Archive for the 'Retirement Plans' Category

Online Social Security

Posted on May 10, 2012 by Rohith

Social Security now provides a service to all that will provide you with your Social Security statement online. It will provide you with the estimated Social Security and Medicare taxes you’ve paid, information about qualifying and signing up for Medicare, things to consider for those age 55 and older who are thinking of retiring, and many other pieces of information that can be useful for planning your retirement. All of the provisions can be found here. To get your Statement online, you must create a my Social Security Account.

Are you considering retirement or having trouble deciding on when to take your Social Security benefits?  Use our Free Retirement Calculator as well as our Social Security Calculator

 

Portfolio Allocation 101

Posted on May 8, 2012 by Rohith

Portfolio Allocation 101

Five years from now, there’s going to be one investment that did better than any other, and of course, you don’t know what that investment will turn out to be. Due to this issue, the desire to come up with an ideal asset allocation is a strong one. Given that we don’t know the future, what guidelines can we use to make our investment decisions?
The Basics: Asset Allocation:
Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash. The asset allocation that works best for you at any given point in your life will depend largely on your time horizon and your ability to tolerate risk.

Time Horizon – Your time horizon is the expected number of months, years, or decades you will be investing to achieve a particular financial goal. An investor with a longer time horizon may feel more comfortable taking on a riskier investment because he or she can wait out slow economic cycles and the ups and downs of our markets. By contrast, an investor saving up for a teenager’s college education would likely take on less risk because he or she has a shorter time horizon.

Risk Tolerance – Risk tolerance is your ability and willingness to lose some or all of your original investment in exchange for greater potential returns. An aggressive investor, or one with a high-risk tolerance, is more likely to risk losing money in order to get better results. A conservative investor, or one with a low-risk tolerance, tends to favor investments that will preserve his or her original investment.

Risk versus Reward
When it comes to investing, risk and reward are entwined. All investments involve some degree of risk. If you intend to purchases securities – such as stocks, bonds, or mutual funds – it’s important to understand that the potential exists to lose money.

The reward for taking on risk is the potential for a greater investment return. If you have a financial goal with a long time horizon, you are likely to make more money by carefully investing in asset categories with greater risk, like stocks or bonds, rather than restricting your investments to assets with less risk, like cash equivalents. On the other hand, investing solely in cash investments may be appropriate for short-term financial goals.
Investment Choices
A vast array of investment products exist – including stocks and stock mutual funds, corporate and municipal bonds, bond mutual funds, lifecycle funds, exchange-traded funds, money market funds, and U.S. Treasury securities. However, there are three major ones to consider:

Stocks - Stocks have historically had the greatest risk and highest returns among the three major asset categories. As an asset category, stocks are a portfolio’s “heavy hitter,” offering the greatest potential for growth.

Bonds - Bonds generally contain less risk than stocks but offer more modest returns. As a result, an investor approaching a financial goal might increase his or her bond holdings relative to his or her stock holdings because the reduced risk of holding more bonds would be attractive to the investor despite their lower potential for growth.

Cash - Cash and cash equivalents – such as savings deposits, certificates of deposit, treasury bills, money market deposit accounts, and money market funds – are the safest investments, but offer the lowest return of the three major asset categories. Generally speaking, the chances of losing money on an investment in this category are extremely low.

These are the asset categories you would likely choose from when investing in a retirement savings program or a college savings plan. But before you make any investment, you should understand the risks of the investment and make sure the risks are appropriate for you.
Why Asset Allocation Is So Important

By including asset categories that behave differently under varying market conditions, an investor can protect against significant losses. Market conditions that cause one asset category to do well often cause another asset category to have average or poor returns. By investing in more than one asset category, you’ll reduce the risk that you’ll lose money and your portfolio’s overall investment returns will have a smoother ride.

The Magic of Diversification
The practice of spreading money among different investments to reduce risk is known as diversification. By picking a diversified group of investments, you may be able to limit your losses and reduce the fluctuations of investment returns without sacrificing too much potential gain.  If you don’t include enough risk in your portfolio, your investments may not earn a large enough return to meet your goal.
By having a good portfolio, you are already one step closer to planning a safe retirement. To take a few more steps closer to an even safer retirement, check out our Retirement Calculator.

Reverse Mortgages may be Riskier for Younger Retirees

Posted on May 7, 2012 by Rohith

A reverse mortgage taken too early could be a mistake, a New York Times article published last month points out. Homeowners who wait until age 72, as supposed to the minimum age of 62; to take out a reverse mortgage will get considerably more money. Gathering input from consumer advocates, the Times addresses what it finds as potential downsides for people taking reverse mortgages at a younger age and concludes that homeowners at or near retirement should work with a financial planner or a lawyer specializing in estates to make sure they have a clear plan for the next 20 years of living expenses

A reverse mortgage allows people age 62 and older to tap the equity they have in their home, pay no money to the bank as long as they stay in the home, and potentially have $1,000, $2,000, or more income each month. This may seem like a lifesaver, but like all other seemingly too-good to be true deals, it does run some risks.

According to Suze Orman, the biggest risk with a reverse mortgage is that while it can indeed be a viable way to generate income, it is very important to understand that after you take out a reverse mortgage you will still be responsible for paying the property tax, the insurance premium, and all the maintenance costs for your home. If you can’t continue to cover those costs you will risk losing your home to foreclosure.

Second, there are concerns over the expense of and use of the reverse mortgage proceeds. Some borrowers withdraw the maximum amount of equity ($625,500) because they think they should, rather than leaving it in a line of credit account to accumulate interest. Many borrowers also make the mistake of treating reverse mortgage proceeds as a windfall – when it is really a loan – and spend it on frivolous or lifestyle purchases, rather than on necessary living expenses.

Finally, borrowers also fail to realize that a reverse mortgage can affect their eligibility for certain government benefits, such as social security and Medicaid. According to Consumers Union, a ‘lump sum’ reverse mortgage payout may immediately put the elder above the asset limit for SSI/Medicaid and disqualify the senior for these important benefits, unless careful legal planning is done to avoid this result. Before obtaining a reverse mortgage then, all prospective borrowers should research the impact on the money they expect to receive from government entitlement programs.

Are you on the fence on whether or not you should receive a reverse mortgage? Take 30 seconds to use the Reverse Mortgage Calculator to help finalize your decision.

 

 

 

How prepared are people approaching retirement?

Posted on March 19, 2012 by Steve

Not very – consider some of these stats from a recent NYT article on the impact of the 2008 financial crisis:

  • 36% of American workers age 55 to 64 say they have less than $25,000 in retirement savings
  • 52% of American workers age 45 to 54 say they have less than $25,000 in retirement savings
  • 33% of retirees get more than 90% of their income from Social Security (the avg SS payment is ~ $1,000 per month)
  • 17 % of workers have defined-benefit pensions
  • 39 % have 401(k)’s
  • 53 % of all workers have neither…

To compound the problem some professional investors are predicting lower long term returns for stocks of about 5% vs. 8-9% historically, based on the historical relationship with bonds which are now providing lower returns.

Anyway – some things to consider as you plan your own future.  Good luck!

Men and Women When it Comes to Retirement Planning

Posted on January 25, 2012 by Erin

Recently, a study put out by Ameriprise Financial took a look at the different ways men and women plan for retirement.  Not surprisingly, both sexes reported not feeling 100% prepared.  What was a little more surprising was just exactly how different men and women look at retirement planning.

According to the study, 54% of men report investing money into accounts such as IRAs and 401Ks while only 46% of women report the same.  It was shown that men tend to pick a number with which they deem to be their goal for retirement savings.  They work toward this goal and do it mostly through their investments.  Women on the other hand were shown to think not so much about the specific number they want to hit, but the lifestyle they want to have during retirement.  But the study still shows that both sexes are underestimating the amount of money they will need in retirement.  With longer life spans, more expensive medical costs and the uncertainty of Social Security, everyone needs to begin to become more realistic with their retirement planning.

Are you prepared?  See how long your money will last you in retirement.  Use our retirement calculator.

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Expanding Your Retirement Horizons

Posted on January 3, 2012 by Erin

With the economy the way it’s been and the cost of living being so high for so many people, the thought of retirement is something that is simply a dream for many.  But that thought just isn’t acceptable for some people and they’ve taken the matter into their own hands.  They’re up and moving out of the country to get their retirement dream!

In a study done by Internationalliving.com, it was found that Ecuador is one of the most popular places for retirees to retire.  Expenses here can be as little as one fifth of what they are in the U.S.  In many cases, people can retire up to 10 years earlier than they would have been able to in the U.S. and they can also afford luxuries like maid services and weekly massages (how does $25 for an hour long massage sound?!).  There are many places to explore around the world that could make your retirement a reality and could create something you may have never even dreamed of!

Can you afford to retire?  Do you know when you will run out of money?  Get answers by using for retirement calculator.

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New Year’s Resolutions

Posted on December 30, 2011 by Erin

It’s that time of year again – Time to make those New Year’s Resolutions!  This year while you’re thinking about all the ways to improve yourself or your life in 2012, don’t forget to add improving your retirement plan to that list!

What do you plan on achieving this coming year to help strengthen your retirement?  Are you going to invest more money into your IRAs of 401(k)s?  Are you going to purchase a lifetime annuity to guarantee income later in life?  Or are you going to look into Long Term Care Insurance to make sure you are covered in case of unexpected medical costs?  There are many small adjustments that you can do to increase the health of your retirement plan.  You can use our retirement calculator to see what a small adjustment can do for you and how far your money will stretch.  We’ll be here in the New Year to continue to help with all of your retirement planning needs – Have a Happy New Year and see you in 2012!

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Important Dates for Your Retirement Savings

Posted on December 13, 2011 by Erin

In a continuation of end of year retirement fund reminders and wrap ups, it’s a good time to let you know about two important dates that are coming up very quickly.  The first is December 31st.  This is the last day of the year that you can make a 401(k) contribution that will count for your 2011 tax return.  So if you haven’t put in $16,500 (or $22,000 if you’re over 50), you better hurry up!  You only have a few weeks.

Next up is of course, tax day, April 17th.   We know it’s only December, but this is a date that seems to sneak up on a lot of people every year.  After the clock strikes midnight and it turns into 2012, you can still make IRA contributions up until April 17th, but you will need to be specific as to what year it is for.  The financial institution that holds your IRA will assume that the contribution is for the year that you made the deposit.

Two very important dates that can help you save more for your retirement!

Do you have to play catch up with your retirement savings?  Use our retirement calculator to see where you stand.

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Drop in 401(k) Balances

Posted on December 8, 2011 by Erin

This year, workers have continued to contribute to their 401(k) plans, yet the money in those accounts continues to drop.  According to Fidelity, the balances have dropped almost 12 percent from June through the end of September.  How can it be that more people are investing more money  while their work places are matching, yet these people seem to be further away from their retirement savings goals now than they ever were before?

A few different reasons.  Remember the credit downgrade from Standard and Poor’s 500 index and the European debt crisis earlier this year?  These helped the markets become shakier than they were previously and the stock market reacted by declining.  Luckily, because 401(k)’s usually include a mix of bonds along with those volatile stocks, the damage was less than it could have been.  Bonds saw good investment gains in the third quarter of this year which helped to offset the deep declines from stocks.  Fidelity also reported seeing a small increase in hardship withdrawals from 401(k) which also contributed to the decline in balances.

Is your money still in a 401(k)?  Do you intend to keep it where it is or do you have other plans?

Relying heavily on 401(k)’s for your retirement income?  See how safe you are from volatile markets by using our retirement calculator.

Sign up for one of our retirement newsletters.

 

New Study From Fidelity

Posted on November 30, 2011 by Erin

Earlier this week, Fidelity released a study that looked at the investment strategies of  higher education employees.  Fidelity took 600 participants across three generations, Boomers, X’s and Y’s, and examined the differences in retirement strategies.

Conventional wisdom tells us that since the people in this survey have a background in higher education, they should know more about investing than an average Joe.  But what Fidelity found was quite interesting: More than half of those surveyed admitted that they were on a beginner’s level when it came to understanding their investments.  And 63% were worried they would never be able to retire.  Another interesting find in the study is that the young investors who have time to take on extra risk with their investments, are on the same conservative plans that boomers who are nearing the end of their working years are on.  So it seems that these folks are on par with everyone else when it comes to retirement planning – Not nearly close enough to being secure.

How is your retirement planning going?  Check your progress with our retirement calculator.

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