Planning Early Retirement

“Flying by the Seat of Your Pants” might have worked just fine while you were employed, but ignorance or mistakes in early retirement planning can cost you dearly. Retiring early, choosing the wrong investments, withdrawing too much money or failing to plan for health-care costs can all turn your golden years to brass.

Although there is no guarantee you’ll avoid unpleasant surprises if you plan — but you can probably tip the odds in your favor. Here’s a checklist to get you started. (As you get going, your Retirement Planning can help you make sure the numbers add up.)

10 years out Think about where you’ll live. Demographic surveys show most retirees “age in place,” meaning they continue to live in the same house, or at least the same community, as when they retired. But downsizing or moving to a cheaper community can help your retirement assets last longer. Since where you live has a strong impact on your expenses, you’ll want to consider your options carefully.

The Sabols, for example, had equity worth more than $225,000 in their New Jersey home. If they sell and move to the Florida condo they own, they could add that equity to the $350,000 already saved in their retirement nestegg. If they stay put for a few years, by contrast, the Sabols would have to keep paying their mortgage and other home expenses — a difference of $2,000 or more in their monthly costs.

Imagine what you’ll do. Some people don’t think about how they’ll spend their time in retirement until they wake up jobless. That’s a bad idea psychologically as well as financially.

Retirees who fare best are generally the ones who have absorbing interests to pursue, said Ralph Warner, the recently retired author of “Get a Life: You Don’t Need a Million to Retire Well” (Nolo Press). Those who wait until retirement often find themselves casting about for something to do, and may discover that the hobby or pastime they thought they would love isn’t quite so engaging when they can indulge it full-time. As Warner says, “There’s only so much golf you can play.”

Speaking of golf, your activities in retirement also influence how much money you’ll need. If you want to play the finest courses or travel the world, you’ll need to save more than if you like to play canasta and visit relatives.

Boost your retirement contributions. If you’re not already taking full advantage of your 401(k), IRA and other retirement options, now’s the time to increase your contributions. Use MSN Money’s Plan for your early retirement planning to see if you’re on track, and try your calculations using different life expectancies. Your chances of making it to age 90 or beyond have never been better; many financial planners now use age 95 as their default life expectancy.

Consider paying down your mortgage. If you still have some cash left over after paying off your other debt and maximizing your retirement contributions, think about getting that mortgage retired before you do. Having the house paid off helps many retirees sleep better at night. Not having a mortgage also means you may have to draw less from your retirement accounts, allowing them to grow tax-deferred longer and reducing your overall tax bill.

It is never to early to learn how to retire. Start today check with your employer to see if they offer any early retirement incentive programs. In the next installment I will cover retirement planning with 5 years to go before retirement.

Jim Roche of NJ has created The Early Retirement Planning Forum for you to visit join and post all of your early retirement planning tips as well as provide information and resources for those wanting to retire early, or just what is necessary for you to know how retiring early can become a reality. .

Future Years: Retirement Planning

 

Future Years helps makes it easy for everyone to plan their retirement. It does not matter if someone has just started a professional career, or if that person is nearing retirement age, Future Years has lots of information to cater to the retirement planning needs of people of different age groups. From selecting a retirement location or home, to health insurance, Medicare, and travel plans, this site proves to be a useful guide for a large number of people, including baby boomers. The fact-based and interesting approach adopted by Future Years is one of the unique highlights of this site.

The section on top retirement locations offers comprehensive information about the best places in the United States for retirees. The listing of retirement homes in states like Alabama, California, Connecticut, Delaware, Hawaii, Idaho, Iowa, Kansas, Maine, Massachusetts, Nevada, New Jersey, Ohio, South Carolina, Texas, Virginia, Wisconsin, and Wyoming, should be particularly useful for seniors and for people who are planning for their second life. This particular section also provides information about assisted living communities in the US, and details about retirement locations outside the country.

Social Security, Medicare, and insurance, these are some of the terms which any person planning for retirement would be acquainted with? Well, this site is one of the largest offering information on all factors associated with the financial needs of a retiree, including Social Security, Medicare, and insurance of all kinds- travel, health and life. Future Years adopts a simplistic language and style to explain the various finance, health, medical and economics related topics, and programs and clauses, to its readers. A senior can also continue working after retirement, albeit with less stress. The careers section of Future Years is a storehouse of information for any senior looking for alternative career options or advice.

Retirement does not mean that a person stops enjoying life! On the contrary, one gets to do all those things which the heart desired, but due to paucity of time could not carry out earlier. Cruises, escorted tours, and active travel are some of the sections on Future Years that would interest any person who wants to lead an active lifestyle post-retirement. The site aims to be the top resource destination for information on retirement planning and related topics.

About FutureYears.com

Future Years is a Silicon Valley, joint-venture project launched by Jim Sutton and Karin Hollerbach.

Jim Sutton has years of experience in high tech industry, including a stint with IBM Research Division, and 12 years with Hewlett-Packard (finishing as General Manager). Jim has also been part of many Silicon Valley start-ups, working in the capacity of CEO.

Karin Hollerbach is the CEO of Taku Group, an organization serving as a business and finance advisory. Karin holds a PhD degree in Biomedical Engineering, and had earlier worked at various levels such as CEO, President, EVP, VP Technology, and VP Products, for multifarious organizations, at different points in time in her career.

 

For more information, log on to: www.futureyears.com

 

Retirement Planning Services

Financial advice is literally everywhere. Everybody has an opinion to give it seems, friends, family, neighbors and even strangers. A lot more people therefore are going to financial planners. They consult these advisers in the belief that these people know better.

Here are some things you would want to know about your financial planner

1. Is the person qualified?

Anybody can say that he or she is an expert financial planner. No particular degree or experience is required. There is no department of government that oversees planners. Of the quarter of a million financial planners, only an approximate of 40,000 are CFP (Certified Financial Planner). The CFP is the most acknowledged designation for financial planning.

Even with this certification, there are no guarantees. It takes experience and continuous education plus a high degree of ethics and integrity to be a professional planner.

One excellent option is to check his CFP status as well as his PFS (Personal Financial Specialists) and ChFC (Chartered Financial Consultants) status.

2. Is he looking after your interest or his?

Professional financial planners take their duties on your retirement plans seriously. Your needs are ahead of his or hers. Unfortunately, most of the so called financial planners are just trying to sell you investments. They are not obligated to provide the best retirement plan but are only prevented from selling you an unsuited plan.

The best option is to ask the financial planner to furnish you a printout of code of ethics that he needs to comply. It is a difficult read, but knowing the standards which your planner abides is a must.

3. How is your planner getting paid?

Several financial advisers still get most of their income through commissions. Many gracefully slide through the ‘commission’ tag by giving themselves the title ‘fee-based’ financial planners. They also simply duck the compensation subject.

Commission is not really bad, but it does create a complexity of interest with the retirement planner. Your retirement planner should voluntarily tell you how he gets paid, or at least give a direct answer when asked.

4. A slice of the pie or the whole thing?

An excellent financial planner takes into account the whole financial situation of a client, including their plans for estate and budgets. That is the only true way of looking at a comprehensive retirement plan.

Most of these financial planners simply focus on a single projection of a client’s financial situation. In most cases, they focus only on the area in which they have received any training.

When your adviser focuses on a single or only a few aspects of your retirement plan, get one that will take into account your entire situation.

5. This is what I’m selling. This is what you must buy

Financial planners that do not have the necessary education in comprehensive retirement planning often rely on what their companies require them to invest in. For example, a stockbroker may possibly hard sell certain mutual funds or individual stocks. This is also true even when the best utilization of the money is on paying the mortgage or raising the emergency fund.

Your retirement planner must be able to discuss intelligently about methods other than his recommendations. If he is not able to, or simply insists that his way is the best way, look for another adviser.

Planning for Retirement Excitement

When planning your retirement years, you probably spend a lot of time on financial considerations. It is good that you should do this, however, you should also put some planning into the type of life you want to live after you retire.

When you retire, you will still be young enough to be able to live the life of your dreams; travel, learn a new sport or hobby, build a new home. The great thing is you will no long be tied to a 9-5 job so you will finally have the time to devote to doing the things you love.

You probably know someone who has retired and complains of being bored and missing work because the days are long and empty. You can avoid ending up with the same fate by thinking ahead of the namy things you would like to do and plan for them just as carefully as you plan your retirement financial future.

Retirement planning isn’t all about money, although that is a big part of it. You want to ensure that you have enough saved up to be able to enjoy life in your later years when you ae finally free to devote your time to doing the things that you love. Retirement should be looked upon as a beginning of a new life, not the end of an old one.

One thing that will work in your advantage is the special rates and deals you will receive as a senior citizen. You can take advantage of discounts on everything from restaurant meals to automobile insurance.

Have you had a secret profession you wished you could work at when younger but knew you couldn’t live on the salary? In your retirement years you can work at what ever interests you and do it as a volunteer or for salary and not worry about the money or pleasing the boss. At this stage in life you can work to please yourself if it is what you want to do.

Perhaps you want to go back to college and get a degree. Retirement is a good time for that too since you won’t have such a hard time juggling classes with work and family. An added bonus is that many colleges offer classes for free to senior citizens.

And there’s also the obvious such as traveling. Whether it is by air or RV or cruiseliner, when you are retired, you don’t have to answer to anyone but yourself and can up and go whereever you want whenever you want as long as you have planned your financial future in such a way that you have the money to fund your goals.

Options for Retirement Planning

Credit Cards: Having a credit card is often a necessity for most senior citizens – from paying for medicine and emergencies to booking a vacation. But for seniors living on a fixed income, there are concerns about carrying a large balance from month to month and running up significant interest charges. In the worst cases, the debt becomes unmanageable and a major source of stress for the account holder and the family.

Another problem for seniors is having too many credit cards. That’s because the more cards you have, the more opportunities you have to get into debt. And that possibility could make it tougher for you to get the best deal the next time you apply for a loan, insurance, a mortgage or an apartment. Having a lot of cards also can make it harder to keep track of when your monthly payments are due or to even realize that a thief may have stolen one of your cards.

Home Equity Loans and Lines of Credit: These are loans that use the equity in your house as collateral and often are tax deductible (check with your tax advisor). The equity refers to the difference between what you owe on a house and its current market value.

A home equity loan is a one-time loan for a lump sum, typically at a fixed interest rate. A home equity line of credit works like a credit card in that you can borrow as much as you want up to a pre-set credit limit. The interest rate for a line of credit usually is variable, meaning it could increase or decrease in the future.

“For elderly people on a fixed income who have paid their mortgage in full or whose mortgage is almost paid in full, home equity loans are tempting to use to pay for expenses, but they can also be dangerous,” warned Janet Kincaid, FDIC Senior Consumer Affairs Officer. “In the worst-case scenario, if you are unable to make the required loan payments, you could lose your home.”

In general, the best uses for home equity-type loans are to purchase goods or services with long-term benefits, such as home improvements that add to the value of your property. The riskiest uses of home equity loans include a vacation or a car because you could end up paying a lot in interest charges for a purchase that’s only of short-term value or has gone down in value. Also beware that some unscrupulous people or companies (including home repair contractors) push high-cost, high-risk home equity loans to elderly people and other consumers.

Reverse Mortgages: These are home equity loans available to homeowners age 62 or older. In general, a reverse mortgage is a loan that provides money that can be used for any purpose, and the principal and interest payments typically become due when you move, sell your house or die. A reverse mortgage also differs from other home loans in that you don’t need an income to qualify and you don’t have to make monthly repayments.

While reverse mortgages can be a valuable source of funds, they also have serious potential drawbacks. In particular, you will be reducing your equity, perhaps substantially, after you add in the interest costs.

“Reverse mortgages can help in some situations, such as when you have large medical bills that are not covered, to make major home repairs or to help people on low fixed-incomes make ends meet,” said Cynthia Angell, a Senior Financial Economist at the FDIC. “However, you are reducing your ownership share of the home. That means the inheritance you are leaving to your heirs could be greatly diminished or you could have far less money available for other purposes, such as buying into a retirement community later on. That’s why a reverse mortgage should usually be used as a last resort, not as an integral part of a retirement strategy.”

Also, Angell said, the fees can be high, and that could make a reverse mortgage a poor choice to cover relatively small expenses.

Life Insurance: People mostly think about life insurance as a source of income when someone dies, but they forget that many insurance policies also can be a source of cash at other times.

If you have a life insurance policy with built-up cash value, you can borrow against that money and either repay the loan with interest or reduce the death benefit accordingly. Example: If you have a $100,000 life insurance policy but you owe $20,000 on a loan from that policy, your heirs would receive $80,000 as the insurance payout.

There are other options reserved for people who have been diagnosed with a terminal illness and have run out of other ways to pay their expenses. One example is a life insurance policy that can pay “accelerated death benefits” to an eligible policy holder – generally up to about 50 percent of the face value of the policy – in either a lump-sum payment or monthly payments that are deducted from the policy’s face value. When the policy holder dies, the rest of the death benefit is paid out.

Another possibility is to “sell” your life insurance policy to obtain a lump-sum of about 40 to 80 percent of the face value in exchange for the right to receive the full insurance payout when you die. This is known in the insurance business as a “viatical settlement.”

These and other options for tapping life insurance policies can be complicated (including tax and other implications), and they are not right for everyone. Consider getting guidance from your state government’s insurance regulator.

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