Pensions - What Should I Do ?

Martin Bamford asked:


It is generally accepted that we have a retirement planning crisis in the UK. The recent stock market volatility is causing more pension problems, with £19bn wiped off the value of the top 200 defined benefit pension schemes in the first half of March alone. Around 25 million of us have defined contribution pension plans - either with their employer or as a private pension plan. The value of these plans are often closely linked to stock market performance.

Here are five questions to help you work out if your finances are in good shape or battered by the credit crunch.

Do you have a pension?

If your answer is yes, move on to Question 2. If no, the seriousness of your position depends on your age and whether you have any other savings that you could use in retirement. Readers under the age of 40 still have plenty of time to build up a reasonable pension fund. But if you are older, you need to start setting substantial amounts aside now.

What type of pension plan do you have?

Employees who have the option of joining a company pension scheme to which the employer makes contributions should grasp the opportunity with both hands. For those who don’t, a cheap stakeholder plan from Friends Provident or Clerical Medical is a good starter plan. If you want to make big contributions and have tight control over the investment of your money, you could consider a self-invested personal pension (Sipp) such as the one sold by Standard Life.

When did you last check the performance of your pension?

You need to keep an eye on where your money is invested and how it is performing to make up any shortfalls as and when they develop.

What are its charges?

Since April 2001, charges on some personal pension plans have been lowered but other plans still suffer from high charges that will eat away at the value of retirement benefits.

How much do you contribute?

Most people like to think they will retire on an income equivalent to two-thirds of their final salary, but few end up with that. Check how much you need to save according to your age, salary and expected retirement age at pensioncalculator.org.uk.



Enrik

Looking ahead asked:


They were called Public Servants. Have the roles been reversed? Are we the servants? A senate of characters who sleep, a house of commons filled with self interested egotists (there are a very rare few looking out for us and have ethics) . Who can fix this rabble?

Morgan

yoni_pillu asked:


—what kind of co-pays and deductables are they subject to, and how generous are their pensions?

Emma

Wally Bock asked:


The Baby Boomers are the members of the generation born between 1946 and 1964. At 79 million people, they’re the largest US generation in history. The oldest Boomers will turn 65 in 2011 and many of them may choose head for the exits.

Can you answer these questions about Baby Boomer retirements at your company? The first five are about raw numbers

How many people at your company are eligible to retire in each of the next ten years?

The odds are good that not everyone who is eligible to retire will do so. But it’s a good idea to consider how many people could leave at a moment’s notice and when they’re eligible to do so.

How many of your senior managers are in that group?

Senior managers have mission critical knowledge and experience. When they leave, they take it all with them, unless you’ve created alternatives for them to stay on, or work as a consultant.

Review your succession planning. Identify the less experienced managers that are best qualified to move up. Help them with personal and career development, especially growth assignments, so they’re ready when their time comes.

How many of your key technicians and craft workers are in that group?

We’re talking here about the kind of hands-on technical work that it’s hard to outsource or offshore. Many of the pipelines for technicians and craft workers have been slowly drying up over the last couple of decades. Union apprentice programs have been hit especially hard.

How many of your first line supervisors are in that group?

Your front line bosses have more impact on morale and productivity than any other group of people in your company. Make sure you’re ready to replace retiring supervisors with qualified new supervisors who’ll get the benefit of solid supervisory skills training.

How many of your knowledge connectors are in that group?

Knowledge connectors are vital to your operations, but they don’t have that title on any organizational chart. Knowledge connectors are the people other people call for help because they’re experts or because they know how to find people or knowledge to help solve problems. You can do a social network analysis to find out who they are, or just ask around.

I call the problem the “Boomer Brain Drain” because of the loss of knowledge and experience when Boomers retire. If you’ve answered the questions above, you have an idea how big a threat this is to your company and you can start to work on responses. The next four questions deal with different kinds of responses to the potential Boomer Brain Drain.

What human resources measures are you or will you use to meet the challenges of Boomer Brain Drain?

Human Resources (HR) responses to the challenges of the Boomer Brain Drain include everything you do to modify your recruiting, training, retention and succession planning. They also include changes to policies and procedures and may include union negotiations.

Since Boomers may be starting to flow out the back door, it’s logical to plan on increasing the flow of recruits in the front door. It’s logical, but it’s dangerous.

Generation X is the generation next in line behind the Baby Boom. It’s only about half the size of the Baby Boom generation, so you’ve got a smaller pool to draw from. You can’t count on simply increasing recruiting to fill the spots left by retiring Boomers.

Several companies are investigating tactics such as having people return to work after retirement or stay at work past their official retirement date. There’s some evidence that this will work since studies by financial services companies tell us that Baby Boomers don’t have a lot put back for retirement.

Older workers are great hires in lots of ways. Their turnover rate is lower than that of younger workers. When CVS compared their older workers to younger workers, they found that older workers are far less likely to call in sick.

If you choose some set of retire late/come back after retirement solutions, there are issues to consider. Start with your current pension and retirement policies. Can Boomers continue to work without losing benefits? This may be something you need to have a dialogue with your unions about.

You may also need to modify your policies and procedures for part-time work. Retired Boomers may want a different kind of flextime than younger workers. They might prefer the ability to take more time off, to accommodate medical appointments and visits to children.

Analyze your corporate culture. Do you see older workers as contributing members of the workforce, or do you see them as workers with their eyes on retirement and one foot out the door? Do you provide training to older workers the same as you do to younger one?

You should also think about how you’ll need to change your work processes to make them friendlier to older workers at the same time as you find ways to get more productivity out of fewer workers.

How will you change or adjust your business processes to meet the challenges of Boomer Brain Drain?

Older workers may be great workers, but they tend to have more physical limitations than younger workers. You may have to modify either processes or equipment so they’re older-worker-friendly. You’ll be in good company. Toyota has been doing this for some time.

Make sure, for example, that the gauges on equipment are easy to read. If instructions are conveyed orally in a workplace, make sure they’re loud enough for older workers to hear.

You can also make changes to business processes that make Boomer retirement irrelevant. If you eliminate some specialized equipment or standardize on fewer kinds of equipment, you may be able to increase your scheduling flexibility and handle more equipment with fewer workers. You can also use technology to capture the knowledge of experienced workers so that it’s available to younger workers.

How will you use technology to meet the challenges of Boomer Brain Drain?

Knowledge management technology is often touted as the way to capture Boomer knowledge and put it to use. In reality, most of the knowledge that Boomers, like other workers, have is in their heads and will go out the door with them. But you can still do some things to capture important knowledge if you start now.

Consider job-shadowing as a knowledge transfer tool. Think about investing in people to chart and document processes that do not currently have formal documentation.

Use simple technological tools, such as electronic discussion groups to capture “shoptalk” and the knowledge that only comes with time on the job. Use social network analysis to identify which people get contacted to solve specific problems.

There are three rules to follow in using technology to capture knowledge. The first is that a tool that no one will use, because it’s too complex or time-consuming, is a useless tool. The second is that culture always trumps technology. Rule number three is that technology that adapts to human habits works better than technology that demands that humans change the way they work.

Have you conducted a “Threat Assessment” to give you an idea of where you need to concentrate your efforts?

Before you move on to planning for Boomer retirements, take the time to do an accurate Threat Assessment. It will make your efforts more productive in the long run.

Assess every position in your organization. Determine when the person in that job can retire. Evaluate how important the position is to accomplishing the mission. And assess how prepared you are to replace the incumbent.

These questions are just the start. Your next step will be to develop a strategy for dealing with a potential Boomer Brain Drain. But the sooner you get started, the sooner you’ll see results.



Rachel

Mrlee asked:


Not taking full lead of your company retirement benefits – it is wise that you lend money into your company retirement plan as much as you can manage.

Withdrawing money from your retirement arrangement – Be very aware when benefiting of loans or withdrawals, owing to by oneself from losing interest, you could kisser penalties or early withdrawal compensations.

Not heavily guiding your investments – it is extremely important to own track of your remunerations in order for you to be appreciative of a little discrepancies.

§ Relying on Social security for your retirement income – polite security may provide a considerable share of your retirement income, iced it can be of great help if you have other means of income as a back-up in tray there are extra unexpected expenses that might come up. In addition to diverting security, it would be transcendent if you have a club pension or retirement plan and particular savings.

§ Relying on your spouse’s retirement plan – this is one of the best common false step of retirement planning people do. It is possible that a helpmate with a retirement plan could improve leaving the other spouse with no income. Instances like divorce or illness can also closeout the only spouse retirement, therefore both co-workers should have a separate retirement plan to best undamaged your retirement days.

§ Forgetting to rethink your way regularly – constantly conduct periodic review of your retirement plan to ensure that you are making the most of your plan.

§ Practicing poor service allocation – poor credit allocation can sometimes be a economic suicide. The closet is to broaden your horizons so that if one asset decreases in value, another will hopefully increase.

§ Not checking your leaflet/financial advisor- there are plenty of highly interested brokers and financial buttinskis who have the expertise about how your portfolio should be set-up and maintained, but there are still who aren’t and are simply ill informed. So, be aware and make sure to check up on guarantee and track records on anyone you uncanny to entrust your retirement savings.

§ Relying too heavily on your stock – your retinue stock is one of the excellent ways to defend for your retirement. But, it is also best to have a gnarly contribution mix in your retirement report.

§ Not taking retirement planning seriously – this could be the deadlier inadvertence you can make with your retirement plan. If you start early on retirement planning, you may be able to retire early and possess the lifestyle you equivalent once retired..



Josie

Tracey Anne asked:


Most of us are familiar with these statistics…

Out of 100 people who starts working at the age of 25, by the age 65:

* 1% are wealthy * 4% have adequate capital stowed away for retirement * 3% are still working * 63% are dependant on Social Security, friends, relatives or charity. * 29% are dead.

More Statistics on “The GOLDEN Years”

Retirement by the Governments own statistics:

* The average savings of a 50 year old in the U.S. is $2500. * 32 Million Americans are currently threatened with bankruptcy. * More than 1,000,000 [1 Million] filed for bankruptcy in the year 2000.

More Statistics…

Out of every 100 people who reach the retirement age of 65:

* 62 retire with less than $25,000 in assets and depend on Social Security or family for their retirement.

* Another 35 retire with less than $100,000, have some form of pension in addition to Social Security and are just making it in their retirement. If either Social Security or their pension went away they would have a very difficult time surviving.

* 2 of the 3 remaining retirees have an adequate pension or retirement account. They have assets of between $100,000 and $750,000. They do appreciate having the additional money they receive from Social Security, but could survive without it.

* The last of these 100 retirees, is the only one who is financially independent. This retiree has assets approaching or exceeding $1,000,000. They do not need the income from Social Security at all.

Which group above will you be in when it is time for you to retire?

Still More Statistics…

“According to recent Governmental statistics, most people are very concerned about their financial security in retirement. Over 70% believe they won’t have enough money put away for retirement. Of those between the ages of 30 and 54, almost 80% feel this way about their future.

One of the factors is the uncertainty of Social Security. In the mid 1970’s, 2/3 of the people surveyed said they were quite confident Social Security would be there for them when they retired.

In 1980, of those surveyed, 2/3 commented that they were not confident that Social Security would be there to support them in retirement. They felt that if Social Security was still a functioning service, it probably would not be paying an adequate amount to cover a reasonable standard of living.

So if this is the case… why aren’t people socking away hoards of money so they are not part of the statistics? Well, it seems that saving for retirement is a difficult task to master for the average person.

Some have difficulty saving on a systematic basis. With others, it’s often the case of having good intentions but very poor follow-through. Still others, it’s that they make poor selections with the saving and investment vehicles they choose.”

Clearly, the working-class scenario of toiling away building someone else’s empire for forty years, trying to accumulate wealth (money) so one can retire comfortably, is NOT working. Most people would like to retire with dignity. Wouldn’t you?

Have we shown you enough? Well, here’s a few more facts…

“The rising stock market and escalating property values, while adding general prosperity, hide the brutal fact that for many Baby Boomers-who are now turning 50, retirement may not be a pretty picture.

Over the next 20 years, 76 million of us born between 1946 and 1964 will hit 50. For most, that means facing up to the harsh questions of how, or even if, they will be able to afford to retire.

With meaty employment pension plans gone the way of ancient history, and Social Security increasingly becoming an uncertainty, the lifestyle of retirees is no longer leisure, golfing, fishing and travel. In fact, the lifestyle for many retirees may be continued work and “cans of Spam . . . and not Caviar and Travels.”

The latest Census Statistics show that only 1 out of every 10 Americans today, is financially prepared to retire when they reach the age of 65.

What about the Current Economic Situation?

As we know, the economy is teetering on recession, companies continue to lay off in great numbers. And, you may as well kiss true job security good-bye. It doesn’t seem to exist anymore.

And although you may be one of those that make it to retirement and manage to hang on to your job, according to the Bureau of Labor Statistics, at 65 only 5% have enough money to retire on.

And since the standard route of working a traditional job has failed for 95% of all Americans. Shouldn’t you be seriously RE-evaluating the traditional career job employment scenario and if it is going to get you to and take you through retirement financially sound?

Here’s the real kicker… You and most of the people you know are going to work for at least 30 to 40 years …. at jobs you hate… with bosses you hate… with commutes you hate… with hours that you hate. What a life - failing while you are miserable most of the time. Do you want to do this for the next 40 years?

So What Can You Do About It?

Well, one pro-active move you can make is to avoid common and costly retirement planning mistakes that could seriously jeopardize your future and the lifestyle you dream of for your retirement.

Mistake Number 1: Procrastination Mistake Number 2: Not realizing that you’ll need a specific amount of money to sustain you each month when retired. Mistake Number 3: Relying on the belief you’ll be able to draw FULL Social Security benefits. Mistake Number 4: The under-estimation of your medical costs if you are not in good health. Mistake Number 5: Not setting up your long-term-care insurance early. Mistake number 6: Making the assumption that you can retire early. Mistake Number 7: Getting into the false hope that in retirement you will be in retirement-mode. Mistake Number 8: Failing to seek expert financial and retirement guidance.

Start focusing on these commonly made mistakes and make sure you are not falling into the traps they can create. If you recognize some of them in your portfolio, get them fixed so you are on the right track. You don’t want any of them to affect your retirement planning and live-on income.

Start a pro-active plan NOW! If you want to be able to live financially stable now and into your “golden” retirement years, you need to make changes in the strategies you’re presently using. One other pro-active move you can make is to join the home-business boom. It is the next big trend. CNN reports that a new home based business is started in the United States every 11 seconds.

Why? Well because a new home based business offers a low start-up investment compared to a brick and mortar, or franchise business, low monthly overhead, and you can start part-time while still employed, and create time leverage, residual income, and tax benefits for yourself. Tax expert Sanford Botkin says that a home business can result in tax savings of $3,000 to $9,000 per year.

Follow this trend, however do proceed wisely - you don’t want to get into a situation where you are wasting time or money out of your pocket.

Make sure you do your research. You are looking for an income generating system that allows you to build substantial supplemental income, PASSIVELY; where you don’t have to give up your life, or your spare time to run it successfully.

You don’t want to be adding a lot of additional work hours to your day, otherwise, you might as well start commuting to a second job site.

Start now… remember, procrastination is mistake #1… That way when you do decide to retire, unlike the income earned at a job, which stops when the work stops, the residual income from your home based business will continue to pay you long after the work is completed. Leaving you to enjoy your retirement free and to the fullest.



Leah

Jim Scherrer asked:


Attention all baby boomers; are you starting to think about retirement but your cash is tied up in 401k´s, IRA’s, pension programs, retirement funds, stock options, or your residence and you’re not quite ready to liquidate any of these assets? Have you been watching retirement properties continue to escalate in price and are concerned that the cost of your retirement dreams might be beyond your reach when you’re ready?

Well, perhaps you’ll find the following information quite enlightening and hopefully it will alleviate some of your concerns.

We discovered an affordable virtual Paradise when we made Puerto Vallarta, Mexico our permanent residence ten years ago and are sharing its features and benefits with you. In 1997, prices for real estate, land, labor, and construction materials were about a third of prices today in Puerto Vallarta, known otherwise as Vallarta or PV. Ten years ago, prices for food, clothing, household goods, etc. were quite reasonable in Vallarta but selection was poor. Ten years ago, virtually all financial transactions in PV were cash, including the purchase of house and land. Although the real estate prices were a half to a third of those with comparable amenities in the US or Canada, in the absence of mortgages, one needed total financial resources in order to purchase a retirement property here. North American banks were reluctant to provide mortgages in Mexico and Mexican banks lacked the available capital.

During the past ten years with the Mexican economy booming, the peso stable, and Vallarta exploding with growth, the situation has changed dramatically. Today, mortgage capital from a number of American mortgage firms is readily available in PV. Interest rates are generally 2% to 3% above the prevailing US rates. Mortgage insurance is also now available as is title insurance. Because the economy is so stable, strong, and growing, the mortgage companies are offering financing up to 70% of the appraised value, thus opening the market to a flood of new baby boomers about to retire.

Now that North Americans can acquire their dream retirement condo or villa in Paradise prior to full retirement, let’s consider some of the associated expenses. As a “rule of thumb”, $200/ sq. ft. would be an average price for a beautiful ocean or bay front condo and approximately $250/ sq. ft. for a villa with breathtaking panoramic views of the bay and El Centro. Almost all properties have sweeping 180° views of Banderas Bay, the entire city of Vallarta, and the Sierra Madres and are comparable to the finest properties in the California seaside areas. As a typical example, a 2,000 sq. ft. condo might cost $400,000 and require a little more than $120,000 initial deposit with the balance being mortgaged at 8% for 15 years. Such a fixed rate mortgage would require payments of approximately $30,000 annually. Trust fees are about $500 per year and property taxes are roughly .12% of the appraised value or $500 per year. Condo association fees are usually about $4,000 per year bringing the total out-of-pocket expenses to approximately $35,000 per year. It must be remembered that the equivalent property in the States could easily be $1,000,000 with taxes alone of $20,000 per year!

In order to reduce the $35,000 per year expense in Vallarta, many of the about-to-be-retired condo owners rent out their condos during the seven month “high season” of November through May. Rental income for a $400,000 condo should average at least $2,500 per month. Do the math and you’ll understand the relative ease in owning a property in Paradise prior to full retirement.

Now that you have a place to retire, let’s consider the other living expenses and compare them to the equivalent in the States or Canada. All of the following information is “rule of thumb” and based on knowledge and experience derived from living full time in PV for ten years, while owning property here for 23 years. Food purchased in supermarkets and meals in restaurants are of the same quality and price as in the US. Clothing, hardware, electronics, and everything else imported will cost about 50% more than in the US. Furniture costs are equivalent to those in the States. Fuel for your automobile and electricity for your residence will cost about the same as in the US. Car prices are roughly 20% higher in Vallarta so bring your own car! Auto insurance is about the same and although house and condo insurance is available, very few people seem to have it. Health insurance is the same, however healthcare, in any of the three new and modern high-tech hospitals in PV, is substantially less expensive. It would be safe to assume that health and dental care costs are one half to one third of the same medical services in the States. Fees associated with hobbies such as golf, tennis, fishing, etc. are about the same as in the States. Labor for house work, gardening, handyman, etc. is a third of such costs in the US. Skilled tradesmen such as electricians, plumbers, air-condition repairmen, etc. charge about the same rates as in the States. You can find self proclaimed skilled tradesmen for a third the price, but you’ll get what you pay for!

Next, let’s assume that you’re retiring and going to spend the “high season” in Paradise where it almost never rains, the sky is blue, and the average daily temperature is 73°F. You’ve purchased your million dollar condo for $400,000, drove your SUV loaded with clothing, personal belongings, and dog with it’s proper immunizations to Vallarta, and you’re ready to begin enjoying life. Your food, energy, furniture, insurance, hobby related expenses, property maintenance expenses, etc. will be about what you’re accustomed to back home. Property taxes will be an insignificant fraction of what they would be in the States, medical and dental care will be a half to a third, labor around your residence will be a half to a third, and most all other service related expenses no more than one half of those in the US or Canada.

Finally, for the kicker! During the past ten years, we’ve seen property values triple in Vallarta. The tourism boom is only beginning at this time with a ten year building plan that borders on being incredible. The Mexican government in conjunction with global developers and a handful of Billionaires, yes with a capital B, are currently in the planning stages and just beginning construction of a mega-resort retirement destination zone near Vallarta.

Prices in PV are sure to double in the next five years. The Mexican law assures all foreigners that they are considered “permanent residents” if they spend more than 50% of their time in Mexico for at least five years. That translates into “permanent resident” status if you live in your dream condo or villa during the “high season” for five years. As a “permanent resident”, you are exempt from Mexican capital gains tax upon the sale of your property in Vallarta. So, let’s say that you decide to sell your dream condo after five years and return to the hectic pace back home. While the housing market is softening in Florida and California, the market continues strongly upward in Vallarta and in five years the value of your condo is estimated to be $800,000. Assuming that you financed your purchase and that you paid $120,000 initially and another $175,000 in mortgage payments and condo fees, without any rental income, you should have around $570,000 equity in your residence at the time of sale. That $275,000 profit should more than offset all expenses that could possibly be incurred even with the highest standard of living in Paradise. Using this hypothetical scenario, the $275,000 gain over five years equals about $55,000 per year. It’s difficult to spend more than $3,000 per month living like a king in Paradise, therefore the seven month “high season” should not cost much more than $20,000 leaving $35,000 for travel and living expenses during the five summer months, or $7,000 per month. If you can’t make it on that, it might be time to go back to work! By the way, your monthly social security checks will be electronically deposited into your account regardless of where you live.

In summarizing, if you’re thinking about retirement within five years and would like to enjoy your life to it’s fullest, you can probably buy that million dollar retirement dream residence in Vallarta today, even if you’re short on cash!



Bryan