current expenses such as the rent or mortgage expenses, food and other necessities. Once these expenses have been covered, the next step should be to fund a retirement plan or some other tax-advantaged vehicle.

Unfortunately, retirement planning is an afterthought for many young people. Here's why it shouldn't be: funding a IRA early on in life means you can contribute less money overall and actually end up with significantly more in the end than someone who put in much more money but started later.

How much difference will funding a vehicle such as a Roth IRA early on in life make?
If you're 23 years old and deposit $3,000 per year (that's only $250 each month!) in a Roth IRA earning and 8% average annual return, you will have saved $985,749 by the time you are 65 years old due to the power of compounding. If you make a few extra contributions, it's clear that a $1 million goal is well within reach. Also keep in mind that this is mostly interest - your $3,000 contributions only add up to $126,000.

Now, suppose that you wait an additional 10 years to start contributing. You have a better job and you know you've lost some time, so you contribute $5,000 per year. You get the same 8% return and you aim to retire at 65. When you reach age 65, you will have saved $724,753. That's still a sizeable fund, but you had to contribute $160,000 just to get there - and it's no where near the $985,749 you could've had for paying much less.

Improve Tax Awareness

Sometimes, individuals think that doing their own taxes will save them money. In some cases, they might be right. However, in other cases it may actually end up costing them money because they fail to take advantage of the many deductions available to them.
Try to become more educated as far as what types of items are deductible. You should also understand when it makes sense to move away from the standard deduction and start itemizing your return.

However, if you're not willing or able to become very well educated filing your own income tax, it may actually pay to hire some help, particularly if you are self employed, own a business or have other circumstances that complicate your tax return.

Own Your Home

At some point in our lives, many of us rent a home or an apartment because we cannot afford to purchase a home, or because we aren't sure where we want to live for the longer term. And that's fine. However, renting is often not a good long-term investment because buying a home is a good way to build equity.

Unless you intend to move in a short period of time, it generally makes sense to consider putting a down payment on a home. (At least you would likely build up some equity over time and the foundation for a nest egg.)

Avoid Luxury Wheels

There's nothing wrong with purchasing a luxury vehicle. However, individuals who spend an inordinate amount of their incomes on a vehicle are doing themselves a disservice - especially since this asset depreciates in value so rapidly.

How rapidly does a car depreciate?

Obviously, this depends on the make, model, year and demand for the vehicle, but a general rule is that a new car loses 15-20% of its value per year. So, a two-year old car will be worth 80-85% of its purchase price; a three-year old car will be worth 80-85% of its two-year-old value.

In short, especially when you are young, consider buying something practical and dependable that has low monthly payments - or that you can pay for in cash. In the long run, this will mean you'll have more money to put toward your savings - an asset that will appreciate, rather than depreciate like your car.

Don't Sell Yourself Short

Some individuals are extremely loyal to their employers and will stay with them for years without seeing their incomes take a jump. This can be a mistake, as increasing your income is an excellent way to boost your rate of saving.

Always keep your eye out for other opportunities and try not to sell yourself short. Work hard and find an employer who will compensate you for your work ethic, skills and experience.

Bottom Line

You don't have to win the lottery to see seven figures in your bank account. For most people, the only way to achieve this is to save it. You don't have to live like a pauper to build an adequate nest egg and retire comfortably. If you start early, spend wisely and save diligently, your million-dollar dreams are well within reach.

Source: Yahoo Finance

Your Guide into Retirement Issues

2009-11-03T07:39:00.000-08:00

Retirement is inevitable for everyone. It does not depend on our wish and readiness. That is why it is better to get ready as early as possible. Sufficient savings will allow you meeting your retirement confident and without need to look for a part-time job to get extra money. If you are young, energetic, and employed you have to think already of how to save money for your retirement.

First of all, plan carefully all your monthly expenditures. In case you go beyond the budget, reduce them and put money by for a rainy day. This will allow you having enough savings with the course of time. It is also advisable to think of what you are going to do when you retire. Of course, if you are going to be occupied with gardening or visit your children, your savings from monthly salary will be enough. But if you plan to undertake an around-the-world tour, you should think of multiplying your capital by means of investing.

Investing tools are numerous and differ by profits and risks. That is why it is very important to consider all options, consult experts and only then make your choice. If you do not want to undertake great risks and be too worried about your money, think of depositing money at a bank. This is a safe place to keep it and interest will increase your capital. Of course, the larger is the amount the bigger the profit. Still interest rates are rather moderate and you may not expect remarkable enrichment.

In case you want to earn a lot, it is better to invest in stocks. Study carefully the information about various companies, since in order you buy the shares of a successful company, you will earn a lot when selling them. But in case you underestimate or do not take into consideration any of the factors, you may lose your money if the prices go down. That is why stock markets are for those who are attentive enough and possess quick reaction.

All investors should be sensitive to all changes in the society, especially when it comes to economical situation. This will allow making timely decisions and profitable investing. For example, due to recession you may invest in real estate, since the prices significantly dropped down. When the prices will recover – and this is inevitable – you will be the owner of a round sum. So, do not lose your chance now and buy at reasonable prices, to become rich in future.

What should all investors bear in mind is that all investing strategies prove their efficiency in the long run. Temporary underperformance should not be a reason for extremes and giving up the whole affair. Be patient enough and you will get the income you planned in the very beginning.

Read more at: Funnyxd

The Limits of Frugality: What’s Next When You Can’t Cut Any More?

2009-10-30T07:50:00.000-07:00

Jen writes in:
Since our son was born, we’ve been trying to function as a one income family, but it just isn’t working. We’ve cut out every expense we can think of and are jumping through every hoop we can find to save money, but we’re simply not making ends meet. What’s next? Surely it can’t be impossible to do this.

You’re not alone in feeling this way, Jen. Many people make a plan for functioning with a low income, then as prices increase at a rate faster than the increase in salaries in your household, it becomes progressively harder and harder to keep up. You keep throwing every frugal technique you can find at the problem, but at some point, there’s a line that frugality just can’t carry you over and you’re stuck.

So what do you do when you reach that point? Here are seven tactics that I would try.

Get a part time job that doesn’t require you to take the kids to daycare. That usually means an evening or night job as a gas station attendant or a grocery re-stocker. Those jobs are fairly high turnover (because many of the people doing it are high school students and college students who are just seeking a quick buck in their pocket), so there are usually slots available if you look around. Most employers will be happy to give you a part time schedule that works for you. Consider a 7 PM to 11 PM shift or a 2 AM to 6 AM shift.

Look into self-employment opportunities. Perhaps you could open a very small-scale home daycare, where you take in just a few children during the day. A small number of kids would provide companionship for your own children without taking away too much from the focused time and attention you give to them, plus it would bring in some additional income.

Consider eliminating what you consider a “basic” service. Many people can’t imagine living without a cell phone or without high speed internet access – they consider these services to be essential. However, such services can easily be eliminated in most people’s lives. Look through every monthly bill you have and consider carefully whether you need that service – or whether it’s just something you’ve become so complacent about that you think of it as a need.

Find a family in a similar situation as yours and work cooperatively with them. For example, you could share a warehouse club membership and take advantage of the low prices there by buying bulk items together and splitting them among the families. You could also get into a routine of potlucking dinners together so that you can make your meal dollars stretch a little further. You might also want to consider reciprocal free babysitting with that family to further cut costs. There are lots of ways that you can share (and reduce) costs with another family – just sit down and talk about it.

Ask for help. Talk to your close friends and family about your situation and see if they have any ideas. Everyone’s situation is unique and you may find that the people closest to you have novel ideas about how you can improve your situation. Don’t be ashamed, either – quite often, working couples are actually envious of families where one parent can stay at home and are amazed that you’ve actually taken the courageous step to pull it off.

Plan for future milestones. You may want to consider returning to work full time when a certain milestone is reached – say, your youngest child begins school. If you can clearly envision that milestone, then you can plan accordingly. Seek out personal loans that will help you to get through until that date. Look for temporary arrangements that might be uncomfortable at the time, but can make waiting for such milestones much easier.

Finally, don’t give up hope. You made a series of choices in your life that led you to this point because they were the right choices for you and your family at the time. Consider all of the positive results that have come about because you took the road less traveled, and use that positive assessment to your advantage. Your choices have put you in a better place – you can get through this.

Good luck!

Source: Frugal Village

Rising numbers face lower retirement living standards

2009-10-28T06:03:00.000-07:00

A new study reveals a substantial jump in the percentage of Americans who won’t be able to maintain their standard of living in retirement in the wake of the economic crash.
The Center for Retirement Research at Boston College (CRR) says 51 percent of Americans are at risk of lower living standards in retirement, up from 44 percent in 2007, before the crash. The higher risk stems from familiar factors, including lower retirement account values, falling housing prices, high mortgage debt and a higher Social Security full retirement age, which gradually is moving to 67.

CRR’s finding is contained in an updated calculation of its National Retirement Risk Index (NRRI), which defines “risk” as the likelihood that individuals will not be able to maintain their standard of living in retirement.

CRR’s analysis, which includes a break-out of risk by income category, shows that the largest jump between 2007 and 2009 occured in middle- and high-income households, which started out with larger asset bases. However, low income households are at the greatest overall level of risk.

CRR’s gloomy conclusion: ”. . . half of today’s households will not have enough retirement income to maintain their pre-retirement standard of living, even if they work to age 65, which is above the current average retirement age. Even if the stock market should bounce back, the housing bubble is unlikely to reappear. And as defined benefit plans fade in an environment where total pension coverage remains stagnant, Social Security’s Full Retirement Age moves to 67, and life expectancy increases, the outlook will get worse over time. The NRRI clearly indicates that this nation needs more retirement saving.”

Source: Retirement Revised

Shoestring Living: Getting back in the retirement savings game

2009-10-27T07:26:00.000-07:00

You recognize the envelope immediately when you get the mail. If you’re like me, you try to avoid it, but soon that dreaded return address announcing your retirement financial institution is right before your eyes. It’s been nearly a year since my husband or I have opened our statements, after growing tired of watching the numbers plummet each period.

So many of us have scaled back or even stopped contributions out of necessity, but the truth is that even in a frugal life, there’s room for retirement savings. According to Diane McCurdy, financial planner and author of “How Much is Enough?,” we should be planning for retirement now. “With all the stimulus that has gone into the economy, things will improve,” McCurdy says. “Plan for your own retirement so that you’re not dependant on a government in so much debt.”

Only 57 percent of respondents in a 2009 survey of spending habits by the Consumer Federation of America and the Employee Benefit Research Institute say that they are saving enough for a retirement “with a desirable standard of living.” Here are some thoughts to help us all from becoming another statistic.

Don’t wait: “There is no better time then now to get back in because of compounding interest,” says McCurdy, who recommends having money taken out automatically to eliminate any chance of spending. “The longer your money is in the market, the better your returns will be.”

Have a budget: McCurdy advises budget novices like me to avoid thinking that living on a budget is punishment. Instead, she reminds us to consider it a reward. Extra spending uncovered by budget creation can lead to more retirement funds or the ability to save for future purchases or events.

Pay down debt and save simultaneously: This is tough, but consider doing both at the same time, if possible. According to McCurdy, socking funds away into a 401(k) or IRA will generate tax refunds that can be used to pay down other debt.

Judge risk tolerance appropriately: Make sure you understand why you cut back or stopped contributing in the first place. Is it possible market fears developed because your risk level was too high? “Just because you’re young doesn’t mean you should have high risk investments,” McCurdy says. Re-assess your risk to make sure you select what’s right for you.

Don’t fear the mail: After writing this column, I felt inspired to open that last statement and was pleasantly surprised. I’m happy to report that after so many months of fretting over those envelopes, we’re nearly back where we started.

Molly Logan Anderson is a freelance writer who lives in the western suburbs of Chicago with her husband, Mike, three kids and a black lab. Join Molly and her family on their journey of living a frugal life and making financial freedom their reality.

Source: Morning Sun

7-Step Financial Recovery Plan

2009-10-26T06:57:00.000-07:00

The stock market crash leading to the recession at the end of 2008 caught many by surprise. If you’re among those whose savings and investments were ravaged by the economic downturn, don’t despair. To lose your assets in such a manner is a traumatic experience, to be sure, but you can bounce back. The first thing you should do is explain the situation to your loved ones so they can offer their support during these trying times, then follow our 7-step financial recovery plan to reclaim your monetary standing.

1- Evaluate the damage

The first action to take in our 7-step financial recovery plan is to catalog all of your losses as well as your remaining capital. Don’t rely on your initial panicked realization. You need to look at hard numbers, which is why it’s important that you take every asset into account, including your house. The situation may not be as dire as you think. You should also contact the credit bureau or any of your financial institutions to check your credit report.

2- Set short-term financial goals

Don’t try to achieve everything all at once. Getting back on your feet is going to take some time, which is why our 7-step financial recovery plan recommends that you set temporary objectives to minimize your debt. This can include saving a modest sum every month and paying off high-interest loans. Make sure to keep your goals realistic. You may not be able to clear all of your credit cards immediately, so it’s a good idea to rank them by interest rate to determine which should be handled first.

3- Redo your budget

Given your current monetary situation, you’ll likely need to tighten your belt to achieve your short-term goals, so track your spending habits and eliminate any superfluous expenses. Be reasonable about it and avoid compromising your health. You may not have much use for cable television or a golf membership right now, but you still need to eat. As part of our 7-step financial recovery plan, we also suggest that you get rid of any unnecessary debt, such as the lease on a second car.

4- Follow your revised budget

Depending on how you typically deal with stress, this can be the most difficult part of our 7-step financial recovery plan. If you’re prone to splurging, it’s imperative that you resist your compulsive spending habits for the time being and that you always follow through on your new monetary decisions. This is not to say that you shouldn’t adjust your budget if you find you were overly optimistic about certain expenses, but keep in mind that you can’t afford your usual luxuries anymore.

5- Update your budget regularly

A key point in our 7-step financial recovery plan is the importance of revisiting your budget every few months. This will allow you to track your progress while adapting to the ever-shifting economic climate. However, be careful not to let your expense budget escalate each time you review it. A slight increase can be expected from time to time as your immediate needs change, but you should always prioritize your short-term financial goals.

6- Pad your income

The most obvious way to increase your revenue is to take on additional work. If your current occupation allows it, you can either volunteer for extra shifts or stay late to accumulate overtime. Otherwise, you may have to get a part-time job elsewhere. Our 7-step financial recovery plan also advises you to develop a passive source of income such as accumulated interest or paid advertisement on a blog. If you’re a homeowner, you can rent out a room as well.

7- Set new financial goals

Once you have achieved all of your short-term goals from the beginning of our 7-step financial recovery plan, it’s time for you to assess your overall monetary situation and formulate long-term objectives. To ensure that you can weather another market decline, your aims should include building a retirement fund (or replenishing it if you already had one), saving a fixed amount of money every month and establishing a more flexible budget. It’s also crucial that you maintain a practical lifestyle that’s adapted to your monetary means and needs.

Making a full financial recovery

Though our 7-step financial recovery plan will help you get back on your feet, keep in mind that the process can be particularly long and arduous, depending on the gravity of your situation and the extent of your responsibilities. Some days will seem harder than others, but it’s important that you never get discouraged. Try to learn from your experience. After all, what doesn’t kill you only makes you stronger — and you’re not dead yet.

Source: Mint

Personal Finance How to Get Your Retirement Dreams Back on Track

2009-10-20T06:20:00.000-07:00

The past year’s stock market drama has likely left your retirement years looking a bit (or a lot) less golden. What now? The stock market is showing signs of life, but now is no time for errors in retirement saving and planning. Here’s where to start to get back on track.

Diversify as broadly as possible. These days you’re probably feeling allergic to risk. The best way to keep risk at bay is to diversify. Doing so typically includes owning a mix of assets like stocks, bonds and cash. Do include international and emerging market stocks, which you can tap through Exchange Traded Funds (ETFs) or low-cost index funds. After all, the past four quarters should have taught you that American managers have no lock on ingenuity.

Forget the herd mentality. The idea that there’s safety in numbers may not work over the long haul, as you can see your savings vanish in one bad bet. “Millions of investors lost the majority of their retirement savings because they followed bad advice. Do your homework and make investment choices that fit your needs,” says Rick Staszak, a registered financial consultant with a brokerage concern called Financial Network Investment Corporation.

Invest time. Many people do not take the time to analyze and understand the various retirement savings vehicles that are available to them. Find out what your employer offers in terms of financial education. “Effectively saving for retirement requires a commitment of both time and money,” says Joe Jennings, investment director for PNC Wealth Management.

Don’t roll the dice. You may be aching to make up the losses - but moving too hard toward what looks like a quick killing can leave you with a hard landing. “This is analogous to a gambler who, having lost a fortune, doubles down in the hope of getting it all back,” says Marvin Doniger, author of A Common Sense Road Map to Uncommon Wealth. “Do not invest in anything you do not understand.”

Play catch up- patiently. If retirement is less than five years away, consider increasing the amount you are currently putting in your retirement account to maximize opportunities over the next few years. You may also want to lengthen the time frame for when you will retire,” says Melanie Hasty-Grant of Waterstone Private Wealth Management. While it is important to hedge risk the closer you get to retirement, it would be a mistake to sit solely in money markets or other fixed assets, she adds.

Live within your means. The surest way to salt money for retirement is to squander less now. Exercise control over how much you spend, save, the risk in your portfolio, and what you want to leave your heirs. No doubt finances have gotten a bit more complicated and the new twists may challenge old rules, so don’t be shy about seeking financial help if you need it. Do the right things now and the reward will pay long into your retirement years

Source: The Faster Times

Early preparation will ease worries over retirement income

2009-10-13T06:08:00.000-07:00

Retirement may seem like a long way off, but as the decades pass time seems to move faster and faster. Planning for retirement can seem overwhelming as we deal with day-to-day life, but it is a worthwhile proposition.

A common mistake made in retirement planning is to rely on Social Security to fully fund your retirement. Social Security was never intended to be the only source of income; it usually will fund about 40 percent of income needs if you wait until full retirement age. A Social Security statement is mailed to individuals annually, or you can request a report. These statements are full of helpful information, so take time to read the statement and run some retirement projections long before you reach retirement age.

Imagine retiring at age 65 with a small nest egg and planning on living on $1,800 a month. Your house is paid for and you live life simply, so it might not be that bad. Then reality kicks in and your furnace goes out, the roof needs repair and your car breaks down. Did you plan for those expenses in your monthly budget? Now let’s add in some health problems. Medicare and supplemental insurance may cover most expenses, but prescription coverage and co-pays add up. By the time age 70 arrives, it looks like you might be returning to the work force or possibly selling your home.

A good place to start is looking at your current income and expenses, then projecting that into your retirement years. If you are just beginning the process you can estimate that it will take about 70 percent of your income to live comfortably in retirement. Those numbers may change over time. Once you settle on your retirement income you can begin to identify income sources such as retirement accounts, investments, real estate or pensions. This process is more comfortable at age 50 than at 65 because you have time to make adjustments to your plan.

Retirement might look very different for you than it has for previous generations. There is a good chance you will be retired for several decades instead of several years. Explore the many retirement options, such as postponing retirement and drawing Social Security at age 70; this solution offers a higher income stream.

Another option is part-time work, consulting work, or creating an income from a hobby. There could be an added benefit to staying mentally and physically active while helping financially. There is a great book called “The New Retirementality,” by Mitch Anthony, that discusses retirement in a new light designed for baby boomers.

Another important consideration is survivor benefits should one’s spouse pass away. Will the remaining spouse have enough income when one Social Security check stops coming? I have seen many cases where one spouse takes charge of the finances with the idea that he will always be there to handle any situation. What happens if he unexpectedly passes away? Survivor income is a whole other topic, but make sure you have a provision in your plan for the reduced income.

Nancy Hadley is a certified financial planner and member of the local Financial Planning Association chapter. Readers can submit questions on financial planning for this column to askaplanner@spokesman.com.

Source: Spokesman.com

Saver + Spender = Happy?

2009-10-12T06:14:00.000-07:00

Are you and your significant other a “money match”? My wife and I have very similar money habits, but many other couples apparently don’t. In fact, according to researchers at the University of Pennsylvania:

“Surveys of married adults suggest that opposites attract when it comes to emotional reactions toward spending. That is, ‘tightwads,’ who generally spend less than they would ideally like to spend, and ’spendthrifts,’ who generally spend more than they would ideally like to spend, tend to marry each other…”
The reason for this, they say, is an innate tendency to prefer mates who possess characteristics that are dissimilar from those that we deplore in ourselves. Interesting.

Since money is a frequent cause of marital discord, we all know where this is headed, right? According to the authors:

“In spite of this complementary attraction, spendthrift/tightwad differences within a marriage predict conflict over finances, which in turn predict diminished marital well-being.”
So… Back to the original question. Are you and your significant other on the same page when it comes to spending and saving? If not, has it created any friction in your relationship? And how have you dealt with it?

Source: UPenn.edu via MSN/Money

Source: The Five Cent Nickel

Are You Making Too Much To Get Help?

2009-10-07T06:53:00.000-07:00

have a few questions that I would like to find some answers to :
We live in Colorado I’m 63 and my wife is 69, we are both receiving SSA benefits.

It doesn’t amount to very much per month. My wife gets her health Ins. for free, I have to pay for mine, which is very costly at this time.

With the rent on my house and the other bills that I have it is very hard to have any money for food.

I also have to care for My disabled son, he does get SSI but that goes to pay his doctors bill and medication.

I have tried to apply for assistants for food stamps and housing but I was told that we are over the Amount we can make per month to get any. When I check the web sites it says that I qualify But when I went down to the county services they said that the web site was wrong.

Does Anyone know of any programs that I can get into for help or where I can go to find out how I can qualify for any of the county services programs?

Wendy's reply: In todays economy, its not always easy to get help. One suggestion, senior housing... read my senior low income housing and senior apartment under HOUSING, just might be the idea you need. Most will have you apply and wait for openings, but if you do get in, the rent and utilities costs is far less than a rented house.

Source: Retirement-Online.com