Retirement Planning - Choose Your Post-Job Years Destination

The challenges in Retirement Planning

Retirement planning is never a very simple job. It requires a lot of thinking and proper execution of the plans. Right from when to where, everything needs to be taken care of well when planning for your retirement years. And, only when the best laid out plans are executed the way they should be, can you enjoy a carefree life after retirement. But in this current economic climate which is a tough one, one major concern that would be bugging the newly retired individuals is choosing a destination to spend their lazy days. Finding a cheap place in the given time can be a challenge but then nothing so challenging that you will have to give up.

Find a cheap place

To find a cheap place for spending your retirement years, you will need to take into consideration several important things. These include the following:

• Cost of an average house

• State taxes for a fixed income range

• Comfort factors like population of fellow retirees, climate of the place, etc.

Places to choose

One of the most popular destinations amongst the retirees is the south western part of U.S, especially the places like South California and New Mexico. These are the most preferred locations for spending the post job days of your life in complete peace. But with popularity also comes a heavy price tag. So, if these places prove too expensive for your pocket, there are cheaper options too in the sunny southwest. Look for houses in Tucson and Arizona if you want things to be on the reasonable side. The commonest choice however, is Florida. An all time favorite destination for retirees, there are homes available for different budgets. The perfect weather conditions coupled with the beach side living makes this destination one of the best choices for every budget.

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Three Tips to Help Planning Retirement

Thinking about retirement is not usually on the top of our list of things to do. Then suddenly we reach the point in out 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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Healthcare - The "Wildcard" in Retirement Planning

Travel, golf, hunt and fish, spend time with the kids and grandkids, sell the big house in the suburbs for a smaller house in the country or a condo in the city. As a Wealth Manager, these are some of the many plans I hear when asking the simple question: "What are your plans for retirement?" When I bring up the question of "What are your plans for taking care of your health and healthcare in retirement?" It is almost always followed by that glassy eyed stare that lets you know that this was not even part of the picture until I brought it up. This is not surprising because after all, those grandiose commercials and ads put out by the various insurance and investment companies, you know the ones I'm speaking of, right? The ones where the older couple are walking hand in hand along the beach into the sunset, or running around with the grandkids.

Unfortunately, this vision of retirement will not be realized by many people. Instead, the previous images will be replaced with images of hospital rooms, dialysis clinics, nursing homes, or even a bunch of brown plastic prescripion medicine bottles that represent the zillion or so pills that must be taken everyday. While this is a reality not many people would like to imagine it will become a reality by many people, or their spouses at some time during retirement. To not have a plan for the "not so fun stuff" is playing a game of financial "Russian Roulette" with your retirement. Only in this game of Russian Roulette, there are two or three bullets loaded in the cylinder, not just one. In this article I'm going to do an overview where healthcare was in the past, where it is now, and conclude with the three components of healthcare planning that I typically address in the healthcare segment of my retirement plans. In the upcoming months, as time allows, I will address each segment in more detail as outlining them all right now in this article would be time and space prohibitive. Feel free to use some or all of my suggestions in your plan, but please make sure that healthcare is addressed in your retirement plan. You are only given one shot at retirement, and you have to do it right the first time. You can't fold, and wait for a better hand next deal.

THE WAY IT WAS

The best way to illustrate where we are is to illustrate where we are is to first look at where we were. Back in the days of the big paternalistic companies and shorter lifespans of the industrial age, healthcare in retirement was never an issue. In fact, many people retired at age 62 and died by age 67. Some made it into their 70s, and only a lucky few made it into their 80s or 90s. Companies like U.S. Steel, GM, and Ford all included post-retirement healthcare in their benefit plans along with a defined benefit pension to supplement their government provided social security. Since each generation was about the same size or slightly larger than the previous one, the "pay as you go system" worked well as the current generation of workers were able to adequately fund the previous generation of workers for the limited time they required coverage. Life was good until...............the game changed to...............

THE WAY IT IS NOW

The decline of the industrial age and the dawn of the information age saw the decline of the big companies with the awesome benefit plans, and more towards the independent "every man for himself" mindset that we currently are experiencing. With the huge Baby Boomer generation heading into their golden years, and a much smaller Generation X and the leading edge of the Echo Boomers having to finance the Baby Boomers retirement, the rules of the game changed significantly, and in many ways they had to. Also, dying five years after retiring is now more the exception than it is the rule. Now the average life expectancy lasts into the early to mid 80s, and with a current married couple reaching the age of 65, there is a 25-50% chance that one of them will be alive to see 90-95! While improvements in medicine and diet are allowing us to live longer lives, the quality of that life is not keeping pace. People are now contracting illnesses and medical conditions that were never much of a problem in the past because either people didn't live that long, or the illness itself killed them. Alzheimer's disease patients, Parkinson's disease patients, stroke patients and cancer survivors (even in to the 1980s, "cancer" and "survivor" were not terms that typically went together) are living a rather long time with these illnesses. The big companies that provided healthcare from employment until death have now not only stopped doing that for the current crop of retirees, many are trying and succeeding in getting out of providing health benefits to the previous generation of retirees. The automobile and airline industries come to mind here. Unfortunately, while the game has changed with the times, many people are still playing by the old rules, and the USA in general is just starting to recognize the the healthcare tsunami that is about to hit.

THE 3 COMPONENTS OF HEALTHCARE IN RETIREMENT

When dealing with healthcare in retirement, the simplest way to deal with such a broad topic is to break it down into three components:

1. Acute Care-The type of care needed to treat an immediate health disorder that could result in disability or death if not treated immediately. It also typically includes preventative measures such as annual checkups, vision and dental checkups, and prescrition medications.

2. Chronic Care- The type of care needed to treat a health disorder that can't currently be cured and, that the person will have to live with for the remainder of their lives.

3. Wellness- Includes measures that people can take to prevent or slowdown the ravages that aging places upon your health.

Since each of the components are in-depth topics by themselves and would be difficult to outline in one sitting, I will address each of these topics separately over the next few months, time permitting. Please stay tuned for the follow-ups to this article that will describe each of the three components in more detail.

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Retirement Planning - Why it is Important

You might spend about a third of your life in retirement. Retirement planning seeks to ensure that you do not spend a third of your life in misery. It also helps us to achieve our long-term dreams and prepare for the financial reality of retirement.

What is retirement planning?

This type of planning is an amalgam of social, psychological and financial preparations for the period when you will no longer be in full-time employment. These days, the definition of "retirement" is getting broader because many retirees continue to work.

That fact doesn't change the concept of retirement planning as planning for your golden years. It doesn't alter the inherent uncertainty of the future either. Planning is multi-dimensional, although primarily financial. It can be perceived as a subset of financial planning that seeks to attain some degree of financial independence at retirement.

Why is there so much fuss about it?

The risk of outliving your life savings (longevity risk) is grave. Also, purchasing power risk and inflation risk make it harder to maintain your pre-retirement standard of living throughout retirement. Greater health risk is experienced, since average life expectancies are on the rise. Retirement planning is vital, because it is designed to be a risk management activity for retirement. Further to this, it can ensure that you have enough hay in the barn to be financially worry-free.

When should you start planning for retirement?

The easy answer is "as early as possible". If you are working or have a source of income, you should start planning now. Retirement planning is not an event, but an ongoing process. The clich "better late than never" applies to adopting a systematic approach to your retirement considerations.

How should you plan for retirement?

The first step to undertaking this activity is to envision your retirement and state specific retirement goals. You should assess how much you'll need to make these goals a reality. Then you will take stock of what you have in place and decide if you are on track or whether you have a shortfall. Take care to identify dedicated retirement plans and separate these from solvent, short-term savings.

Planning requires a bit of ambition and organisation as well. It should not be done with arbitrary targets and figures that do not represent your true desires. A retirement calculation forms a core component of your retirement planning activity. You should also consider the following when planning for retirement:

i) Inflationary pressures during retirement

ii) Health insurance and other protection products

iii) Debt reduction or elimination by or in the early stages of retirement

iv) Retirement products (annuities, pension plans); including options for late starters (reverse mortgaging & single premium annuities)

v) Your accumulated retirement fund and income stream

One important retirement planning rule-of-thumb is that you should plan for at least 30 years of retirement. This is based on two factors. The average increase in life expectancy averages dictate that people will spend a longer time in retirement than before. Also, those who retire earlier tend to have higher life expectancy averages compared to those who retire later.

Retirement planning is all about anticipation, systematic approaches and financial prudence. It can involve all aspects of financial planning as well. That financial approaches tend to dominate discussions on retirement planning is inevitable. However, it must not be forgotten that retirement involves more than money issues. Still, without being financially comfortable, you are likely to be financially susceptible and scraping the barrel.

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Why Early Retirement Planning is Important?

An often overlooked but essential way to ensure a good future for a worker is to consider early retirement planning in advance. There are important data about pensions, social security benefits, and other that the worker must know in depth. The worker should never set this information aside to find out how it all works the day before retiring. In fact, the wisest thing for a worker to do is to start considering the possibility of saving money for future use, which many people are doing nowadays when they get a fixed salary.

Early Retirement Planning Essentials

One of the most important things to consider when you plan your retirement is timing. In order to be able to satisfy your future needs after you retire, you need to make a proper use of time, work out a habit of saving, and make sure you embark on the right businesses. If things work out as desired, the amount invested is supposed to grow larger through time. Unluckily, some people who were able to get a greater amount of income, have a short period of time to make investments; that is why, even though your income is small, you should plan your early retirement.

How to Develop an Early Retirement Plan

There are four aspects that need to be considered if you want to work out a great retirement plan. If you want to make sure that the amount you spent on this was worth it, you must follow each one of the instructions illustrated in each step. First, there is the time when you have just started your career and do not have extra money to invest every month. However, even if the amount seems minimal to you, you have to invest it, so that the quantity increases. A wise thing to do for a young worker who has no money to spare is to turn to a bank offering mutual funds with no annual fees.

Second, as time goes by, you get a bigger salary and you are able to put some money either into brokerages that offer discounts, or into other good investments, which could yield profit. Of course, the more money you can earn the more chances you have to lose it, which is an important reason to watch carefully where you are going to put your money. Third, in order to avoid bitter times in the future, do not owe money to anyone. Pay all your debts as soon as the income reaches the desired level. Finally, you are free to make other investments in several other businesses as soon as you get rid of the debts. If you follow these guidelines carefully, you will not have harsh times after your early retirement.

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Retirement Planning Made Easy

Retirement planning works to the benefit of both the employer and the employee. A good retirement plan is an important job incentive. By making a retirement plan available employers are able to satisfy the needs of good workers and those workers are happy to continue performing well for their employer. The employees benefit from having a tax deferred savings for their future. This is how a simple retirement plan works.

What is Involved

For small businesses or less than 100 employees a simple plan allows them to offer 401k or IRA benefits to their employees as a retirement plan. To take advantage of this plan employees cannot be participants of any other retirement plan. Since 1996 the simple plan has operated under the laws of the Small Business Jobs Protection Act.

Another benefit to the simple retirement plan is that it allows the contributor to determine how much he will contribute, up to $6,000.00. The employer matches the contributions of the employee, not in excess of 3% of the employee's earnings. This way the employee can control how much he wants to put toward his retirement each month. It is in the best interest of the employee to contribute as much as possible since his contribution is being matched 100% by his employer. Of course there is a limit on how much the employer can contribute as well - no more than 3% of the employee's income.

The employee is not required to contribute any funds toward retirement. The plan can be set up so that the employer contributes an amount equal to 2% of the employee's salary into the plan and the employee makes no contribution. If employees no longer want to be a part of the plan they can cease participating at any time.

If you have a simple retirement plan and would like to opt out of it you should consider this carefully. Early withdrawals are subject to high penalties, up to 25%. Also taxes are imposed on the earnings at the time the funds are withdrawn. It is very expensive to terminate a retirement plan prematurely so serious thought should be given before doing so.

You might even be better off to borrow money, using the retirement fund as security, if you can find a lender that will allow you to. Leaving the money in your retirement fund lets it compound tax-free, which can balance off the interest you pay on the loan, or might even work out to your advantage in some cases.

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Ways to Save Money For Retirement

Retirement might not be in your near future, but it must be something that you are preparing for it now. Many professionals believe that saving money for your retirement is more important than paying off the credit cards and having emergency savings account accessible in case when you have surprising bills, such as hospital bills, car problems, and so on.

Around 10 to 20 of your income must go to saving for retirement, and if you are very close to retirement, then you need to save minimum of 20 and if you are younger than you need to save 20 for the retirement if all is possible. If you save little money now, it can work for you and amplify greatly over some time, leaving you with nice retirement in future.

There are lots of employers that offer matching program. For every dollar you put in your retirement account, they will add up to a dollar, up to a certain amount. There are many types of retirement accounts for one of its type is Traditional IRA that is funded by the money before taxes. Majority of the banks will permit you to fund on your retirement accounts by an automatic withdrawal system. Sign up for this alternative at your bank so that money goes into this account every month, and does not accidentally get spent or overlooked about.

For business proprietors, mainly small business landlord, look in SEP IRA for your workers. Whatever you put in this retirement account is tax deductible, and it permits you to add money to your workers' IRA instead of pension fund.

In today's weakening economy, it is very difficult to direct one's finances as well as find certain methods to save money. However, this makes it further significant than ever to prepare for your future and retirement. Start saving whatever you can today, to promise yourself as well as your family a very good future.

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