Retirement

The Retirement Fitness Challenge – Book Giveaway

March 8th, 2013  |  Published in Retirement  |  7 Comments

I was recently given a copy of the book, The Retirement Fitness Challenge: Shape Up Your Finances and Make Your Money Last a Lifetime, by Mark Bautis to review. Since I do write for a retirement blog this book was just the kind of financial book I like to read.

The book uses the analogy of comparing planning for retirement to starting a fitness routine. The analogy actually works pretty well. The book is divided into three parts. The first part concerns getting a snapshot of where your finances are at today. The second part focuses on withdrawal strategies including Social Security. The third part focuses on investment strategies. I particularly like his chapters on annuities and real estate investment trusts. I do own some REITs but don’t own an annuity. I think an annuity can be a smart addition to a retirement plan. Having some of your income guaranteed helps reduce the risk you will outlive your money.

Planning for retirement is a daunting challenge similar to starting a fitness routine. Your chances of successfully improving your health increases if you put together and implement a well thought out plan rather than just winging it by attempting to run 5 miles a day. The first step in improving your health as well as your current financial outlook is by assessing your current status. The Retirement Fitness Challenge: Shape Up Your Finances and Make Your Money Last a Lifetime, while simple in concept, is an evolving program that presents core concepts while layering complexity based on each retiree’s unique needs. You will emerge from taking The Retirement Fitness Challenge with a realistic assessment of your current financial status, learn several smart savings withdrawal strategies as well as different investment options to convert savings into an income stream to cover your expenses through retirement. The Retirement Fitness Challenge provides tools to help you stay on track with your retirement strategy and enable you to enjoy the retirement of your dreams.

If you would like a copy of the book just leave a comment. One winner will be chosen at random next Friday, March 15, 2013. Please, only one comment per person and you will need to have a U.S. mailing address. If you do not have a U.S. mailing address or would just prefer a different prize you have the option of receiving a $5 Amazon gift card instead of the book.

Net Worth TV Presents 5 Keys to Growing Wealth

February 4th, 2013  |  Published in Retirement  |  4 Comments

The Net Worth TV show with Terry Bradshaw covers a variety of wealth management topics on a regular basis. One of the most important topics in wealth management is growing your personal wealth. Growing your personal wealth is the key to retiring early, and living the lifestyle that you want to, when you want to. Here are 5 key ways that you can grow wealth over time.

1. The Net Worth TV Show on Saving Money

Saving money goes without saying, but you need to start saving something. Net Worth TV focuses on interviews with people who are great about saving money. Just thing about the saying “it’s not what you earn, but what you say”. Look at people who make a lot of money but complain: Vice Presidents of companies who always complain they don’t have any money. The reason is because of how they talk.

Then, look at the quite family on the block with the biggest houses. They don’t say much, but have a nice sum of money. The goal is to save, and you can focus on this to grow wealth.

2. Starting Young

The younger you start focusing on growing wealth, the easier it will be because of the power of compounding. Many people don’t realize that even if you start out contributing a small amount of money to a 401k, over time, you will build real wealth because the money will grow. The longer you wait to start saving, the more you will need to save because you have less time to watch your money compound.

It doesn’t matter how much you save, but it does matter that you start early. Grow wealth by starting young.

3. Stay Married

Divorce is one of the biggest destroyers of wealth in society. If you stay with your spouse, you have double the income and earning potential, and you can grow wealth. Think about people you know who divorce (especially later in life). Since they have to split everything and incur a lot of costs, it destroys financial momentum. Plus, you lose the advantage of starting young. You lose the power of compounding. You basically have to start over again in mid-life. So, if you want to grow wealth over time, work as a team with your spouse and you will get much farther.

4. Focus on Yourself Above Your Children

This may sound odd, but financially, if you want to grow wealth, you need to put your own personal financial health above your children. This means saving for yourself first. By focusing on yourself while you’re young, you will inevitably be able to pay for your children’s college later.

Too many people fall into the trap of saving for their children at too young of an age. They contribute to a child’s college fund when the child is a baby. Instead, use that money to ensure that you are stable and you can build your own wealth. This will help you be financially stable to be able to provide for your children later. In a worse case scenario, your children can always get a loan for college, but you can’t get a loan for retirement.

5. Live Below Your Means

Finally, you need to live below your means. Just because you have a good income doesn’t mean you need to spend it all. Instead, buy a house that is much less that you can afford. If both you and your spouse work, try to live on one income and save the other. If you want to build wealth, you need to have money to save and invest. This means looking at your budget and living below the top line amount.

By living below your means, in a smaller house or by spending less, you free yourself from a lot of unnecessary expenses, which in turn allows you to save and invest. You don’t want to be house poor, where you’ve put everything into a house, but don’t have any real wealth. Real wealth comes from the ability to live the lifestyle you want, when you want to, and living below your means can help you achieve that.

Types Of Retirement Plans – 401K and IRA

October 17th, 2012  |  Published in Retirement  |  1 Comment

Knowing that you should be contributing to a retirement plan is one thing; picking out the right retirement plan for you is another. There are numerous retirement plans to choose from today, so let’s look at a few of them and what they are all about.

Betterment.com

IRAs

There are two different types of Individual Retirement Accounts, Basic IRAs and Roth IRAs. Neither of these two retirement accounts is started through an employer, but is the responsibility of the individual. These retirement accounts are often used to roll company retirement accounts into, so the transfer is not taxed.

Each year after 2010, the maximum cap goes up in $500 increments each year to account for inflation. These contributions are tax deferred until the individual withdraws the money at retirement.

Roth IRAs were started in 1998 as a result of the Taxpayer Relief Act of 1997. The main difference between a Roth IRA and a Basic IRA is when the money is taxed. Where Basic IRAs are taxed when the money is pulled out of the account, a Roth IRA is taxed when the money is put in. This allows for the taxpayer to withdraw all of the funds at retirement without being taxed on the lump sum of money.

Defined Benefit Plans

Defined Benefit plans, (DB) are employer-sponsored retirement plans that hold monthly benefits for the taxpayer at retirement and can only be contributed by the employer. These benefits can be set at a specific dollar amount each month or can be calculated with a formula based on years of service and retirement salary. Since ERISA in 1974, many employers have moved from Defined Benefit plans to Defined Contribution plans.

Defined Contribution Plans

Unlike Defined Benefits plans, Defined Contribution plans (DC) allow the employer, employee, or both, to contribute to the employee’s account. These investments usually come in the form of mutual funds or stock in the company and as a result, your retirement account is usually directly linked to the performance of the mutual funds or how well your company stock does.
There are numerous types of Defined Contribution plans that your employer can contribute to on your behalf, including a 401(k), profit sharing, Saving Incentive Match Plan for Employees (SIMPLE), ESOP plans, and SEPs. These plans all have different stipulations on what an employer can add and how often it can be changed, but they all must be employer sponsored.
No matter what route you decide to go to plan for your retirement, whether it is an individual retirement plan of an employer sponsored retirement plan, the biggest thing is that you are planning. There is a different plan or set of plans for every person in every situation, so work with your local retirement planner to figure out what will be best for you in the end.

Making Retirement Savings Last

October 2nd, 2012  |  Published in Retirement  |  3 Comments

Most senior citizens have a morbid fear of retirement and the loss of income that comes with this life-changing situation. This is quite easy to understand because retirement comes with several unanswered questions. In most cases, the most significant question is; “how long will the retirement savings last?” Other questions which bother retired people are the inflation rate and the long term value of money. The point here is that a lump of money which has been set aside for retirement may not last the retired person as much as he or she will like it to last. This is why it makes a lot of sense for retired people to have a plan on drawing down retirement assets.

One of the best plans for spending retirement savings is the “4% rule”. This is a good plan because it usually works. More to the point, this rule takes care of inflation rates to a certain extent. A retired individual who has, say $1,000,000, can simply aim to live on just 4% of that sum per year. This works out at $40,000 per year and it is a reasonable sum for a senior citizen who has to really cut down on unnecessary expenses. The beauty of this plan is that the person in question can add just 3% per year to this figure annually. This will take care of inflation and ensure that the retiree is still on the right track.

Another great idea is to delay withdrawals from the pension fund for as long as is reasonably possible. This is a perfect option for people who can afford to wait because delaying withdrawal will substantially increase the retirement cash. For people who are married one great idea will be to maximize the years of tax deferral by living on the income of the younger spouse for a while.

As stated already, retirement can be a frightening prospect for some people. For all that, there is one way to make retirement pleasant experience. This can be done by careful planning of prudent spending of retirement savings.

Making Your Savings Last in Retirement

September 4th, 2012  |  Published in Retirement  |  3 Comments

One of the most common fears of those nearing retirement is that their savings will not last for the entirety of their retirement.  Assuming you have saved enough that a reasonable withdrawal rate (3 or 4% for most people) will cover your current expenses there are three primary dangers to your retirement savings.  These dangers are inflation, market volatility, and longevity.

Inflation can quickly erode your buying power.  Even at a relatively modest inflation rate of 3%, you will need two and half times your current annual income to maintain your standard of living in 30 years. One way to combat inflation is to keep a percentage of your portfolio in stocks.  The stock market has historically produced returns greater than inflation.

The longevity risk is similar to the inflation risk.  The longer you live, the more inflation affects your standard of living and the more money you need to maintain your reasonable withdrawal rate.  Keeping a percentage of your portfolio in stocks will also help combat this risk.

Of course, the problem with keeping a percentage of your portfolio in stocks is that you are exposed to market volatility.  This is somewhat reduced since you are planning for at least 30 years of retirement.  Although stocks are often down in the short run, over a period of 30 years the stock market has in the past always produced positive returns.  There is no guarantee that the stock market will continue to do that in the future, but it seems like the best bet.  You need to research what percentage of stocks will work for your retirement needs, or discuss them with a trusted adviser.  If you have a significant part of your retirement portfolio in stock you should increase your chances of your savings lasting through your retirement.

Riskiest Investments for People at or Near Retirement

August 20th, 2012  |  Published in Retirement  |  2 Comments

Riskiest Investments for People at or Near Retirement

Phil Cannella is a Master IRA Advisor and the CEO of Retirement Media Inc.

The Next Three, Five-to-Seven Years

August 6th, 2012  |  Published in Retirement  |  1 Comment

How I See the Scenarios for the Financial Markets Playing Out

Bitter Medicine

I do not have a crystal ball, and I am sure this will get an overflow of opinions from our Readers, but I am going to go ahead and try to give a couple of different scenarios/predictions of global economics.

First, I doubt any of these are going to be pretty as the longer our “smart people” delay the medicine, the more painful the cure will be. For example, as you know we have a balance sheet problem with Social Security. It’s not as if this issue hasn’t been known for the last two decades. It’s the demographics. Duh!

In fact, SS was “fixed” before, but apparently not well enough to escape the troubles it is in once again. Had this funding/spending problem been seriously addressed years ago, we would not be thinking about this today. Isn’t future problem solving what we hire people in Washington for? Now we are looking at a crisis that easily could have been avoided.

Kicking the Can up the Hill

But honestly, that is small peanuts compared to debts that global governments have been – and are still – taking on. At some point, confidence in the system will break down. If and when that happens, the transition won’t be graceful.

Looking over Santa Ana, Guatemala and Volcano Agua

This is already starting in Europe. Greece is lost and needs to be exited from the Euro. Sure they may be able to kick the can down the road – or more like up the hill – a while longer, but the math between assets and liabilities does not compute. That is unless, Germany, the Dutch and the Finns decide to take on Greece’s debts and in the end, not be paid. Doubtful.

One option floating about is to issue Euro Bonds, similar to U.S. Government Bonds. The problem with that is the member countries would have to give up sovereignty, making Euro-land the United Countries of Euro. That has about as much chance of happening as the French changing their national cuisine to rye bread and sauerkraut and the Spanish specializing in pasta and pizza.

And speaking of the Spanish, they are the 12th largest economy in the world, and their bank balance sheets are a mess, to be polite. How long can they simply move the pile of cash around the board using accounting tricks and bailouts before the investors realize the jig is up? Oh wait! With bond yields around 7.5% the bond market is forcing Spain’s hand. It gets to a point where a government can no longer service their debt, and Spain is near the end game. Are you hearing this America?

Is Europe presaging America?

Why do you think the Fed is keeping a lid on interest rates?  Where would bond yields be if the Federal Reserve was not buying Treasuries? And what would the added interest cost be to the Federal Government/tax payers? In one word… HUGE!

But I am getting off track, and the purpose of this is not to frighten you with the-world-is-coming-to-an-end doomsday stuff. The question I have is how can we profit from this madness?

I cannot control the idiots in charge or the decisions they make. You may not like it that I am calling them “idiots,” but if they are so smart, why are we in this mess?

Possible profiting plans

Can the Fed save the economy? The better question is: Can you save yourself?

I am as frustrated as you are about what is going on and none of us can run our personal finances the way governments do, but we can profit from their blunders.

If the Euro slides – or worse – the funds will flow to the Dollar as has been demonstrated in the past. One trade is to go long the Dollar and short the Euro, but currency trading has too many risks for my tastes.  If the Dollar rises, it will put pressure on U.S. exports making them more expensive worldwide, thus affecting profits and the U.S. equity markets will fall. So the trade for me is either get out of the way, let the markets fall, and have a large cash position to re-enter at a later date and/or short the Indices. Either way I profit.

This does not mean there won’t be huge rallies that can be taken advantage of, as the leaders tout this program or that plan and the markets react. But until the “wizards of smart” seriously address the underlining issues of debt, this would be more of the same rhetoric which further exasperates the problem.

Taking control of your destiny

And it’s not just Europe where things are getting interesting. Asian economies are slowing, and the Asian millionaires are firing bankers, taking control of their own destiny, something we have been espousing for years.

But what if I am wrong and the global governments, the ECB and Federal Reserve leaders find a solution where our lifestyles and entitlement programs can continue without changes, and Santa Claus and the Easter Bunny really do exist?
Then I am wrong, I will gladly be the first to admit it, and your next newsletter is free.

S&P 500 2000 – 8-2-2012

At some point in the future this over-indebtedness will correct itself, be it 3, 5, or 7 years from now. At that point there will be a generational buying opportunity in the financial markets, and I want to be a part of it. My best guess is that until then, we will have a market that moves up, down – and in the end sideways – similar to what has happened since 2000, but probably drifting lower over time.
A sideways market presents many opportunities for profit, and I plan on taking advantage of them.
This is my opinion and I am sticking to it.

About the Authors

Billy and Akaisha Kaderli retired two decades ago at the age of 38 and began traveling the world. As recognized retirement experts and internationally published authors on topics of finance and world travel, they have been interviewed about retirement issues by The Wall Street Journal, Kiplinger’s Personal Finance Magazine, The Motley Fool Rule Your Retirement newsletter, nationally syndicated radio talk shows and countless newspapers and TV shows nationally and worldwide. They wrote the popular books The Adventurer’s Guide to Early Retirement and Your Retirement Dream IS Possible.

 

Retirement Plan in Tatters

May 10th, 2012  |  Published in Retire Abroad, Retirement, Social Security  |  6 Comments

Recently, we read a New York Times article by Joe Nocera called My Faith-Based Retirement.

 It was a cheerless piece detailing the failure of 401k’s as an investment vehicle, the decline of pensions, the lack of employer-sponsored healthcare benefit plans and the consequent reduction of Boomer’s retirement expectations. A dreary, rain-drenched, out-in-the-street future was being painted focusing on stark data from EBRI that states: “only 22 percent of workers 55 or older have more than $250,000 put away for retirement and 60 percent of workers in that same age bracket have less than $100,000 in a retirement account.”

 Taking this information as the only premise from which you work out your retirement, you may as well give up. Just chuck the idea of having any appealing options, start on the cat food now and simply get used to it.

Houston, we have a problem

 Remember the 1995 movie Apollo 13 starring Tom Hanks and Kevin Bacon? The future of these astronauts looked pretty bleak also, with the seeming possibility of arriving back to earth safely being all but a lost dream. What they did – what they HAD to do – was put everything available to them out on the table and take a hard look at what they had to work with. There was no room for mental darkness, no room for whiners. And time was running out.

 From unrelated bits and pieces they fashioned the part they needed to repair a life-threatening problem and made it unscathed into their future.

 If you find yourself in a future-threatening financial situation today, you, too, need to ask yourself “What do I have available to me, and how can I make it work?”

But… but… but…

 When we retired over 20 years ago, we had no pension and no guaranteed healthcare plan. We were 38 years old and too young to draw social security. Today, that situation would be described as a crisis. In the wisdom of the current moment, we would be told that our retirement is out of the question. Talking heads would paint a bleak picture, emphasizing the drop in our standard of living and the possibility of bankruptcy due to medical costs.

 Accompanying this gloomy description from the media would be the bleating chorus of: “If only Wall Street wasn’t so greedy. If only the housing market hadn’t gone bust. If only health care was guaranteed and free. What a shame to find yourself in this state of affairs at this time in your life. Don’t rely on yourself, all is lost.”

Back to your future

 In those long-ago years we chose to look at creative combinations to fashion our future. Mind you, there were no guarantees our plan would work, and there still aren’t any today. Our stance has always been to take advantage of options that are available, and make the most of them.

 Keep in mind that it’s impossible to reach for the stars when your nose is pointed to the shadows. Caution! Looking only at the dark side of a situation is a dangerous road to walk. Believe us, you can find anything you want to support that line of thinking.

 Instead, why not reduce your spending footprint, and increase both your lifestyle and financial longevity by looking at other places to live?

Some inspiration and a practical plan

 According to the U.S. Government Social Security Website, the average monthly benefit received in 2012 will be $1,229 per retired worker. That equates to $14,748 annually. For easy math, let’s call it $15,000.

 Billy and I just finished living in Panajachel, Guatemala for 6 months on just over $34 per day. That equates to $12,550 a year, and that was for the both of us. We ate out, took boat rides across gorgeous Lake Atitlan, sent presents home to family and friends, grabbed beers at a bar with friends and drank the best tasting cappuccino every afternoon.

 It was not a hardship.

 We met other couples in the thriving Expat community doing the same exact thing – living in beauteous surroundings with views of volcanoes, the lake, or majestic waterfalls and paying as little as $200.00 per month rent. All of us chuckled to ourselves over our good fortune.

 Living in this location on one’s Social Security payment would be a breeze. If there were two checks coming in, you’d have money to spare. Medical Care in the larger cities of Xela, Antigua or Guatemala City is top notch, and there were several dentists in our town of Pana who were highly recommended.

 Don’t like Guatemala? Try Chapala or San Miguel de Allende, Mexico, Medellin, Columbia, Chiang Mai, Thailand, Silver City, New Mexico or any number of exotic, exciting and easy-to-live locations. Open your mind; open up to your options.

 If you are one of the “unfortunate ones” who only have $100,000 in retirement savings, you can still bump your $15,000 annual social security income up another $5,000, and that $100,000 will last you 20 years.

The American Expectation Syndrome

 Do you really want to keep your current standard of living? How’s that working out for you? If supporting this lifestyle involves the pressure of maintaining a mortgage, car payments, upkeep and fuel, credit card debt and hefty monthly payments – you may want to think twice.

 Just because someone else imagines that you are “taking a cut in lifestyle” doesn’t mean it’s true. It’s entirely possible that they don’t know what they are talking about!

 It may take a while for you to find the right combination in your new lifestyle. Allow yourself time. There is a natural process in letting go of the “American Expectation Syndrome.”

 Years ago when we first retired, we had been living pretty high – we had a new home, and were illustrious members in the local town. We had gardening service, house cleaning service, dry cleaning service, and we owned two new cars. Dining in the best places wherever we went, we took high priced vacations, and our medical care was paid for through our employer (which of course, is no longer the case). We expected our lives to go UP from here (which meant more spending) and we “couldn’t” see value in simplicity.

 But the stress was too much. We came face-to-face with some very significant personal choices; Keep up our expectations which incurred more spending and therefore more pressure, or simplify and set ourselves free.

We chose freedom

 To be honest, the hardest part of the transition to retirement (and our freedom-based lifestyle of today) was just letting go of the psychological and financial weight of having these expectations. Equally as hard, was letting go of peer pressure to consume, peer judgments over our choices and our peers’ expectations – of us and of themselves.

 However – just to clear away any confusion – we have been retired now for 22 years, have traveled the globe and opened our world (which has gotten larger not smaller), and our friends have continued to work for the last 2 decades. Now those same people are wondering how they can ever afford retirement.

 If you feel that your retirement plan is in tatters, why not put everything you have on the table, take a hard look and be willing to consider the possibilities that are right in front of you?

 There are many workable solutions if you are willing to look.

About the Authors

Billy and Akaisha Kaderli are recognized retirement experts and internationally published authors on topics of finance and world travel. With the wealth of information they share on their popular website RetireEarlyLifestyle.com, they have been helping people achieve their own retirement dreams since 1991. They wrote the popular books, The Adventurer’s Guide to Early Retirement and Your Retirement Dream IS Possible.

Average Retirement Savings by Age 2012

April 23rd, 2012  |  Published in Retirement  |  12 Comments

Average retirement savings by age is a popular topic. Everyone knows they need to save money for retirement but a lot of people are not saving any money for retirement and many more are not saving enough money for retirement.  If you would like to know how your retirement savings compare to those of others in your age group I have provided the date for you below.

Here’s how retirement savings breakdown by age group:

25 – 34

76% saved less than $25k, 12% were between $25k-$50k, 6% were between $50k-$100k, 5% were between $100k-$250k, and 1% were above $250k.

35 – 44

61% saved less than $25k, 11% were between $25k-$50k, 14% were between $50k-$100k, 12% were between $100k-$250k, and 3% were above $250k.

45 – 54

54% saved less than $25k, 9% were between $25k-$50k, 9% were between $50k-$100k, 12% were between $100k-$250k, and 17% were above $250k.

55+

40% saved less than $25k, 8% were between $25k-$50k, 12% were between $50k-$100k, 18% were between $100k-$250k, and 22% were above $250k.

All (Combined)

60% saved less than $25k, 10% were between $25k-$50k, 10% were between $50k-$100k, 10% were between $100k-$250k, and 10% were above $250k.

This data is from the 2012 EBRI retirement survey.  When you compare this data to the results from a few years ago you can see there are more people that have less than 25k saved.  How do your retirement savings compare?
To understand if your retirement savings are enough Industry Super has a good calculator.