| For Baby Boomers, outliving your savings is | | | | |
| becoming an increasing concern - and if it | | | | That equals a 10% annual contribution to your |
| isn't, it should be. | | | | pension plan (5% from your employer + 5% from |
| | | | you) and in addition, you can deduct your 5% |
| One of the main reason for concern is the | | | | contribution from your taxes - up to a total |
| rising life expectancy. In 1906, the average | | | | of $3,000. |
| life expectancy was 54 for men and 61 for | | | | |
| women. | | | | You will be taxed on your pension funds when |
| | | | you start to withdraw them. |
| Today the life expectancy has risen to 78 for | | | | |
| men and 84 for women - a 31% increase in | | | | 3. Traditional Individual Retirement Account |
| life-span for men and a 27% increase for | | | | (IRA) - This is the most typical way to save |
| women. | | | | for retirement, outside of work and probably |
| | | | the easiest. |
| In today's world if you haven't started | | | | |
| planning for your retirement by age 25 you | | | | With an IRA you set up your plan through your |
| may already be too late. | | | | bank, a financial planner, broker or your |
| | | | accountant. |
| Among the 78 million Boomers approaching | | | | |
| retirement only about 25% are in a position | | | | Yearly contributions are limited to $3,000 |
| to be able to retire comfortably. | | | | and the contributions are deductible from |
| | | | your current taxes. |
| There are a lot of reasons that Boomers, as a | | | | |
| whole, are so ill prepared for retiring but | | | | You can begin receiving benefits from your |
| one of the main reasons is the way they have | | | | IRA at age 59 1/2 if you have retired. The |
| approached the retirement process. | | | | taxes you pay on the amount withdrawn are at |
| | | | a lower rate (in most cases). |
| Most have failed to ask and answer the | | | | |
| important questions that can go a long way in | | | | You are required to begin withdrawing from |
| helping your retirement planning. | | | | you IRA no later than age 70 1/2. |
| | | | |
| The questions require almost brutal thinking | | | | 4. Roth IRA - The Roth IRA is the same as a |
| and planning for your future - which most | | | | regular IRA but with a twist many people |
| people don't like to do since they are forced | | | | like. |
| to face a certain reality. | | | | |
| | | | With a Roth IRA you make contributions again |
| But lets face it, failing to do any sort of | | | | are limited to $3,000/year but instead of |
| planning is an even more brutal reality since | | | | deducting your contributions from your |
| you are left floating in a rudderless boat - | | | | current taxes, you pay taxes on your yearly |
| no direction and very little chance of | | | | contributions. |
| reaching the port you started out for. | | | | |
| | | | There is difference in withdrawal |
| So if you are ready to get started thinking | | | | requirements as well. |
| about your retirement here are the questions | | | | |
| you need to ask and answer as a first step | | | | Since you have already paid the taxes on your |
| (don't worry, there are only 3) in basic | | | | pension plan there are no withdrawal |
| financial planning: | | | | requirements or early withdrawal penalties. |
| | | | |
| How much money do I need to retire | | | | Plus the huge benefit of no taxes on any |
| comfortably? | | | | amount of gain your IRA may have accumulated |
| | | | through the years. |
| 2. Where is that money going to come from? | | | | |
| | | | 5. Keough Plan - If you have a small business |
| 3. How can I make my money last for as long | | | | that you run part time out of your home it is |
| as I need it? | | | | recommended that you investigate setting up |
| | | | this type of pension plan that is designed |
| We'll cover these in some detail to give you | | | | specifically for small businesses. |
| an idea of how to get started in your | | | | |
| retirement planning process. | | | | Even if you participate in your employers |
| | | | pension plan and have an IRA, a Keough can |
| 1. How Much Money Do I Need To Retire | | | | give you huge benefits not only for saving |
| Comfortably? | | | | for your retirement but it may also give you |
| | | | some very nice tax advantages. |
| This question is completely subjective | | | | |
| because no two situations are exactly the | | | | Before you begin setting up a Keough make |
| same. The best you can do is take the | | | | sure to get competent legal and financial |
| examples given here and apply them to your | | | | help. |
| own lifestyle. | | | | |
| | | | 6. Increased Savings - The one thing most |
| First, this discussion assumes that you have | | | | Boomer's have failed to do is develop the |
| less than 20 years of working before you | | | | discipline needed for regular savings. |
| reach 67 (the soon to be minimum Social | | | | |
| Security retirement age) and have pretty much | | | | The year 2005 saw savings in the U.S. drop to |
| ignored your retirement savings and planning. | | | | a -1.7% - the lowest savings rate ever |
| | | | recorded. |
| Most financial planning models will say that | | | | |
| you need a minimum of $250,000 in total | | | | In other words, we are spending way more than |
| savings - a combination of savings and your | | | | we make and seem content be squandering any |
| pension fund - in order to retire and | | | | hope for a secure retirement. |
| maintain your current standard of living. | | | | |
| | | | Most people will say that they "can't afford |
| However, the reality is that most people | | | | to save" because they have no money left |
| don't have anywhere near that much money | | | | after all their bills are paid. |
| saved. In fact, the average amount that most | | | | |
| Boomers have saved for retirement is less | | | | If this description fits you need to readjust |
| than $10,000! | | | | your thinking and make sure you pay yourself |
| | | | first every month. |
| In today's economic climate this amount will | | | | |
| be no where near sufficient for you to retire | | | | You can start by having your paycheck |
| on. The question now is if and when you will | | | | directly deposited to your SAVINGS account |
| be able to retire depending only on Social | | | | instead of your checking account. |
| Security. | | | | |
| | | | Transfer at least 10% of your earnings into a |
| If you live month to month and aren't saving | | | | money market account you set up and then |
| anything you may have to adjust not only | | | | earmark that money as untouchable and not |
| your retirement date, but what your | | | | part of your family budget. |
| retirement will be like. | | | | |
| | | | The remaining money in your savings account |
| The first place you should start is | | | | can be transferred to your checking account |
| determining what your current cost-of-living | | | | as you need it to pay your regular bills. |
| is and what you expect it to be once you | | | | |
| retire. | | | | It will amaze you how fast your savings |
| | | | starts to build and how little you will have |
| A good rule of thumb in determining your | | | | to adjust your standard of living. |
| post-retirement cost-of-living is that you | | | | |
| will need a total monthly income from all | | | | For all the work you do to earn your money it |
| your sources that equals @ 60% of your | | | | seems only fitting that you treat yourself as |
| pre-retirement income. | | | | any other bill you pay - only with this bill |
| | | | you get to keep your money. |
| This figure makes a huge assumption that you | | | | |
| are entering retirement debt free - no short | | | | How To Make Your Money Last Your Lifetime |
| term or credit card debt and a home that is | | | | |
| paid off or will be in the first five years | | | | The biggest decision you will make after you |
| of retirement. | | | | do retire is how you will live the rest of |
| | | | your life. |
| If you enter retirement carrying a lot of | | | | |
| debt your, post-retirement income may need to | | | | With us Baby Boomer's the way most of us will |
| be as much as 75-90% of pre-retirement income | | | | live in retirement is still being formulated. |
| just to pay your living expenses plus your | | | | |
| debt service. | | | | For some Boomer's retirement means sailing |
| | | | off into the sunset. Others see retirement as |
| If you are deeply in debt when you retire | | | | being endless travel or games of golf and |
| the chances of you ever getting yourself debt | | | | tennis. |
| free are not that great. | | | | |
| | | | Still others will start a business doing |
| The important lesson here is that even before | | | | something they have always dreamt of doing or |
| you start saving significantly for retirement | | | | volunteering their time with local agencies |
| you need to get out and then stay out of debt | | | | and charities. |
| before you retire - pay off your credit cards | | | | |
| and short term loans and then make every | | | | Whatever you decide to do after retirement |
| effort to pay off your mortgage. | | | | there is one certainty that will affect |
| | | | everyone - that is the very best way to make |
| There is one more important reason to be debt | | | | the money you have saved last as long as |
| free before you retire - the older you get | | | | possible. |
| the more you will spend for your health care. | | | | |
| | | | After you retire you will realize a reduction |
| Right now health care costs are increasing by | | | | in your cost-of-living simply from the |
| about 15% per year (that figure shows no sign | | | | elimination of certain things that were |
| of slowing down) and the amount you have | | | | connected to your job. |
| saved is going to need to cover those rising | | | | |
| costs. | | | | You will no longer have the cost of a daily |
| | | | commute or a wardrobe nearly as extensive and |
| Where Is My Money Going To Come From? | | | | costly. Gone will be the cost of expensive |
| | | | lunches and your daily fix of a Starbucks |
| There are many different ways that you can | | | | double latte Grande. |
| save for retirement. | | | | |
| | | | The only way you can make sure your money |
| There's always the old-fashioned way of | | | | lasts as long as you need it is to invest it |
| hiding money in your mattress, but there are | | | | in a money making instrument of some sort. |
| probably some better ways to save for | | | | |
| retirement that will also save you on your | | | | Stocks, bonds, annuities, or mutual funds are |
| income taxes as well. | | | | all things you can invest in which will earn |
| | | | money on top of your money. |
| The following discussion lists the most | | | | |
| common types of retirement savings plans | | | | CD's through your bank are another thing you |
| available. | | | | can invest in but you must make sure that the |
| | | | interest you will earn will exceed the rate |
| It is strongly suggested that you seek | | | | of inflation for the time your money is |
| competent financial advise if you decide to | | | | unavailable to you. |
| set up one of these plans. | | | | |
| | | | If you participate in a 401(k) you will need |
| 1. Defined Benefit Plan - These are sometimes | | | | to roll the amount in your fund into an IRA |
| referred to as traditional pension plans | | | | after you retire. This is likely to be the |
| since they are provided by your employer and | | | | largest single amount of money you will be |
| require no employee contributions. | | | | responsible for. |
| | | | |
| An employee's pension benefit is usually | | | | You absolutely must become pro-active in |
| based on the number of years you worked for | | | | making sure the money you have earned |
| your company - i.e. $XX/month for every year | | | | continues to grow throughout your lifetime. |
| worked for the company. | | | | |
| | | | You need competent and unbiased advise when |
| An example would be $65/month x 35 years of | | | | it comes to handling the money you'll need to |
| employment = $2275/month pension. | | | | live on for the rest of your life. |
| | | | |
| These pension plans will generally pay for as | | | | You can get the best advice from someone who |
| long as the employee survives after | | | | is NOT trying to sell you their product or |
| retirement but you can set them up to pay a | | | | something that will earn them the highest |
| lower amount to the employee for life but | | | | commission. |
| will then continue to pay an amount to your | | | | |
| spouse for as long as he/she lives. This is | | | | If you need help in finding financial advice |
| known as a Life and Certain plan. | | | | and you don't know of any, call your local |
| | | | Better Business Bureau and ask for a list of |
| 2. Defined Contribution Plan or 401(k) - This | | | | FEE BASED Financial Advisors or Financial |
| is the retirement plan started in 1973 and | | | | Planners in your area. |
| known as an ERISA plan. | | | | |
| | | | Like attorneys or accountants, you pay these |
| With this plan your employer sets up a | | | | professionals a fee for their services. |
| pension plan in your name and then | | | | |
| contributes an amount equal to a percentage | | | | By wisely managing your money you will stay |
| of your wages every year. | | | | ahead of two things that can destroy your |
| | | | estate - inflation and income taxes. |
| For example, your employer may contribute up | | | | |
| to 5% of your annual salary. This is money | | | | Please feel free to e-mail this article to |
| you receive tax deferred from your employer. | | | | anyone you think might benefit from the |
| | | | information. |
| If you are smart, you will then contribute an | | | | |
| amount equal to your employer's contribution | | | | Copyright information and my Sig File must be |
| every year as well. | | | | included. |