Most people anxiously look forward to retirement-that is unless they do not have any money saved. Life after retirement can be expensive, particularly if you are planning to do many of the things you never had a chance to accomplish while you were working. Fortunately, there are practical ways to save towards your retirement every month without causing a financial hardship right now.
Make a Budget
It is difficult to know where you can cut expenditures unless you create a budget. Compare your income and expenses to identify things you could cut back on or eliminate altogether. Use this information to come up with a new spending plan that pays you before any of your other bills are tackled. Most people find that when their savings are taken out first, their spending habits automatically adjust to compensate for it.
Contribute to a 401(k)
If you are not already contributing to a 401(k), you are missing out on a great opportunity to save towards retirement. 401(k) contributions will not only build your retirement fund, but the fact that they are deducted before taxes are assessed means you may barely notice that you are having money taken out.
You may already be contributing to a 401(k), yet not be fully taking advantage of your employer’s match. For example, your company might offer to match half of all the contributions you make on up to five percent of your salary. If you are only contributing two or three percent, you are missing out on a great deal of free money.
Until age 50, the amount you can contribute to a 401(k) plan is limited. Once you reach 50, you may then begin making “catch-up” contributions by going beyond the normal limits. If you are over age 50, but have not increased your contribution amount, look into boosting your monthly deduction now to make the most of the last few years you have before retirement.
Open an IRA
An Individual Retirement Account or IRA is another tool you can use to save money toward retirement. Traditional and Roth IRAs are good choices for those who are not offered a 401(k) plan through their employer. Contributions to a traditional IRA are tax deductible, and taxes on any investment earnings are deferred until after retirement. A Roth IRA utilizes after-tax funds, and withdrawals are free of federal tax once you reach age 59 ½.
A Simplified Employee Pension (SEP) IRA might be a better choice if you are self-employed. A SEP IRA allows you to contribute as much as 25 percent of your net income up to the maximum amount allowed by the IRS.
When it comes to saving for retirement, the best advice we can think of is to start right now. It is never too early or too late to begin saving using any or all of the tips listed here. Even small contributions add up, so you will notice tremendous benefits even if you are only able to stash a little bit of cash away.Continue reading
Hard work is required in order to achieve a high credit score. What most people do not realize is that keeping that high score also requires a diligent effort, particularly if you are nearing retirement. Here are some things you should keep in mind that will help you preserve your credit score through retirement and beyond.
Keep Your Long-Held Accounts
Most people do not realize it, but maintaining a good record on an open account over a period of years positively affects your credit score. If you are near retirement age, you may have a number of accounts that were opened 20 or even 30 years ago. You may be tempted to close these accounts if you have not used them in a while; however, doing so could shorten your credit history and negatively impact your score.
Your credit score could be negatively affected in another way, and that is by decreasing your amount of available credit. A great deal of your score depends on how much credit you have compared to the amount you are using, so lowering the amount of available credit could result in a dramatic drop.
Old Accounts: Use Them or Lose Them
It’s not enough to just keep old accounts open, as you must use them at least occasionally to prevent the creditor from closing them. Using old accounts is especially important if you are completely debt free, because there is nothing for the major credit bureaus to base a score on otherwise. Many seniors have learned this lesson the hard way when they were denied a loan after being debt free for several years.
You don’t have to rack up enormous amounts of debt in order to keep your credit score active. Simply making an occasional purchase and then paying off your balance the next month should be sufficient.
Avoid Cosigning for Loans
Once your children leave home, you may be tempted to cosign for them to obtain a car note or student loan. Keep in mind that doing this will automatically increase the amount of debt that is reflected on your credit report. While this may not necessarily affect your credit score, it could impact your ability to obtain a loan in the future if it appears your credit-debt ratio is too high.
Consider your Debt before Retiring
A good portion of your credit score is also based upon your ability to pay your debts on time. This could be a problem if you have a significant decrease in income after retirement, or encounter unexpected medical expenses that wipe out your savings. Before retiring, make sure you have enough income to continue saving money. Better yet, wipe out all of your debt ahead of time to ensure that will not be a problem.
Even in retirement the unexpected could happen, requiring you to take out a loan you hadn’t anticipated. By taking measures to protect your credit score now, you will be prepared for anything that might come your way in the future.Continue reading
You’ve been looking forward to retirement for some time now. You have the date marked on your calendar and have been counting down the days. Nothing can stop you now-or can it? There are actually quite a few good reasons to consider postponing retirement, a few of which we would like to discuss with you.
#1. Working longer may increase your life expectancy
Research from Hebrew University’s Department of Geriatric Medicine reports that continuing to stay mentally and physically active later in life provides numerous health benefits, including a longer life expectancy. CBS Money Watch also reports that the death rates of people who are still working is around half that of individuals that same age who are fully retired. Not only may you live longer, but your quality of life could also improve, as those who remain active are less likely to develop dementia or Alzheimer’s disease.
#2. You’ll have a chance to save more money
It goes without saying that the longer you wait to retire, the more time you will have in which to build a nest egg. In addition, those age 50 and older are allowed to contribute more to a 401(k) plan, and are typically in a better place to do so because they are making more money and no longer have children at home. If you waited until later in life to begin retirement planning, giving yourself a few more years to save is crucial. Allowing yourself more time to save has another benefit in that the money you do stash will not need to last nearly as long.
#3. You’ll be able to draw more in Social Security Benefits
Although you may be eligible for Social Security at age 62, the reality is that you will draw far less money than if you wait until age 65. Delay retirement until age 70, and you could see an increase of up to 32%. Even retiring just a year or two later (up to age 70) will allow you to earn a slightly higher salary, making it worthwhile to at least calculate the difference and see if you could benefit.
#4. Continued health benefits
If you or your spouse have a significant health issue, Medicare may not fully provide for your needs. As such, a good number of seniors find themselves delaying retirement in order to keep their employer-paid health insurance. Others work for a company that offers contributions to a Health Savings Account (HSA) that helps them afford certain medical treatment. Even if you do not currently have a health problem, you should also consider the likelihood of developing one in the future before you give up any health coverage you may have.
As you can see, there are some advantages to postponing retirement that should be taken into consideration beforehand. What is right for you will be much different than what is best for someone else, which is why you should keep your own unique set of circumstances in mind when determining when to retire.Continue reading
Not everyone wishes to retire quietly and spend the rest of their days in a rocking chair on the front porch. Many people prefer to keep on working, while others find that Social Security alone is not enough to cover their expenses. The Pew Research Center estimates that more people over the age of 65 are working than ever before, and here are just a few ways they are continuing to draw a paycheck.
#1. Getting hired back by the same employer
A growing trend is for workers to retire, only to be hired back by the same employer for seasonal or part-time work. More and more businesses are recognizing the mutual benefit this type of scenario brings-not only does it eliminate the need to hire and train new workers, but it also allows people who are not quite ready for full retirement to ease into it slowly.
#2. Becoming a consultant
Those who have spent decades in a particular industry have a vast amount of knowledge that is invaluable to business owners. As such, many retirees find themselves making just as much money (or sometimes even more) by becoming a paid consultant, which also offers more flexible hours for retirees who wish to travel or pursue other interests.
#3. Monetize a hobby
Many seniors have dabbled in hobbies such as woodworking, jewelry making, or flower arranging for years, but have never made any money from them. Retirement gives these individuals more time to perfect their crafts, as well as the freedom to explore ways to get paid for doing them. Retirees can more easily schedule events such as flea markets and craft shows, and can spend their off days peddling goods to other venues.
#4. Consider self-employment
One of the things people like most about retirement is not having to answer to a boss. As such, it is only natural for those who would like to continue working to transition to self-employment instead. For many, the idea of operating their own business is a lifelong dream that is only possible when they are not bogged down with other commitments. Others find that working for someone else is no longer desirable once they no longer have to do it.
#5. Find part-time work
Not all senior citizens are interested only in money, as a good number of them desire social interaction and the ability to stay active. These retirees may not necessarily want to become entrepreneurs or independent contractors, in which case part-time work might be more suitable. A growing number of companies are recognizing the value that older employees bring, which is why Harris Interactive reports that 60 percent of individuals over the age of 60 plan to job hunt after retirement.
These five examples show that there are plenty of opportunities available for senior citizens who wish to continue earning a paycheck after retirement. With community colleges and job training programs becoming more open than ever to seniors, the ability to work or even change professions after retirement have never been greater.Continue reading
Planning for retirement is a complicated process that is often years in the making. With so many things to consider, no one should go it alone; however, many people are hesitant to seek advice because they are not sure who they can trust. How you determine who to trust will depend on a number of factors that we are more than eager to discuss with you.
A Certified Financial Planner (CFP®) is someone who meets the standards set forth by the Certified Financial Planner Board of Standards (CFP® Board). Only those who meet the requirements for education, experience, and ethics are allowed to sit for this organization’s certifying exam, which tests an applicant’s ability to apply knowledge to real-life financial planning scenarios. As such, someone with CFP® credentials has a well-rounded knowledge that can be used to customize a retirement planning program that will better suit your needs.
CFP Board of Standards
Once you have identified CFP®s in your area, your next move should be to contact the CFP® Board of Standards. This will help you verify certification and determine if there have been any complaints against a particular individual.
Interviewing Potential CFP®s
After identifying qualified retirement planners, your next move should be to set up interviews with a few of them. This has a two-fold purpose: allowing you to assess one’s qualifications and determining who you are best able to connect with. The latter is very important, as you will need to establish trust and cannot easily do so if you are unable to communicate freely. Some important questions to ask during an initial interview are:
- How much experience do you have with retirement planning? Remember that CFP®s do more than just help people save for retirement, which is why finding someone who specializes in retirement planning is so important.
- What is your typical client like? A CFP® may not be a good fit if he or she regularly sees people above or below your income level.
- What are your fees and what are they based on? CFP®s may charge a flat rate, annual retainer, or earn a commission on any of the products they sell. There are advantages and disadvantages to each method of payment, so it is important you know what you are getting into ahead of time.
- How often do you see your clients? Depending on how comfortable you are with retirement planning, you may wish to see your CFP® more often, and will need to make sure that person is available.
Finally, don’t forget to ask for the names of two or three references. Ideally, these should be people with approximately the same income, lifestyle, and retirement goals as you if possible.
Finding a trustworthy retirement planner is something that requires a great deal of thought and effort. With so much at stake, you can never be too cautious or ask too many questions. Your hard work will be rewarded not only with a greater return on your investment, but also by your enhanced peace of mind.