Retirement Tips

This is National Retirement Week. Have you saved enough for your retirement? If not, why? There are many ways to plan for retirement. Whatever method you choose it is a known fact that unless you are born in a wealthy family you will have to save for retirement. If you retire at age 65 you could live another 10-20 years which means you will need on average $1,000,000 to $1,600,000 depending on your salary.

This translates into contributing to a retirement account for a minimum of 20 years depending on your salary but more likely for 25 to 30 years or more on a consistent basis. The key to planning for retirement is to start planning as soon as your get your first job, planning early eliminates the need to play catch-up in your later years in life.

However, it is never too late to plan for retirement. No matter what your age you should put some money aside for your retirement even if you have to get a job after retirement which is better than having no money saved at all. Many people do not save enough and end up having to work well past their desired retirement age or have to get part-time jobs because social security is not enough to cover all of their expenses. Don't panic and get overwhelmed by the media, fear, anxiety and nervousness of those around you. Don’t let emotions cause you to make bad decisions. If it sounds too good to be true it is. Don’t let someone invest money for you that is not a licensed financial advisor.

How to Save for Retirement:
1. CDs/Bonds/Mutual Funds
2. Pay down debt
3. Contribute extra to your 401(k) or other retirement account
4. The motto is "buy low, sell high" is truly appropriate during an economic crisis. This is a great time to buy stocks or to invest in a mutual fund. When the market bounces back you will achieve great gains.
5. Sign up for matching employer contributions (free money)
6. Increase retirement contributions with each salary increase
7. Save at least 10-20% towards retirement
8. Scale back expenses within at least 1 to 5 years prior to your retirement date
9. Don't depend on your spouse's retirement account because your spouse may not have saved enough money for retirement
10. Review allocations yearly to make any necessary adjustments. Check your statement for any errors and notify your financial planner immediately.

Diversify at a minimum:
Pre-retirement invest 60% stocks, 40% bonds/cash; near retirement (5-10 years) invest 40% stocks, 60% bonds/cash; during retirement invest 20% stocks, 80% bonds/cash.

What to invest in:
1. Invest in emerging market funds (foreign markets)
2. Equities (mutual funds) or other items that return a dividend or capital gains
3. Pharmaceuticals
4. Oil and petroleum
5. Commodities (corn, soy, wheat, coffee beans, petroleum, copper, coal, salt, sugar, soy beans, aluminum, rice, gold, silver, palladium, platinum, electricity, gas, oil, etc.) when the prices are low.
6. Real estate, if the home’s value is low it can continue to decrease but over a long period of time you will gain equity and can make a profit
7. Defensive stocks don’t depend on economic prosperity such as the food and beverage industry, manufacturing companies such as Philip Morris, Proctor & Gamble and alcohol and tobacco
8. Under-priced stocks (offer price is lower than price of the first trade, however they carry a higher risk factor because they may not rise in the future) – IPO’s, airline stocks, small cap stocks, etc.
9. Utility stocks – water, gas, electric, telephone companies
10. Green technology and green energy stocks for long-term gains such as Canon, Green Mountain Coffee Roasters, Nike, Whole Foods, Google, etc.
11. Invest in Dividend Reinvestment Plan (DRIPs) to offset any losses you may have experienced or use it as an easy way to start investing.

General Retirement Advice

It is estimated you will need a minimum of $1,000,000 to cover your monthly expenses during your retirement years. The average Americans live 10-20 years after retirement. You will need at least 80% of your income during retirement.

If you are stressed and anxious reduce your investments in stocks and bonds, however when the market returns you will lose money when moving your investments back to stocks and bonds because the prices will be higher. Investing in individual stocks on your own is risky. Consult a financial advisor to ensure you minimize losses and maximize gains. Here are some general retirement tips to ensure you enjoy your retirement.

Diversify at a minimum:
Pre-retirement invest 60% stocks, 40% bonds/cash; near retirement (5-10 years) invest 40% stocks, 60% bonds/cash; during retirement invest 20% stocks, 80% bonds/cash.

What to invest in:
1. Invest in emerging market funds (foreign markets)
2. Equities (mutual funds) or other items that return a dividend or capital gains
3. Pharmaceuticals
4. Oil and petroleum
5. Commodities (corn, soy, wheat, coffee beans, petroleum, copper, coal, salt, sugar, soy beans, aluminum, rice, gold, silver, palladium, platinum, electricity, gas, oil, etc.). However some commodities are overpriced right now and should only be invested in when the prices are low.
6. Bonds (corporate or treasury)
7. Real estate, however keep in mind if the price is low it can continue to decrease but over a long period of time you will gain equity and can make a profit
8. Defensive stocks (don’t depend on economic prosperity) - food and beverage industry, manufacturing companies such as Philip Morris, Proctor & Gamble, alcohol and tobacco
9. Under-priced stocks (offer price is lower than price of the first trade, however they carry a higher risk factor because they may not rise in the future) – IPO’s, airline stocks, small cap stocks, etc.
10. Money Market Accounts/CDs – use these for an emergency fund savings account for unexpected expenses
11. Utility stocks – water, gas, electric, telephone companies
12. Green technology and green energy stocks for long-term gains such as Canon, Green Mountain Coffee Roasters, Nike, Whole Foods, Google, etc.

How to Save:
1. CDs
2. Money Market Accounts (MMAs)
3. Bonds
4. Online Savings Accounts
a. CD current interest rates nationwide go up to 1.27% (AloStar Bank of Commerce NR for $1,000 minimum balance) and Money Market Accounts rates nationwide go up to 1.05% (First Trade Union Bank for $1,000 minimum balance). Online Savings account interest rates go up to 1.15% (Discover Bank High Yield Savings Account for $500 minimum balance).
5. Create an emergency fund to cover monthly bills and expenses for nine to twelve months.
6. Pay down debt
7. If you receive government benefits/checks think of at least 1 additional way to generate additional income if your check is last or does not arrive at all due to the debt ceiling
8. Contribute extra to your 401(k) or other retirement type account now. Money you invest now can buy more fund shares which will provide you with additional gains when the market goes back up

End of Year Financial Tips

2010 Roth IRA Conversions

1. Funding. Funded with after-tax (post-tax) dollars, offer tax-free growth and tax-free distributions in retirement
2. Distributions. No minimum distributions and no age requirement
3. Income. Can convert to a Roth IRA regardless of your income
4. Pay taxes. Conversion taxes can be spread over two years: 2010 and 2011
Conversions after 2010 will pay the full tax due
5. Conversion. Can convert back to traditional IRA by October 15, 2011
6. 1099. No 1099 is required
7. Deadline. Make conversion by 12/31/10

Paying Down Debt Now Can Help You Next Year

1. Future. The future is an unknown.
2. Tax Rates. Tax rates may be higher in 2011 which means you may bring home less money. Tax credits may be reduced, child tax credit will be reduced to $500 in 2011, the deduction for mortgage insurance premiums will be eliminated, energy saving improvements will be reduced to 10%.
3. Minimum. Paying more than the monthly minimum pays your balance down faster so you will owe less next year (interest, finance charges, etc.).
4. Shopping. Cut back on shopping to reduce changes of going into more debt or having large credit card balances after the holiday shopping season.
5. Variable. Many credit cards have been converted from fixed to variable rates which means if the federal rate increases, so will your monthly payments
6. Finances. Can improve relationship with your spouse or partner related to arguments over finances
7. Retirement. You can't focus on retirement if you are in debt

Tips to Help You Plan for the Future

1. Change your thinking. Eliminate negative thoughts about money and bad money habits. Follow those who have good spending habits and consult a professional.
2. Emergency Fund. Create an emergency fund to cover bills for 9-12 months.
3. Plan for retirement. Contribute the maximum to get matching contributions. You will need 60-80% of your current retirement salary for a minimum of 20 years to have enough money to cover living expenses during retirement. Save 10-20% each month towards retirement.
4. Pre-retirement. One year before retirement start reducing your expenses to retirement levels to get adjusted to living on a reduced income.
5. SS Income. Don't count on social security unless you are near retirement age.
6. Financial Goals. Sets financial goals, i.e. plan for retirement, children's college education, pay off mortgage, pay off car note, etc.
7. Contributions. Increase retirement contributions with each salary increase

Tips to Plan For Retirement Now

1. Sign up. If you don't have a retirement account, run to your employer and sign up. Setup an account even if you are self-employed (SEP) or stay-at-home mom (spousal IRA).
2. Diversify. Don't put all of your eggs in one basket. Ensure your retirement account is diversified. This helps to offset losses.
3. Live below your means. Reduce spending and create a budget.
4. Pay down debt. Pay off large debts and keep debt at no more than 10% of your monthly income after taxes (credit cards, medical expenses, other loans, etc.)
5. Estate planning. Perform estate planning (will, trust, health care directive, etc.). Hire a lawyer to prepare documentation.
6. Review. Review financial statements on a regular basis to check for errors and stay informed about your account.
7. Backup Plan. Create a backup plan if some financial crisis occurs and you need extra money. Have a plan A, B, C and D. Use what-if scenarios.

Retirement and You

Last week was designated as National Savings Retirement Week to help bring awareness to the need to plan for retirement. Many Americans still do not save enough for retirement and some do understand the importance of saving for retirement.

According to a 2009 EBRI a study of employees: 43% of workers said they have less than $10,000 in savings, while 27% of workers said they had less than $1,000. According to the FDIC: 97% of Americans will be dependent to some degree on family, friends or the government in retirement; a 65 year-old couple retiring today has a 63% chance that one of them will live to 90 years old; a 65 year-old couple retiring today will need approximately $240,000 to cover just medical expenses even with Medicare assistance.

You will need at least 60-70% of your salary during retirement. You should plan to save enough in your retirement account to cover living expenses for at least 20 years. Here is a retirement checklist to use when saving for retirement.

1. Do you have a retirement account?
2. Have you contacted a professional to map out your retirement plan and goals?
3. Do you know your retirement account balance?
4. Do you check your quarterly retirement statement?
5. Is your retirement portfolio diversified?
6. Do you know where you will live, what age you want to retire and the lifestyle you want to live during retirement?
7. Have you determined what costly expenses you will need during retirement (healthcare, prescriptions, etc.)?
8. Have you created an estimated budget for retirement?
9. Will you have enough life, health, disability and long-term care insurance?
10. Do you plan to pay off your mortgage and any other large debts prior to retirement? If not, how do you plan to pay for those expenses?
11. Do you want to be fully retired or work part-time?
12. Will you be eligible for social security when you retire?
13. Is your beneficiary information is up-to-date?

Here are 6 ways to help you prepare for retirement and increase your retirement savings.

a) Don't panic. Don’t make decisions based on emotions or get overwhelmed by the media, fear, anxiety and nervousness of those around you. Stay calm and follow the plan you have setup with your financial planner. Don't torture yourself by checking the stock market everyday or checking your retirement account balance every week or every month.

b) Review. Review your financial goals with your financial planner at least once a year to ensure you are on track to meet your goals. Also, check your statement for any errors and notify your financial planner immediately.

c) Time. Your money cannot grow if you take it out too soon. It takes a minimum of 7 years to see a significant return on your investment so leave your money in your account.

d) Diversify. If you have all of your investment in one area, re-allocate your investments to at least 3 areas to minimize losses.

e)DRIPs. To offset any losses you may have experienced you can purchase a Dividend Reinvestment Plan (DRIP) or use it as an easy way to start investing.

f) Buy now. The motto is "buy low, sell high" is very appropriate during a recession. This is a great time to buy stocks or to invest in a mutual fund. When the market bounces back you will have achieved great gains.