An ideal scenario is to retire rich after a lifetime of working and saving. Just how possible is that these days? CNN Money reports that most Americans are seriously behind when it comes to saving for retirement. Just because you have not yet begun saving does not mean you are destined to barely scrape by. Here are some tips that will help you adequately prepare for your golden years.
#1. Begin Saving and Investing right Now
Naturally, the earlier you begin investing the larger your nest egg will be. As time goes on, it becomes even more imperative to start saving toward retirement. Implement an aggressive savings plan, particularly if you are close to retirement age. Be sure to raise your savings amount whenever you incur an increase in salary. Likewise, you may also want to save more if you take on a second job or finally pay off a substantial debt.
#2. Make Savings Automatic
Many people argue that they simply do not have enough money left over after paying their bills. Ironically, when savings are taken out first, those same individuals seem to have no problem making ends meet with fewer dollars. You won’t miss what you don’t have, and will also not be tempted to make major purchases if you know you only have so much money coming in.
#3. Don’t Start and Stop Savings
Perhaps you’ve been saving for a while and find that life changes now make doing so more difficult. It can be tempting to forego automatic savings for the time being. Maybe you think you will only suspend your efforts temporarily, and will get back to saving in only a little while. A good number of other people have thought the same thing, only to find they never quite got around to starting again. Unless you are facing very dire circumstances, stay the course.
#3. Don’t be Afraid to Take (Calculated) Risks
Odds are that you will never save enough money to become rich. Instead, you must earn that money through investments. Creating a low-risk portfolio is comfortable, but will not net you much return. To notice a significant return, you must carefully balance your portfolio to include some low-risk investments, a few high risk ones, and others that are somewhere in between.
#4. Watch What you are Paying in Fees
IRAs, mutual funds, and 401(k) plans all come with fees. Even your everyday checking and savings accounts might also have fees associated with them. These charges can really add up over time, so you should do everything you can to minimize them. This means knowing what fees you are being charged and why. Do not get caught off guard, as doing so could potentially cost you hundreds or even thousands of dollars.
Will you be rich when you retire? A lot of that depends on what you do right now. Make a well calculated plan and stick with it to ensure you are in the great shape financially whenever it is time to retire.Continue reading
Healthcare is a growing concern for nearly every segment of the population, and that includes retirees. When making retirement plans, it is now more important than ever to consider health care costs-here’s why.
Health Care Costs Rising
Fidelity Investments recently reported that the average 65-year-old couple will need $275,000 to cover their health care costs. Last year, that figure was only $260,000. This amounted to a six percent increase year-over-year.
In calculating the results, Fidelity looked at things such as insurance premiums, over-the-counter medications, and long-term medical care. In a press release, they stated that the $275,000 estimate was for “average retirees”. In other words, it is based on an assumption of average health. As such, those with significant health problems could pay more, as could retirees in areas where the cost of living is especially high.
Factoring in Health Care
Financial experts are now stressing the importance of calculating health care costs more than ever before. Some things they would like people to know are:
- After leaving a job, there is a limited window for enrollment in health care through the insurance marketplace.
- At age 65, individuals automatically transition from Obamacare or an employer-based plan to Medicare. This is true even if they are still working.
- There are a limited number of options in many states. As such, many retirees are often restricted to more expensive PPO plans, or must enroll in HMOs or EPOs that offer fewer providers.
- Many people who are close to retirement age do not qualify for subsidies to reduce their health insurance premiums.
Making Healthy Choices
Carolyn McClanahan, a certified financial planner in Florida, advises her clients who are near retirement age to make healthy lifestyle changes. Preserving good health now can help people offset the higher cost of health care once they retire.
There may also be an added benefit, which is more money to save towards retirement. For example, the average pack-a-day smoker spends up to $2,000 per year on cigarettes. This is money that could easily be invested or placed in a savings account.
Many could even increase their 401(k) contributions, something that has taken a hit due to rising health care costs. A survey conducted by Bank of America and Merrill Lynch showed that two-thirds of all workers have decreased 401(k) contributions because they are now paying more for their health care.
Health savings accounts can also be a valuable asset. They may be used along with high-deductible plans to help lower premiums. Contributions are also tax deductible, and there are no tax penalties for withdrawal. They can also keep people from dipping into their savings accounts in the event a serious health issue arises.
These days, retirees must consider the cost of health care more carefully than ever before. This is true whether a person is leaving the workforce early or plans to continue working after retirement. Since health care costs will likely keep rising, factoring them into a retirement plan will become especially crucial in the years to come.
Many people these days wonder if they will be able to retire on time-if at all. These individuals often think that early retirement is entirely out of the question. That’s not the case, as it is still possible to retire early provided you keep the following things in mind.
Make a Plan
How early you can retire largely depends on the type of lifestyle you plan to live afterwards. As such, you should think about things such as where you want to live once you retire. Moving to a sunny location may sound nice, but if the cost of living is higher you will need to have a great deal more money saved.
Some other things to think about include:
- Whether or not travel fits into your retirement plans
- The amount of debt you will likely have once you retire
- The possibility of downsizing
- Additional expenses such as increased health care costs or the need to pay another person to help you out around the house
Who are you Responsible For?
Who you owe an obligation to will play a part in your retirement plans as well. For example, you may have a spouse or children who rely on your health insurance to meet their medical needs. Perhaps you have kids in college and need to continue working to help them pay their expenses. You should even consider your pets, particularly if you own larger animals such as horses.
Once you have determined how much money you need, you’ll then need to start accumulating funds. This may seem like an overwhelming task, but keep in mind that even small savings can really add up over time. Even if you can only put back a few dollars each week, make it a habit to start saving now.
Don’t be discouraged if you are already in your 40s and have not yet started saving. Look for little ways to cut costs so that you can add a few extra dollars to your savings account. Consider taking on a second job, or take advantage of the gig economy to earn yourself some additional cash. The most important thing is to do what you can while you can.
Pay off Debt
It can be nearly impossible to save money whenever you are drowning in debt. As such, you might find it necessary to pay off your debt before you begin saving. Speak with a financial advisor, who can put you on the right track to becoming debt free. Once you have eliminated debt, make a budget and stick with it to ensure you do not find yourself in the same situation again.
Retiring early does not have to be just a pipe dream. With the right planning, it can be entirely possible even for those who do not earn a great deal of money. You are never too young to start thinking about retirement. The sooner you start preparing, the younger you will be when you finally hit the time clock for good.Continue reading
The idea of retiring with a million dollars in the bank sounds like a dream come true. Even so, many experts warn that $1 million might not be enough for some people. A number of things can determine how far this money goes, so here is what you need to be aware of.
Geography Plays a Role
The leading factor in determining how far your money will last is location. Obviously, if you live in an area plagued with high rent and utilities, your retirement funds won’t last quite as long as they would in another location. For this reason, you may want to consider moving somewhere with a lower cost of living, particularly if you don’t quite have a cool million stashed away.
States in the Southeastern United States have a lower cost of living, and could allow retirees to live comfortably for longer. For example, $1 million will last approximately 26 years and four months in Mississippi, or an estimated 25 years and 6 months in Arkansas. However, that same money will be gone in only 11 years and 11 months if you live in Hawaii, or 16 years and five months if you reside in California.
Ways to Get By
Moving to a different location is not always feasible. That doesn’t mean you can’t maximum your retirement accounts. Financial expert Dave Ramsey claims the average retiree should have $1,157,000 in savings. Even so, he does say it is possible to retire on less than one million, and suggests the following things to help stretch your dollar:
- Paying off a mortgage, which can save an average of $9,000 per year.
- Cutting back on travel plans. Ramsey estimates the average senior spends $3,000 on travel.
- Knowing the tax ramifications of withdrawing from a 401(k) plan or IRA.
Ramsey also advises people to account for inflation when calculating how much they will need. As an example, he claims that someone planning to retire 25 years from now should have $2.2 million in savings to account for skyrocketing costs.
Length of Retirement a Factor
Of course, the length of your retirement will also play a role in how much money you need. Naturally, people who plan to retire at age 55 will require more cash than those who wait until they are age 70. Likewise, individuals who plan to work part time will not need to have quite as much stashed away.
Life expectancy and health are contributing factors as well. If your family has a shorter life expectancy, you might easily get by on far less than $1 million. On the other hand, if you have ancestors who have lived to be 100, you could find yourself running out of money well before you expire.
Not everyone needs a million dollars in order to retire. Even so, retiring as a millionaire should be a benchmark for working adults to achieve. Having that amount on hand can allow you to be financially secure and enjoy life to the fullest after leaving the workforce.Continue reading