Business Development Companies - Should They Be a Part of Retirement Planning?

VCs, Angels, BDCs, what are they? How are they different? How can an ordinary investor get involved? Do they offer an opportunity for high yield dividend payouts during retirement? These are all questions that anyone planning for retirement should know the answers to in order to have the opportunity to include one of the least understood, and highest dividend paying, categories into their portfolio as part of a diversified plan for retirement.

Venture Capitalists (VCs), Angels (accredited investors), and Business Development Companies (BDCs) essentially fulfill the same role: to help small and medium sized companies obtain financing when more traditional means of funding (bank loans) are unavailable. Bank financing almost always requires a certain amount of guarantees such as accounts receivable, inventory, buildings or equipment or other assets that can be held as collateral for a loan or line of credit. Smaller companies, start-ups, or even individuals with an idea for a business, or medium sized companies that don't have sufficient funds to grow their business often don't have the capital required, nor do they have the requisite assets or accounts receivable required by traditional banks to meet their strict loan requirements. This is where Angels, VCs, and BDCs come in. Angels are regulated by the SEC and must be "accredited investors" with a net worth of at least $1,000,000 in order to get involved with a private placement of stock which means that they provide funds for a smaller company and in return own a percentage of the business. VCs are generally partnerships of accredited investors that provide the same type of funding. In addition, they often offer other "incubator" type services to help their portfolio companies to prosper, frequently including the placement of their own management personnel on the board of directors or on the management team. In the case of both Angels and private VC firms these activities are, by regulation, the realm of wealthy investors and beyond the reach of most individuals.

As part of a broad base attempt to level the playing field and give smaller investors an opportunity to become involved in growing smaller businesses, congress passed The Investment Company Act of 1940 which, among other things, created a new class of business called Business Development Companies. While similar to VCs in function, unlike VCs, Shares of BDCs are traded on the major exchanges, and anyone can own them. Similar to Real Estate Investment Trusts, BDCs do not pay income tax on their profits as long as they pass along at least 90% of their profits to their shareholders who then pay tax at their individual tax rates. Since they are required to pay out nearly all of their profits to stock holders, BDCs often fund their growth by issuing additional shares. When this occurs, a stockholder, or potential stock holder, must determine whether or not dilution, caused by the sale of the new shares, will be more than made up by the new business that the incoming money will fund. Generally a BDC will announce, at least in broad terms, how the proceeds from the new offering of stock will be used. Additionally, it is important to evaluate how successful the company has been in the past, how leveraged they are, and how management has reacted to changing market conditions. In other words, like any other investment, doing the proper due diligence, and knowing and understanding the company prior to investing is critical in making the right investment choices.

Because of the pass through tax structure as well as the inherent risk in this type of venture, BDCs typically pay significantly higher dividends than the average company. For that reason it makes good sense to consider them as a part of a diversified retirement portfolio. If you are building up a nest egg for retirement, dollar cost averaging into quality BDCs is an excellent way of creating a high yield position as part of your overall mix. If you are in retirement already, quality BDCs can provide an excellent income stream that will continue to payout regardless of market fluctuations.

A word of caution, BDCs should not be bought and forgotten, like most investments, past performance is no guarantee of future results. By the very nature of the business, BDCs frequently change their portfolio of businesses, may change their risk tolerance levels, may change their leverage, may be impacted by changes in interest rates, etc. Fortunately all of this type of information is readily available in annual and quarterly reports, and BDCs are required to publish any material changes in their business. With the proper due diligence, and appropriate vigilance, BDCs make sense for anyone interested in boosting their retirement income through higher dividends. They are especially valuable in IRAs and other tax free venues where the higher yields can compound free of taxation.

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Prepare For the Retirement of Your Key Employees

Say "retirement planning," and most of us think about savings and pensions. But there's another very important angle to this issue, and that's the impact on your company when a key person retires. Regardless of how formal you make the process, the continuity of your company's performance depends on preparing for the retirement of key personnel. Keep these points in mind:

- Have a clear understanding with key managers about when retirement is likely to take place. You need to create an environment where retirement is a continual part of the dialog, where you recognize that this is a natural occurrence, and where you can have discussions that are frank and in the best interests of the company as well as of the individual. Make it clear that your goal is not to force people out but rather to prepare for the inevitable in a positive, productive way.

- Identify potential successors. Know who within your organization has the potential to fill the retiring person's position. Begin grooming those individuals so that an actual successor is easy to select when the time comes.

- Evaluate whether or not the job will change, and if so, why and how. Consider industry trends, your own growth strategy, and other issues that may affect the job and how it is performed. With that in mind, you can develop a plan to prepare potential successors to be ready to take over the job when the time comes.

- Offer support for people approaching retirement to help them make the transition. Such support might include financial counseling or even other types of counseling to make it easier to adjust to the lifestyle change. If appropriate and beneficial, you may also want to retain them in a consultant status for a period of time after they leave.

- Notify customers who will be affected well in advance so they have plenty of time to adjust to a new contact person.

Of course, some retirements take place unexpectedly with little notice, such as when an illness or other circumstances drive a retirement decision. Deal with that just as you have to deal with other surprises. But in the normal course of business, a retirement should be something that is planned well in advance, both for the benefit of the individual and the company.

When you have a clear understanding with key managers about their retirement plans, you've got time to prepare your company. You should be talking about this at least two or three years in advance of the target retirement date. It's an important, prudent step in being a well-managed company.

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Invest Now to Survive Retirement

It is really a pity the way and manner people take retirement today. It is supposed to be a thing of joy that is should be welcomed with great expectation. I take retirement to be the second honey moon devoid of tension and anxiety.

Take a closer look at what I take retirement to be, your children have all left home, you have a nice home that you fully paid for with good looking flower garden, a lot of money stashed in your bank account, you are at liberty to traveled round the world, attend Olympic games, watch great football matches, tennis tournaments and visit memorable places, what a fulfilled you will say. But only a few achieve this great feats during their life time because of poor financial planning.

Life is full of choices, if you choose to live the above mentioned kind of life, then start today to plan for it, to live a good life and retire early does not depend most times on your nature of job but on financial literacy.

What most people do in my locality is to depend on their children when they retire from active service, no matter how wealthy your children may be, they will only give you money for your feeding and not for your wants, they may provide for your basic necessities, but you can never be as comfortable as you would have been if you were financially independent.

There is nothing like freedom, it is only through investments that you can actually be independent from financial embarrassment of any sort, imagine that you are sick and needs medical attention, since you financially incapacitated, you have to inform your children - what a way of life. The earlier you realize the importance of being in control of all your needs and wants the better.

Retirement should be a thing of joy and not sadness. You do things you want to do at your convenience, you are at liberty to do whatever you want to do without being compelled to do so. Imagine getting up from bed any time you want, paying visits to important places without being in a hurry.

Remember you can never enjoy all these freedom if you don't hasten up today. All you need to do to live a good life during retirement is to start investing today so that your future will be secured.

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Dealing With an Ageing Workforce

If people are considered to be an organisations most important asset, then many UK employers are finding that their assets are ageing pretty quickly.

In the UK the average working age has increased steadily over the last 30 years and is set to increase further in the future. This is an issue that is affecting virtually all of the western industrialised nations and is viewed by experts as potentially very disruptive to their economies.

The facts speak for themselves:

• In 2007 there were 1 million people in the UK workforce who were aged between 65 to 70, this figure is expected to reach three million by 2017.
• It is estimated that by the year 2030 at least 46 per cent of the UK population will be over the age of 50.
• The UK population of over 65's grew by 31 percent between 1971 to 2006.

To further demonstrate the ageing of society as a whole, the government's own statistics show that already in 2009 there were already over 1.4 million people in the UK who were aged over 85.

These demographic changes have thrown up challenges and also opportunities that responsible employers should be planning for. From the most basic questions like how to replace a retiring experienced member of staff to more serious ones like how to deal with combating age discrimination.

On a practical level the nightmare scenario that could arise for some companies is that they may find that a group senior managers or key personnel reach retirement age at the roughly the same time. If this were to happen it could be very disruptive to the company to loose so many key personnel over a short period of time. As more and more of the baby boomer generation reach retirement age, this scenario may become reality for some companies.

On the positive side research has shown that the majority of those over retirement age say they would like to continue working. Mostly for financial reasons but also to keep themselves active and connected with society.

The question companies and indeed society should be asking is how should employers deal with a ageing workforce?

Listed below are three fields where I feel should be put into effect to address this issue.

(1)Firstly employers must make sure they do everything possible to meet legal requirement so that you don't fall foul of any employment legislation in relation to ageism.

To deal with a ageing workforce it is vital that companies are aware off any current Employment Equality (Age) Regulations relating to older employees. It is also important for policies to be implemented and regularly monitored, as failure to do so can lead to allegations of age discrimination or even prosecution.

In previous decades it was the norm for older workers to be made redundant first. This cannot be the case any more, laws exist to combat ageism by making it illegal to discriminate or target a person because of their age. Employers should be aware of these facts and make sure they do not make similar mistakes.

(2)Secondly employers should develop practises and policies to make sure they get the most of out their existing elderly employees and also to be willing in the future to hire more suitable elderly workers.

By having a positive workplace practises and policies towards older workers you can encourage them to work harder, be more loyal and bring out the best of their skills and experience.

One of the best ways to do this is to ensure that rewards and benefits are equally distributed to all staff. Doing this demonstrates fairness, helps to promote inclusion and makes for a better workplace atmosphere.

Listed below are some of the many obvious advantages of a elderly employee who has been with a company for a long time:

• Due to their experience and knowledge of their industries older workers are considered to be more productive than their younger colleagues.
• They are more likely to be loyal to a company, especially if they have been there a long time.
• According to official UK data for 2004 elderly workers were less likely to take time off for sickness than their younger counterparts.
• As they have been in a profession for a long time they are less likely to go around asking for advice from colleagues.
• They can mentor and advice new or younger less experienced staff.
• They may have strong and important contacts within their respective industries.
• By retaining a long term member of staff you can ensure continuity and less disruption to the workplace atmosphere.

Organisations that take maximum advantage of their mature experienced staff will find that their overall company performance can improve, helping them to gain a competitive edge.

(3) Thirdly companies should have detailed plans in place to deal with the vacuum left behind by any retiring staff.

Retiring staff who leave take with them years of experience, connections and talent. Rather than loose all of that experience employers should consider re-employing them or offering them more flexible working conditions to entice them back.

As retired people are more likely to consider working in part time jobs rather than full time occupations, consider offering them a part time role.

Other ways to try to encourage staff to remain are:

• Offer flexible reduced working hours and better working conditions.
• Have pro age policies and implement them. Many surveys have shown that a good friendly working environment is a major reason for elderly workers wanting to stay on.
• If possible perhaps offer a completely different job role, perhaps in mentoring or training on flexible terms.
• Having a better understanding of the health issues that can affect older member of staff.
• Allow career breaks for those staff who would like a few months or a year off work.

How well any of the above points are implemented or indeed if they can be implemented at all depend on individual companies.

For instance the size and income of a company can affect on how it copes with a ageing workforce. A small private company will be less able to meet the costs of an older employee who is off work for say 2 months due to a serious health condition. Whereas a large private sector or public sector employer will be more able to absorb these costs.

In conclusion is it clear that in the future there are going to be a lot more older people in both society and the workplace. To take full advantage of these coming changes we need to be positive in our attitudes and practises towards our ageing workforce.

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Effective Budgeting For Retirement Years

Retirement seems like it is so far away, but the reality is it will be here sooner than we think. It is a simple fact that people cannot afford to live off of their pensions alone and that they should plan by budgeting for retirement. We should always be thinking towards the future and making decisions that will make our lives easier when we are older.

Many recommend that you start a savings account as early as possible and save a nice nest egg for your retirement. This is important and will allow you the freedom to live the life that you choose. You should put back as much as you can afford to and continue to add to it yearly.

Make sure that you pay off all of your bills before you officially retire. It is impossible to pay a mortgage payment with a pension. Do not use credit cards and if you have them, pay them off to avoid paying thousands of dollars in interest payments. They should be reserved for emergencies or thrown out and not used at all.

Investing is also a great way to save for your retirement. Many people have made enough money on the stock market to live comfortable for the rest of their lives. It is always a good idea to speak with a financial planner who can assist you with these types of decisions.

Savings bonds are a good choice because they double in value in as little as 11 years. This is a really a low risk investment and they can also accumulate interest if they are allowed to mature even more than the pay off date. Many people like to use bonds and feel that their money is much safer by purchasing them.

Many employers offer employee retirement plans and they will pay a matching amount to any money that you allocate to that account. You should always participate in these types of programs because they can make you a lot of money for your retirement. It is always a good idea to take advantage of these programs.

You can live very comfortably during your retirement years with the proper planning and budgeting. Your twilight years are something to look forward to. Take that trip that you always want to take or go see the grandchildren. You earned the right to retire and you should enjoy yourself. This is why it is crucial to have a plan and follow through with it. Never rely on a pension to pay the bills and allow you to have the lifestyle that you deserve.

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Retirement Planning - Consulting a Counselor For Pre-Retirement Planning Needs

Retirement is a new chapter of adulthood as it transforms a person to a time of passion and purpose. Retirement is not the end of everything. It is just the beginning of a new and relaxed life which could turn out to be interesting and more productive if you plan well. So design your next phase well to lead a meaningful second adulthood.

Many people are uncertain about their pre-retirement planning. Are you confused about the right plan or selecting a career path after retirement? You should be, and more so if you are nearing your fifties as you have plenty of years to plan ahead and this question is the one that should lead you to the right path. Some people find pre-retirement planning very tedious and boring and they feel that they would need more money than they calculate. Many executives prefer leading stressful lives, as they don't know how to start planning for their retirement. Some find themselves locked in a decent pay pack and they cannot think of anything else or any change over.

You should plan well for your retirement. Seek the help of a counselor who can create a plan for your retirement and help you set your goals or define your career path so as that you can lead a satisfying retired life. Retirement counseling is generally based on your needs and either the counselor guides you to a specialist or provides a referral. Retirement counselors are well versed to handle all your issues relating to relationship, financial management, life balance issues, stress and well as anxiety that accompanies when you near the retirement stage.

Retirement is very critical for some people and other than financial issues some also face restlessness. Experts are not satisfied with the currently available pre-retirement programs as they find them shallow. They suggest that a retirement counselor should give a holistic approach towards understanding:

Current financial resources and the future needs. Management of leisure time more meaningfully, either by pursuing hobbies or opting for some volunteer activities, or in reflection and contemplation. Obtainable property, or health and safety. Relationships.

Research shows that pre-retirement people often refuse to seek help from counselors. But slowly this trend is changing and many corporations now offer specific pre-retirement help. Retirement counselors play an important role in providing financial information with meaningful suggestions based on a special sensitivity to the fact that anxiety about retirement is often about aging.

Counseling baby boomers and elderly during the pre-retirement stage is a new and challenging field that promises a more satisfying, meaningful life for America's older citizens. The little planning and initiative goes a long way.

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Preparing For Retirement Requires Careful Planning

With the baby boomer generation quickly making its way toward retirement, there are some issues that pre-retirees should be concerned with addressing before saying good-bye to their employers.

Long retirement period

When Social Security was first established, most retirees didn't live long after terminating the employment. But over the years, our life expectancy has increased significantly.

People in their 60s can expect to live an average of 20 years or more in retirement. Once we reach our 70s, the chances of making it to 90 or even 100 are greatly increased. Therefore, we need to make sure that our retirement nest egg is sufficient to cover a long and comfortable retirement.

Funding retirement

While we know that we need a big nest egg, we should give some thought to the sources that will provide those funds. Traditionally, retirement was funded by pensions, Social Security, and savings. However, times have changed.

Pensions have become a thing of the past. More and more companies are eliminating pension plans and adopting retirement plans that depend more on employee contributions. Many pension plans have become insolvent, leaving retirees with only a fraction of the income they expected.

We cannot rely on Social Security, either. Although many Americans currently rely on Social Security for a large portion of their retirement income, future retirees should prepare a back-up plan. Unless changes are made to the current system, the Social Security Administration estimates that benefits for all retirees could be cut by 26 percent by the year 2040.

Savings needs to become a priority. Most Americans spend more than we make. If we continue to operate this way, retirement will look extremely bleak for many of us.

How much will it take?

It is hard to get a clear picture of exactly what it will take to ensure a comfortable retirement. However, it is better to prepare as much as possible. We also need to make sure to account for inflation in any calculations that we do.

For example, if you plan on having a $5,000 per month retirement income, keep in mind that, based on a 3% annual inflation rate, 10 years from now you will need $6,700 per month. In 20 years, it will take $9,000 per month to maintain that same standard of living.

Rising health care costs should also be included as part of retirement income. If your employer's retirement package does not include full medical coverage for life, expect to pick up where our underfunded Medicare plan leaves off. According to the Social Security Administration, Medicare is in a much worse financial position than Social Security.

Reevaluate now

The way we handle our finances requires a changed attitude. There is no better time than the present to make sure that you are on the right track to a comfortable retirement. The sooner you are able to correct your current course of action, the better it will be for you financially.

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