Pensions - What Should I Do ?

David Chazin asked:


Plan Today for Retirement Tomorrow

By David N. Chazin

In conjunction with Sagemark Consulting, a division of Lincoln Financial Advisors, a registered investment advisor. Mr. Chazin is a regular contributor to PlannerConnect.

Planning and saving for retirement, like cleaning out the attic, may be something you figure you’ll get to later. But when “later” arrives at retirement age, you may not have the financial resources to enjoy your golden years.

Long gone are the days when you could expect the traditional sources of retirement income — Social Security and your company’s pension plan — to carry you through retirement. This is the result of several factors: inflation, longer life expectancies, company cutbacks of medical and pension benefits, and the rising age requirements for full social security benefits.

By taking an early and active role in planning for your retirement years, however, you can stay ahead of the game. Building up your personal savings should be at the center of your overall retirement planning strategy. Your savings could come under increased pressure in future years to make up for the shortfall caused by corporate and government retirement benefit cutbacks. So the sooner you start saving, the better.

Setting specific goals is the first step in planning for your retirement. That means figuring out when you want to retire and what kind of lifestyle you want to have. The younger you are, the tougher it is to calculate exactly how much money you’ll need at retirement. A popular rule of thumb is if you earn $100,000 or more annually prior to retirement, you will need almost 70 percent of that amount ($70,000 or more) annually to maintain your standard of living after retiring. Your financial needs could be greater or smaller, of course, depending upon your individual circumstances.

Here’s a closer look at the compelling forces, which are causing more workers today to recognize the importance of personal savings for retirement:

Medical Benefits

In response to soaring retiree health care costs, many cost-conscious employers are reducing health coverage for their retired workers. Companies are making retirees pay a greater share of the premium, tightening eligibility requirements, and requiring higher deductibles. Some businesses are even eliminating retiree coverage altogether. According to a Foster Higgins survey, only nine percent of firms with fewer than 500 employees offer coverage to retirees.

Pension Benefits

Employer-sponsored pension plans are an important source of retirement income for many employees. But recent changes may ultimately mean a decline in the standard of living for tomorrow’s elderly. One trend is companies’ shift, generally from defined benefit plans (which promise a specified payout upon retirement), towards defined contribution plans (in which the employer and/or employee may contribute to the employee’s account, depending on the plan’s specifics). As a result, the decision and risk on how to invest pension funds is shifting from employers to employees — and many employees who make their own investment decisions are inclined to choose low-risk/low-return investments. Without greater diversification however, that strategy may leave them with a lower-than-expected standard of retirement living.

Social Security

A tidal wave of baby boomers will begin straining the Social Security system when they start to retire around 2010. Once considered politically untouchable, the system’s walls started cracking in the 1980s when benefits for couples earning over $32,000 were partially taxed for the first time. Higher Social Security taxes or reduced benefits remain a possibility in the future. So don’t rely too heavily on Social Security to bankroll your retirement.

Other Factors

Inflation and family needs also can impact your retirement plans. Although the rate of inflation has been relatively low in recent years, the long-term effects of even a low inflation rate can eat away at your pension investment returns. And saving for your children’s college education bills and caring for your elderly parents may also erode your savings.

There’s no need to panic. But you should start planning for your retirement now. More than ever, it’s up to you how large a nest egg you’ll have at retirement. To help you determine how much money you’ll need to retire on, or to see if your current retirement plan will achieve your goals, consult qualified professionals for retirement planning advice.

David N. Chazin is part of a network of qualified financial planners affiliated with PlannerConnect. You can reach him at David.Chazin@LFG.com, or to connect with a financial planner in your area please call (800) 318-7848, or visit the PlannerConnect website.

David N. Chazin, is a registered representative of Lincoln Financial Advisors, a broker/dealer, and offers investment advisory service through Sagemark Consulting, a division of Lincoln Financial Advisors Corp., a registered investment advisor,3000 Executive Parkway, Suite 400, San Ramon, CA 94583, (925) 275-0300. Insurance offered through Lincoln affiliates and other fine companies. This information should not be construed as legal or tax advice. You may want to consult a tax advisor regarding this information as it relates to your personal circumstances.



Andrew

Ray Prince asked:


As you are probably aware, the New NHS Pension Scheme goes live from April 1st 2008.

This scheme is automatic for new members from that date, and a major change here is that the normal retirement age is 65, not 60.

However, the existing scheme also changes in some key areas for those of you who opt to stay as you are.

We concentrate here on these changes as most of our clients are in their 40’s and 50’s and are almost certain to remain in the current scheme. You will automatically become members of the updated existing scheme from April 1st next year.

So how are you going to be affected?

Well, there are quite a few changes, so lets start with the bad news! The flat 6% cost will now be tiered, depending on your earnings:

Up to £19,165 6%

Up to £63,416 6.5%

Up to £99,999 7.5%

£100,000 plus 8.5%

As you can see, if you earn more you pay more. If your NHS income is, say, £90,000, you are currently paying £5,400. From April it will be £6,020, although this is gross and you get tax relief on these figures (meaning as a higher rate taxpayer you would pay £3,612 on the latter figure).

The good news is that you will retain the normal retirement age of 60, or age 55 in certain special cases such as Mental Health Officers.

Other key changes are:

The earnings cap for hospital based individuals is being abolished. So, although higher earners will be paying more as above, you will benefit from a real pension increase if your NHS earnings are above £112,800 pa. (e.g. if you have a merit award).

The General Dental Practitioner earnings cap is also being removed - circa £110,000. So for those of you earning more than this figure, from 2008 you will benefit from increases to your pension.

Also for this group, and also for General Medical Practitioners, your pensionable earnings revaluation on dynamisation will now be determined by the retail price index plus 1.5%, rather than the increases in each practitioner profession.

A key change for benefits to partners on death have also been announced. Qualifying partners now include someone you have nominated who you have an exclusive and long-term committed relationship with for at least two years and who is financially dependant or inter-dependant. In addition, if such a partner were to remarry or cohabit, they keep their survivor pension (a huge benefit).

It should be mentioned here that the ill health retirement rules are being reviewed seperately, and this review is due to report early next year. As these are very important benefits, we will update you when there is more news.

Buying extra pension benefits has also got new rules, one of them bringing the NHS scheme in line with the overall ‘A DAY’ pension changes that were introduced in April 2006. This means you can contribute as much as you earn. Secondly, the option of Added Years is being removed entirely - existing contacts will be honoured - (you need to have your application in by the end of March 2008 if you wish to use this route). The replacement is called ‘buying additional pension, with a maximum of £5,000 per annum.

At retirement, you can take your pension and lump sum as usual, but there is an option to commute some of the pension to give more lump sum. As this lump sum is tax free, it may well prove popular. For example, for someone with around 36 years service and an NHS income of £100,000 pa:

Typical pension/lump sum - £45,500/£136,500

Option pension/lump sum - £36,500/£244,000

Finally, you can now work on to age 75. Please apply early to avoid the rush

We have not covered all the various changes here. Make sure you are aware of how these changes affect your benefits.

The Financial Tips Bottom Line:

As the NHS Pension Scheme is the foundation for many dentists and doctors, ensure you are up to date with these changes, and understand what they mean to you.

You will receive information packs from the NHS Pension Agency with your pay advice in due course.

ACTION POINT

For full details of the changes go to:

www.nhspa.gov.uk/site/nhs/index.htm

For the pension/lump sum calculator go to:

www.nhspa.gov.uk/site/nhs/Pensions_Contribution.html



Felipe

Kim Kirmmse Toth asked:


The word “retirement” seems to surround you, it’s everywhere you look! Has it gotten a bad rap? It seems to be an unpopular term as people continue to try to be creative with new names and titles, such as 3rd Age, Second Act and Bonus Years.

Regardless of the word you use, people know this is what happens after your career ends. With the evolution of this stage of life come new ideas and new terms to describe them.

Bridge job, is one of these new concepts. What the heck is a bridge job? It’s a job you might have during the period of time between your career and when you really retire, meaning being totally and unequivocally, unemployed.

The important thing to keep in mind is that retirement is a process, not an event. It may be a marathon, but not a sprint. It’s a phase of life we can do over time. You don’t have to have a long career and bam! Retire. You can, but you don’t have to.

A bridge job might be the perfect transition for you, especially if you define yourself by your work. It might be a new line of work, it may be part time, it may mean self-employment or if you are self-employed you might enjoy working for someone else and letting them handle most of the responsibilities.

There are also some very hard hitting truths as to why you might consider a bridge job for yourself.

*There are many unanswered questions about Social Security and how stable it will be when it comes your time to collect.

*Many of you simply haven’t saved enough during your working years to be able to retire when you thought you would.

*Too many contracted pensions and retirement plans have been a victim of over promised and under delivered.

*You are living longer and healthier than ever before. With life expectancy at an all time high, it obviously will cost you more if you wish to be self supporting and not rely on you children and/or the government.

In the United States, the average retirement age is 56 years old. That could mean 30 years living without working! Even if you have saved diligently, that’s a long time to live without a pay check.

There are many statistics, available to interpretation. Generally speaking, 79% of Baby Boomers expect to work in later years. 52% work part time. Only 10% of the

Baby Boomer generation will retire in the traditional sense, moving from a full time career to a non-working lifestyle.



Sean

Derek Both asked:


Pensions are plans that offer steady income to a person after they have retired. Pensions are essentially a deferred compensation that offers tax advantages to the employer and employee. Pensions can be in the form of an annuity, or a cash balance that is drawn from after retirement. Whichever the case may be pension plans allow employees to prepare for their retirement. In the United Kingdom, pensions come in many forms.

Basic state pensions are offered for most people and the amount received depends on the amount of contributions that person has made to the National Insurance fund. Factors such as being married also contribute to the amount of money a person will get each week from the basic state pension. The State Second Pension is offered to employees that are not self employed and was introduced by the Child Support Pensions and Social Security Act of 2000. It offers three distinct payout rates determined by the amount of contributions made.

Personal pensions were introduced in 1988 for people that are not a part of a company pension. This is a great tool for people who are self employed or work for a company without a good pension plan. Since 2001 members of a company pension scheme can also take out an additional personal pension. Occupational pensions are set up by employers for employees. Most occupational pensions usually offer an eightieth of the final remuneration for each year of work plus a lump sum of up to a hundred and fifty percent of the final remuneration.

Employers have to offer employees the chance to invest additional contributions to their pension. These are called additional voluntary contributions. An employee can voluntarily invest up to a hundred percent of their total remuneration. Free standing additional voluntary contributions are a variation of additional voluntary contributions. The difference is that free standing additional voluntary contributes are made to a pension scheme run by a third party pension provider rather than the employer. This allows for a wider range of investment choices.

Self invested personal pension schemes allow individuals to have more flexibility to how they invest and use their pension funds. Since 2006 individuals can purchase an annuity as well as using a pension drawdown. Using a self invested personal pension scheme you can transfer a balance to another pension scheme, make or receive lump payments, and an employer can even pay into the plan or match your payments. Since 2006 you can also invest in as many pension plans as you’d like you have a wide range of investment options available including shares and property.

Preparing for retirement is a very good idea and the modern pension laws in the United Kingdom give you many options for paying in and drawing funds. The manner in which a pension pays out is very important. Flexibility is key because it is impossible to predict the future and it is important to have flexible access to your money. You do not want to have a large pension but not the ability to use the money you need during a particularly hard month or year.



Lauren

Wally Bock asked:


Next time you’ve got a bunch of senior managers in a room together, ask those who are eligible to retire within five years to leave the room. Then figure out how you’re going to replace them.

That’s an exercise I’ve done with senior management in a client company. A full third of the senior people in that room were eligible to take their pension and go within five years.

This is not just a problem in the executive suite. Check out the senior people in sales. Check out the team leaders for key craft functions, the people who usually came up through union apprentice programs.

There are several definitions of the Baby Boom and they all vary a little. But you’re safe if you assume that it’s people born between 1946 and 1964. In America, that’s about 79 million people.

The oldest boomers hit sixty in 2006. In 2011 they’ll start hitting sixty-five.

I call their exit “The Boomer Brain Drain.” It’s not likely that they’ll all retire when they can and they certainly won’t retire all at once, but enough of them could start heading for the exits soon enough that you’d better know how you’re going to deal with the Brain Drain in your organization.

There are three things that make this a difficult problem for you. They are lead times, pipelines, and human complexity.

If you need a graduate engineer to fill an entry level position in 2011, when a senior Boomer engineer retires and people bump up the pipeline, that graduate engineer needs to be in college today. The same is true for skilled craft positions where people come through an apprenticeship program.

The people in the pipeline now constrain what you can do with people replenishment in the short term. In the long term, finding enough engineers and craft workers will be a problem that needs to be tackled by the whole industry or country.

Note, though that the overall number of people in the pipeline is less than the number of people who could be retiring. That’s because the generations following the Baby Boom are smaller.

This shortage is even greater in several key kinds of work. The number of people getting engineering degrees has been falling for years. So has the number of people in apprenticeship programs.

People are not interchangeable parts. That’s a joy for most of us most of the time, but it can create problems for you as your Boomers start to leave.

Bill’s a guy that everyone likes. He’s easy to talk to. He’s good at what he does in the distribution part of his company. When people have a problem, they call Bill, and he almost always knows who to call or what to do to help.

Kaye’s been in the same clerical job for over twenty years. She’s good at what she does. People know that Kaye’s the one to call if you’ve got an administrative problem. She knows who to talk to at headquarters to set things right. She also knows just how far you can stretch the limits of any company policy.

When Bill or Kaye retire, you can fill their position, but you can’t really replace them. Bill’s problem solving ability has developed over years. So has Kaye’s knowledge of policy and headquarters staff. And they both have relationships that are impossible for any newcomer. When they leave that special knowledge and those relationships go with them.

So what should you be doing? Start by doing what I call a “Threat Assessment.” Take a look at every position in your company. Concentrate on the ones where the incumbent is eligible to retire soon. Evaluate your ability to fill the slot with a qualified person.

Then put together a task force to take a long term view of the situation. You’ll find that solutions to the Boomer Brain Drain fall into three basic areas.

Some solutions will be Human Resources (HR) solutions. These include improved recruiting and succession planning.

You may decide that you want to allow some people to work beyond their retirement date or to return to work after retiring. That may mean you need to adjust pension and retirement rules.

You may also need to make adjustments to increase flexibility for your “retired” workers and you may need to change some materials and equipment to make them easier for older workers to use. If you’ve got union workers, you’ll need to negotiate with the unions.

Consider some business process changes to meet the threat of the Boomer Brain Drain. By streamlining processes or eliminating some steps altogether you may be able to maintain excellent performance with fewer people.

Investigate equipment issues, too. By simplifying and standardizing equipment, you may be able to achieve similar results with fewer workers or increase your scheduling flexibility. If part of your plan involves having more older workers, make sure that equipment and support materials are comfortable for them to use.

Finally consider some technological solutions to knowledge retention. Artificial intelligence, smart systems, and Knowledge Management (KM) are appropriate for some larger companies.

Companies of all sizes should look for ways to use technology to help people do a better job of knowledge sharing, learning, and problem solving. Social networking systems can help people find experts. Simple discussion systems can facilitate the sharing of shoptalk and the learning that goes with it.

The blanket that overlays all of this is culture. As you make changes in procedures and in the mix of people and technology in your workplace, you need to pay attention to your culture.

Culture, in the classic Deal and Kennedy definition, is “the way we do things around here.” Culture is the way you think about older workers. Culture is the things you reward and the things you only notice. If you change your workplace and the mix of people in it, you will almost certainly need to change your culture.

In the end you need an integrated system to deal with the threat of massive Baby Boomer retirements and the potential Boomer Brain Drain. You need to assess your situation. You need to use a mix of human resources and business process changes. You need to make judicious use of technology and you must factor culture into the mix.



Lillian

Moneyman asked:


Over the past few years, final salary pension schemes have witnessed volatility in equity markets and a retired workforce that is living longer. Add the two together, and what was once a healthy pension scheme became a huge liability, carrying significant deficits.

To reduce the liability, one by one, companies closed their final salary schemes to new members. The rules of some existing schemes were also amended to require higher contributions to be made.

This means that the number of employees retiring with a pension that pays around 50% of their final salary is forever reducing, and is a trend that will not be reversed. Granted, the number of people staying with the same firm to amass forty years of service to qualify for the maximum pension is also reducing. Greater movement in the labour market will also be a contributing factor in lower pensions at retirement.

So where does this leave employees? Companies that have moved away from final salary pension schemes have turned to offering defined contribution or money purchase pension schemes. Here the employer and employee pays contributions into the scheme, more than likely based on a percentage of current salary. The premiums are then invested in pension funds that can range from with profits to UK equities to Far East funds. At retirement the amount in the kitty depends on the level of contributions but also on how well the funds have performed, increasing the risk to the employee.

The big difference is the level of contributions paid into the respective schemes by the employer. A typical final salary scheme may have received 15% - 20% from the employer with employees paying 5% or 6%. The money purchase scheme will require the employee to contribute at a similar level but the employers premium may have reduced to 5% also, that is to match the employees contribution.

It gets worse still for the employees whose company now offers a stakeholder pension scheme, whereby the employer contribution may be in the range of 0% to 3%.

It’s not difficult to see the impact this has on the pension pot. With contributions to money purchase schemes at least 50% lower than final salary schemes the amount of income it generates will drop by a similar amount. This could be less than the amount required to live on.

So from having 100% of salary many people face the prospect of receiving one quarter of that amount. Where does this leave employees in this situation? Well, neither option is easy to swallow. First, you work longer, putting back your early retirement at 55 to a more realistic 65. Another ten years at work definitely doesn’t appeal. The second option is to save more. Not always doable with rising living costs such as mortgages, utility costs and petrol, but saving as much as possible will help. For those lucky enough to be just starting out at work, the best option is to start a pension (or savings plan) as soon as you can.



Mary Jo

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

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