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.

NBA Players Welcome to the Real World

NBA Players make more than 90% of the U.S. population. They get to travel across the country for free by the NBA. You get paid for doing a job you love. Most Americans work a job that they hate and have no other options.

Many times players are lured into the NBA and believe that their lifestyle will last forever so they aren’t concerned with how much money they spend – but nothing lasts forever. Americans learned the hard lesson that nothing in life is guaranteed and that life can be hard.

NBA Players suffer from the Instant Gratification Syndrome, you want everything right now. You spend money that you earn in the future to buy things in the present. You have no right to complain that you can’t pay your bills. No one made you buy a multi-millionaire dollar home; spend money on partying, women, designer clothes, jewelry, and things that have no value. You made those choices.

You decided that living that lifestyle was what you wanted and more important than planning for your future. Don’t be like Chris McAlister of the Ravens.

Immigrants that were brought to this country or migrated to this country knew the value of hard work; they did whatever they had to do to make a living even if it meant making sacrifices or working multiple jobs. Americans are spoiled and have forgotten how to survive. If one option stops working, find another option.

Yes you should be treated fairly by your employer but you should always look for other options. You can use your celebrity status to create a radio show, a television show, a clothing line, a sneaker line, sunglasses, hats, become a speaker, become a board member or advisory committee member for a national company or start a business. So many options are available to you and are easier for you to attain because of your celebrity status and the people you have at your disposal.

NBA owners are denying players adequate pension plans and requesting stricter salary caps. You can’t have it both ways. You have to provide one option or other. This will continue to lead to future lockouts until owners realize they are nothing without the players. Here are 7 tips to plan for your future.

1. Save. Save. Save. Save at least 30-50% of your income each month.
2. Retirement. Sign up for the NBA Retirement Association. You only get a small amount of income but if you combine it with additional steams of income through endorsements or businesses you should be able to retire comfortably.
3. Downsize. Downsize your lifestyle. Who are you trying to impress with your ferrari, maybach, diamond watches, and millionaire dollar home. People may be fascinated by the things you have but no one really cares. When you retire what do you want people to remember about you, that you lived in a million dollar home that you couldn’t afford or that you helped your community.
4. Think About Tomorrow. You can get traded, released or hurt at any time. Plan for your future so that you don’t have to file for bankruptcy or foreclosure.
5. Role Model. Be the best person you can be and serve as a role model for youth and younger players to prevent them from making the mistakes you made.
6. Give. Donate to charities or start your own foundation. This helps to reduce your tax liability and provides greatly needed assistance to social organizations that have been affected by the recession.
7. Say No. Learn how to say no to friends, strangers, relatives who ask to borrow money or ask you to buy something. If you always lend money you only enable that person to be dependent on you forever. Show them how to earn their own money so they don’t have to ask you for money.

You determined your self-worth by the things you own instead of realizing that your self-worth comes from within. No matter how much money you have it cannot make you happy and cannot fill a void in your life.

Think how different your life would be during the lockout if you saved at least one year’s salary, if you only bought one car or if you lived in smaller house. When you experience a financial crisis, your true character is tested. You either become a winner or loser.

Determine that you will always be a winner. Don’t let anyone determine your destiny, determine your own destiny. Money can generate wealth or generate debt you make the choice.

Warren Buffet's Investing Style

I am a big fan of Warren Buffet. However, being a fan doesn’t mean I agree with everything he does or with all of his beliefs. I do admit that he is knowledgeable about investing. It has been stated that “he invests long-term and understands what he invests in”. It is essential that with anything you do or anything you put your money towards you understand. Many homeowner signed mortgage loans and didn’t understand what they were getting in to. As a result they foreclosed on their homes.


LouAnn Lofton wrote a book entitled, “Warren Buffet Invests Like a Girl”. Well, if he does, then all men need to follow his advice too. I think Warren Buffet is a great investor who doesn’t get emotional about investing. His investing is very strategic which was displayed when he bought shares of Goldman Sachs in 2008 for $5 million which made his company Berkshire Hathaway millions. Here is some background information on Buffet:

1. Carried golf clubs at age 9 for $3 a day

2. Bought his first share at age 11

3. Sold used golf balls from age 11-13 and sold newspapers at age 13

4. Bought a small farm which was 40 acres at age 14 with savings from delivering newspapers

5. Rented out used pinballs machines at age 16 making $50 a week

6. Bought Berkshire Hathaway in 1962

7. Bought stock in Coca-Cola, Disney, McDonalds, Gillette, American Express and Dairy Queen

8. Follows 6 Principles: 1) keep it simple, 2) be an investor not a trader, 3) find outstanding business, 4) make your own decisions, 5) leave a margin of safety, 6) Rule 1: never lose money, Rule 2: never forget rule #1, focus on strengths.

9. Still lives in the same small 3-bedroom house in Omaha that he bought after he got married 50 years ago. He says that he has everything he needs in that house. His house does not have a wall or a fence.

10. Don't buy more than what you "really need" and encourage your children to do and think the same

11. Drives his own car everywhere and does not have a driver or security

12. You are what you are

13. Never travels by private jet, although he owns the world's largest private jet company

14. Always think how you can accomplish things economically

15. His company, Berkshire Hathaway, owns 63 companies.

16. Does not socialize with the high society crowd. After he gets home is to make himself some popcorn and watch television.

17. Don't try to show off, just be yourself and do what you enjoy doing

18. Does not carry a cell phone and does not have a computer on his desk

19. Stay away from credit cards (bank loans) and invest in yourself

20. Money doesn't create man but it is the man who created money

21. Live your life as simple as you are

22. Don't do what others say, just listen them, but do what you feel good

23. Don't go on brand name; just wear those things in which you feel comfortable

24. Don't waste your money on unnecessary things; just spend money on those who are really in need

Do you still think Buffet invests like a girl? Let me know your feedback.

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.