Tag Archives: Retirement

6 Steps to a Satisfied Retirement

Discipline bears fruit over time when discussing the retirement savings. But if you’re like many people who are still working but are closing in on retirement, there is still hope for a happy retirement. A recent Consumer Reports Retirement Survey, of more than 24,000 online subscribers, found 6 steps that work to obtaining a satisfied retirement.

  1. Live Modestly

    This was the top “best step” listed by retirees who said they were highly satisfied with their lives; 39 percent said they did not spend beyond their means. One way to rein in spending is to create a budget using store-bought software such as Quicken or a free online service such as BudgetPulse (https://www.budgetpulse.com/). Those programs help you track your spending and your progress toward meeting saving goals by consolidating your financial data from banks, credit-card companies, and brokerages.

  2. Maximize your savings

    Even if you don’t have a defined-benefit plan, regularly contributing to a 401(k), 403(b), IRA, or other investment vehicle pays off, our satisfied retirees told us. (Saving too little was a regret of 27 percent of dissatisfied retirees.) At 50 and older, you can put as much as $22,000 into a tax-deferred, traditional 401(k) plan or after-tax Roth 401(k) or their 403(b) equivalents in 2010.

  3. Reduce debt

    Thirty-eight percent of retirees owed $25,000 or more on their mortgages. But 74 percent of retired respondents who were free of major debt reported being highly satisfied with their retirement. For greater peace of mind, pay off your debts before retiring. Even a low-rate mortgage can be a burden if other expenses rise and your income-producing assets falter. Notably, debt-free retirees had a higher median net worth than those with debt: $843,000 compared with $717,000.

    In the current economic environment, accelerating payment of your mortgage can be a wise investment. Most certificates of deposit, bank accounts, and other safe savings vehicles are paying less than 2 percent, so putting your money into additional payments on a 5 percent mortgage instead offers a better return (though you’ll give up some tax deductions on mortgage interest). By making extra principal payments, you can whittle down your loan’s interest cost and term handsomely. For example, adding $100 per month to payments on a 30-year, $150,000 mortgage with a fixed rate of 5 percent reduces the total interest by almost $35,000 and cuts the loan’s term by 6½ years.

    I agree on this one! My husband and I participate in an accelerated mortgage program. Not only is it nice to make our mortgage payments weekly and the life of the loan is reduced significantly, but we’ll also save over $40,000 in interest!

  4. Don’t invest too conservatively

    Taking on even a moderate amount of risk pays off. Median net worth for retirees who said they took a middle-of-the-road approach was $836,000 vs. $671,000 for conservative investors. Notably, the difference in net worth between self-described moderate and aggressive investors was relatively small: a $57,000 advantage for the more aggressive. The lesson: You don’t have to go out on a limb to get the best return. Diversification will help reduce your risk.

    I will have to let my husband know the results of this one. Being so close to retirement, he believes in investing agressively to play catch up on the missed years. With a relatively small advantage I don’t think it is worth it. I fear there would be potentially much more to lose if their was another crash. What’s your thought on this one?

  5. Study your options

    When you design your dream retirement, also devise a Plan B in case you’re forced to retire early or can’t sell your home (a predicament of 8 percent of surveyed retirees). Your alternative plan might include a more restrictive budget or a different retirement location. To determine your Social Security benefits at different ages, go to www.ssa.gov.

    A major issue will be health-care coverage. You can move to your spouse’s insurance plan, find a new job with health benefits, extend your own employee coverage under the COBRA law (go to www.dol.gov and type “cobra” in the search box for details), or look for private health insurance. If you go that last route, try to get group coverage through professional or other membership associations.

    What about becoming an expat for Plan B? I heard their are some nice places to live on way less money. Anyone have experience with obtaining healthcare as an expat?

  6. Take the intangibles seriously

    Stress affected overall satisfaction in retirement even more directly than net worth, our survey found. A quarter of retirees cited nonmonetary stresses such as family relations, poor health, a loss of identity, and boredom. So before you retire, develop hobbies and line up volunteer work, trips, or part-time jobs. Strengthen your personal connections outside the workplace. And, of course, do what you can to maintain good health.

    I agree on finding a hobby before retirement. I have seen too many people get bored. But I have also seen people enjoying their retirement thru volunteering.

Retirement planning is not solely based on a person’s financial net worth. The survey found a happy retirement was about the same between those with a net worth of $500,000 and $1 million. Having more than $1 million did not make a notable difference in their level of happiness either. And if your net worth at retirement will be lower than $500,000… or even lower than $250,000, more than 50% of retired individuals were still statisfied with their retirement.

Are you ready for retirement? Just in case, do you have a plan B?

(photo credit: Mississippi Family Law)

Maximize your Retirement Account

A millionaire-to-do list… I don’t have such a thing, but if I did have a structure it would probably follow J. Money’s to-do-list.

I recently became curious as to the state of retirement account. A gal’s gotta make sure she is covered for such a thing in this day and age. For one, she will most likely outlive the male counterpart (I don’t see how since it’s truth be known that we stress more than the other sex). Second, many women do hold responsibilty to the dual-income household. Third, its just plain common sense that a woman should hold claim to her finances!

Well, I started thinking about how under par I am in this retirement category. And the thought strains my mind as I have no desire to retire at 65, but at a much younger year than that. Well, I don’t know exactly how or if I will reach retirement at a desired younger age. But one thing I know, is I gotta start somewhere. And the easiest place to start is maxing out my 403(b)!

Unfortunate for me, at this time I only dedicate 3% of my gross income to my 403(b). Yet the max 2010 contribution is $16,500. And my company automatically contributes 6% of base salary up to SSWB (social security wage base) .

Potential Outcome

If I max out my 403(b), consider my company’s 6% contribution with the same 6% compounded interest rate, I am looking at $1,671,656 in my pension account (plus the additional consideration of receiving income via Social Security and a Personal Savings Account).

 
How does one find $16,500 per year to maximize their retirement account?

5 ways to find the money to invest

Here are 5 ways to find the money to invest (For more ways to Invest for Your Future, check out Cooperative Extension System).

  1. Pay yourself first. To start this step, head to your company’s HR department and set up an amount to be automatically deducted. Even if it may be $25 per paycheck. Like I mentioned earlier, I have 3% of my gross income automatically deducted from my check.
  2. Invest your raises. Those annual increases… invest them. Up your automatic deductions with your HR department. I have not done this. *shame* And will be my next step – to figure the amount of my last recent increase and move it over to my automatic deductions. This will increase my contributions this leaves me roughly 73% away from maxing the 403(b).
  3. Continue Installment Payments. Pay off that car loan? Continue to ‘write’ that check, but put the money into your retirement account. This will take place after my debt is payed off. Wow, if I invested my car payment then I am 46% away from reaching my goal of investing $16,500! Note to self: pay off car fast!
  4. Collect loose change. Collect those pennies and put them in a jar. Then every same annual time point, cash it in and put the money into your retirement/investment account. I will consider, but at this time that loose change is used for summertime fun activities for my family.
  5. Make your own lunch. Get up earlier to make your own lunch. I do know this saves me a considerable amount of money by making my lunch compared to eating at the cafeteria. Own the Dollar found he could save $112,000 during his career by bringing lunch to work in a brown bag.

Think collecting loose change could lead up to the remaining $7,100 I will potentially need to max out my retirement account?

And if you need more inspiration to find money for investing into your retirement, consider reading Monevator’s Tin Pot Gold Mine post on Curt Degerman – lived frugally and invested to amass over £1.1 million with recycling tins as his only source of income.

Another post you may enjoy: Your Retirement Lifestyle

A little about Retirement

Retirement

Well, I’m only in my mid 30′s. So, I haven’t bothered to look at my Retirement accounts. I have this notion that one day they will return back on a positive note. I think Shtinkykat has got me thinkin’ about my retirement. (Thanks! – lol!)

So, I decided to check my accounts and gasped. Okay, well I was expecting a big drop. And I was right. Well, it stung a bit. I may only have $13,000 in my account(s) and I lost $5,000; leaving me with a grand total of $8106! Geesh!. Actually its my dang AIG Valic account! Losing approximately 23% per quarter. I know, the name says it all and I should have changed its allocations loooooooonnnnnnnnggggg ago. Especially since they are probably partying on my funds.

My TIAA-CREF account is wonderful. Have only lost approx. 7% per quarter. I can hang with that!

Anyhow, I finally changed my AIG Valic asset allocations to a fixed account earning a guaranteed 3%, possibly 3.75%. I can live with this change. I really should have done it long ago! I don’t longer contribute to that account. Stopped that awhile back when I opened my TIAA-CREF account. I would role it over, but I have a loan balance with AIG Valic. Ya, one day I will pay it off, but its on the bottom of the list because of the low interest rate.

Then this got me thinking about my 401b, IRAs, Real Estate, and other types of investment accounts. Arising questions like: how am I to fund my 401b and fund an IRA, too? I have an IRA with $0 balance through ShareBuilder/ING. And another question like: am I up to par on my savings?

Time to check into CNN Money’s online Retirement Calculators. Of course, I chose the one labeled, Can You Retire Early? The senerio is to: See how much you should already have if you want to retire by age 60. Plugged in my numbers and found out that, at this time, I need $104,000 if I want 80% of my annual retirement income. That would mean I am standing -$96,894. Hmph…

Now remember to plug in the “current salary” with notion as to what you want your 80% retirement income to be. I did use my current salary and would be okay w/ 80% of that. At least for this exercise. So, boost it up to approx $96,000 if you plan on having $75,000 as your 80% or whatever X number you put in.

Okay, so that is not my case, right now. What about seeing, What I Will Need to Save? Plugged in my numbers, again. I need to save $10,205 per year at a savings rate of 15.7%.

I figured the numbers: I am of course short. I realized that I currently save 4% of my income. That is a no-no. Need to boost.

If I want to meet these #s then I need to put approx. $400 away per month. Sounds like a lot, right? But, I see it this way. I will gradually increase these funds. Today, I elect to raise my contributions +$50 bimonthly. And will continue to do so at intervals. Remember, we are paying down our debt. Which means I can increase my contributions to my retirement account.

Then, when I get to a greater point, its time to look at investment options. Like real estate. It is soooo affordable in our area and it bums me that I can take advantage of that! Thanks to my past debt! But, its okay…that is why I am doing all this (blogging, etc…) to GET OUT OF DEBT! Then, I will take advantage of bigger investment options. :)

So, I leave you with these questions:

  • Where are you in terms of saving for retirement?
  • Will you be able to retire early?
  • If not, will you be able to retire at 65?
  • Your Retirement Lifestyle

    I flipped through my KPF magazine and read a great article on, “Your Retirement Lifestyle”. So yesterday, I decided to figure out my Net Worth (see bottom of post) and was thinking about what I am going to need to financially accomplish to meet my retirement lifestyle. Of course, I want the grandest. Don’t we all? ;)

    But, I would settle for mediocre, too. Read the section below. What’s your dream retirement?

    From Kiplinger’s Personal Finance Magazine, February 2009

    Most experts recommend that you replace 75% to 85% of your pre-retirement income in order to meet your needs after you stop working. But the size of your nest egg will dictate how many extras you can afford.

    The snapshots below look at a 65-year-old couple who earned $90,000 a year while working and who need about $70,000 annually in retirement to maintain the same lifestyle. Their expenses were calculated in the 2004 Retirement Income Replacement Ratio Study by Aon Consulting and Georgia State University. We assumed the couple withdraws a conservative 4% of their savings initially, adjusted for inflation each year (add 3%), and then we imagined how they might spend it.

    $500,000 Nest Egg
    Simple Pleasures
    Annual Income: $70,000
    ($30,000 From Social Security);
    $20,000 from a Pension;
    $20,000 from Personal Savings

    Lifestyle: With a cushion of about $20,000 a year, you can put a down payment on a used RV and tour the country. Focus on staying healthy and active because your budget doesn’t include long-term-care-insurance premiums. If you need cash in the future, you could take out a reverse mortgage.

    $1-Million Nest Egg
    Vintage Moments
    Annual Income: $90,000
    ($30,000 From Social Security;
    $20,000 from a Pension;
    $40,000 from Personal Savings)

    Lifestyle: You’ll savor life in your golf-course community and even splurge on an occasional cruise or a trip to Disney World with the grandkids-as long as you paid cash for your new home. If you still have a mortgage, you might have to trim some of the extras., such as annual theater subscriptions or season tickets for your local team. The rate of return on your investments will determine how long your money will last. You might want to use some savings to buy an annuity.

    $2-Million Nest Egg
    Sparkling Future
    Annual Income: $130,000
    ($30,000 from Social Security;
    $20,000 from a Pension;
    $80,000 from Personal Saving)

    Lifestyle: You might want to trade in your big house for two condos – one in a warm-weather destination. You shouldn’t have to worry about running out of money, even with a 50% chance that one of you will live to 92 or beyond. Take advantage of the market downturn to gift more stock to family members while reducing the size of your taxable estate. Pay attention to estate-tax changes and adjust your plans.

    Look at my Net Worth. In the negative. :(

     

    But, I am going to fix this right? :)

    But, I am wondering what it is going to take to build $1-Million in Assets to satisfy the medicore lifestyle.

    A mortgage, of course. A rental property or two… depending where you live (I’m in the 1/2-million or more state of CA). But, then I need time to build equity in the homes to sell and make the large Personal Savings.

    Or should I keep buying more rental properties to pass to my kids. Hopefully, there will be equity in them. Then the ‘rent’ paid by the tenants can be a passive source of income.

    Thoughts to ramble in my head.

    So tell me, what do you think it will take to reach the Retirement Lifestyle you Want? And don’t forget to place yourself in the fact you still have the everyday lifestyle to still support. I would love to hear some tossed thoughts from your mind.

    I really wonder how all these finance experts expect us to financially fulfill every category (kid’s college, weddings, buying a house, saving for retirement, etc…)! But, I did come to the conclusion that maybe its time to whip out the Monopoly game again and polish my skills.