Retirement Planning

Planning for retirement is something grown ups do.  So as soon as you can when you settle into your adult life, if you can get your retirement planning moving, you will benefit from the wisdom of moving on this early in life when its time for you to retire.  Too often young people live in a fantasy world that they will never grow old.  But short of the worst case scenario of an early demise, everyone is going to get old and its far better to do so with a plan then to “let it sneak up on you.”

This is something you don’t want to screw up.  Is it possible to screw up retirement planning? Of course it is.  If you speak to senior citizens who did not start planning in advance and got to their senior years with nothing to fall back on and no funds to use so they can step out of the working world and enjoy a more leisurely retirement lifestyle, that is an example of people who screwed up their retirement planning.  So it’s good to know the common mistakes people make so you can avoid them.

Probably the biggest mistake that you can make in your retirement planning is to wait to start it until you are pretty close to retirement.  If you want to retire at 60 and you don’t start getting ready until you are 55, you will not have nearly as well prepared a retirement package as if you had started when you was 25 or 35.  By starting early, you can set back a small amount each month and put it into an IRA, your employer’s 401k or some other retirement vehicle.  Then just let that money continue to accumulate and grow and before you know it you are sitting on top of a pretty substantial nest egg.

Speaking of sitting on top of a nest egg, the second big mistake people make is not leaving that nest egg alone.  When that retirement investment fund starts to get big, it is really easy to look at it as a way to get you out of credit card debt trouble or to borrow against for some new plan or possession you want.  Above all, resist this temptation.  If you lose that retirement fund due to foolish use of the funds in your middle age years, you are back to square one with nothing to show for your years of hard work developing that retirement nest egg.

The plan of setting up withholding from your checkbook or a direct deposit to your retirement account of retirement savings allows you to go about your busy life knowing that your retirement planning is underway.  This is step one but its not a good idea to never go back and review your retirement plan and see if how you are going about getting ready for retirement well in advance.   Make it a regular ritual to sit down and review what is going on with your investment funds.  Look at the way your investments have been performing and if you are not getting a good return on those money, make some changes.  Remember, just because your retirement funds are being managed by the company you work for doesn’t mean the money belongs to them. It’s yours so be responsible and manage it.

Starting early and staying proactive about your retirement is your best approach to retirement planning and one that will result in a much bigger retirement fund for you to start your golden years with.  And by taking good care of your retirement before you need it, you are guaranteeing that it will take good care of you when its time to depend on that fund for a happy and prosperous retirement lifestyle

Retirement Plans - Make a plan and Work

Being ready for retirement is not something that just happens.  Every single person you see in retirement today that is enjoying a leisurely life in their golden years are where they are because they planned for it.  The first question that may come to mind is when the right time to start planning for your retirement might be.  The answer is that if you are asking the question, it’s the right time.  You really cannot start planning too soon.  If you could start putting money back for retirement as early as right out of high school, that would be just that much more time you have to build up a really comfortable retirement nest egg that will serve you well when you need it in your golden years.

But most of us start thinking about retirement in our adult years and usually in association with some big life event such as getting married or having a baby.   So we have one word of advice if you have been thinking about beginning a retirement plan. That advice is stop thinking about it and take action.  If you make the subject a focus for you and your spouse to look at, you both will be glad you got off the dime and got moving on a plan.

Often the trouble with making a retirement plan is you don’t know where to start.   Too many people just wait for their employers to introduce a 401K plan and they just dump some money in there and count on Social Security to be there in a few decades.  Then they call it a day and call that a  retirement plan.

You and I both know that your security in your golden years is too important to not take more seriously than that.  So set aside some time each week for both of you to sit down and start thinking about how to create a retirement fund and how to plan to build a retirement plan that you can grow into.  The first step always begins with you.

If you don’t know where to start, then admit that and set about to do some reading to get ideas.  You are doing that right now by reading this article.  But get out there on the internet and find some of the great books out there on retirement planning and take some time and read them.  You will start out ignorant and end up an expert in retirement planning.

Keep plenty of notes during the discussion and learning phases so you have a road map of ideas to build into a plan for building a retirement fund.  Once you have a simple plan, its time to talk to a financial advisor. If you trust your bank, go talk to them and see what they can do for you.  Or you can seek out a friend or someone in your community who you know will be able to steer you toward how to build a retirement fund that is structured properly to protect your retirement money from taxes and be there for you when you need it when you are old and grey.

Now it is time to kick it up to the next level.  Once you have a plan and perhaps are seeing it start to take off, start learning about investments.  There are lots of places you can see your retirement funds go that will give you a nice yield that can make that fund grow more quickly do to shrewd investing.  You can divert money to real estate, the stock market, mutual funds or other well know investments.  Diversify where you put your money so no one financial reversal can whip out your retirement funding.

Above all stay on top of your retirement fund and your retirement plan. Review it together frequently to see if your retirement goals are still the same and your investments and pans for building our retirement fund line up with that plan.  By making retirement planning as big a part of your thinking as planning your family or your career, you will give it serious attention over the years.  And the result will be a strong financial plan that will give you good resources to enjoy a happy and worry free retirement life.

Retirement Plans

If you are like me, it’s easy to get fed up with constantly paying insurance premiums.  Writing a monthly check for car insurance alone will drive you crazy.   Not to mention the direct withdrawals from your paycheck for health insurance and the hit to your mortgage for home owners insurance and you have a lot of money going out the window to pay for disasters that might not even happen.

But if those disasters do happen, you will be very glad you had insurance.  But there is one big life event that is coming that you want to do all you can to prepare for financially and that is old age and retirement. While there is no “old age insurance”, you will find as you do your retirement planning that there are some very valuable insurance policies that are absolutely critical to a retirement life that is enjoyable, safe and prepared for.

We may or may not think of life insurance as part of retirement planning.  After all, the benefits of life insurance, at least on the surface are for those who survive you after your death which doesn’t do you a lot of good when you are living and breathing.  But you can invest in life insurance that also serves as a long term investment as well.  These policies which are sometimes called “whole life” allow the funds you put in to be invested and to build a cash value that you can cash in on when you retire.

So you may want to carry $100,000 insurance when you are in the working world, paying a mortgage and trying to get the kids through college.  But if you can then hit retirement, cash in on the investment value of that insurance and spend your golden years with just enough insurance to cover some protection for your spouse and funeral expenses, that is a better way to organize your insurance programs.

Another layer of insurance that a lot of people are taking advantage of is Medicare supplement insurance.  Medicare is a great program that benefits a lot of people.  But Medicare can only go so far.  Those corny commercials for Medicare supplement insurance are goofy but they are on target that you need to have another safety net in the event you find yourself needing more extensive medical coverage than Medicare can provide. If you took the time to set up this kind of insurance early in your retirement planning, it will pay you big time when the need is there during your golden years.

A level of insurance that can be one of the biggest blessings if you become ill in your elderly years is in home health care insurance.  Many times illnesses that you endure due to old age are not the kind of thing you would want to get through in an expensive hospital room.  You will recover more quickly in your home but you still need someone to make sure you get your medications, take care of the little life details that you cannot tend to when you are poorly and be there if you take a turn for the worst.

This is where the care of an in home nursing service can be so valuable.  This insurance can enable you to have care with you right in your home which will give you the care you need and take a lot of worry and work off of your family.  And since all senior citizens need medical care at some point in their retirement life, in home health care insurance is a must.

By setting up these different specialized insurance policies early enough in your working life, you can get some value into them when the time comes for you to retire.  Then you can you enter retirement with confidence knowing you have policies with reliable insurance providers to take care of the needs that you expect to come up during your golden years.

How Much Do I Need to Retire

There are levels of preparedness when it comes to looking down the road at your retirement and how much you will need when you get there.  The basic level of retirement planning is to sign up for your 401k at work, support legislation to keep Social Security intact, buy some life insurance and let it go at that.  This system will work so there is reason to call this bad retirement planning.  After all, if you began preparing for retirement in your early adult life and stayed with it, you will have a resource to retire on and that’s a good thing.

But there is a way to take it to the next level and that is to actually start putting some flesh and bones on your vision of your retirement and get a feel not only for the fact that you will retire but how you expect to live in retirement.  Very often, we have idealistic visions of retirement life based on media images or the fantasy life of living in luxury and having little to do but golf in the morning and drink campaign and eat caviar all afternoon.  So if you can get a realistic view of what you have as your expectations for retirement, you can start making adjustments to your retirement planning package right now.

Start with how you see your retirement lifestyle working.  If you want little more than a manageable retirement apartment, a cat and the chance to knit or watch ESPN without interruption, that is a fairly modest retirement lifestyle to prepare for.  But other people have adventure and high living in their retirement dreams.  So if world travel or living in a luxury setting is part of that dream, only one person is going to make that dream a reality and that is you.

An exercise that is fun and eye opening is to detail every aspect of your dream life in retirement. Start by picturing your living conditions.  Include your diet needs and wants as well as any entertainment and recreational needs you expect to be a part of retirement.  For example, if you know you will want to go on long fishing adventures several times a year, you will need a RV and the finances to support taking off for the most scenic spots within driving distance to kick back and enjoy the fishing.   So include the physical and financial needs for that lifestyle in this “detail” step of retirement planning.

You can complete the exercise by getting to such a level of detail that you could go out and price the dream in today’s dollars.  Then when you take your “dream retirement shopping list” out into the open markets and use retail locations, catalogs and internet sites to actually find out how much it would cost to have that retirement today, that will shed a lot of light on your retirement preparations that you are doing.

Now, the actual cost of those different components will be much higher when you actually get to the point of retirement. You could try to factor in inflation and make those kinds of adjustments but don’t play with the formula so much that you get the idea that it’s impossible and give up.  However, another factor that offsets the inflation factor is that your retirement life will be less expensive then your current lifestyle.  Your daily needs may not be as demanding.  If you sell your house after paying off the mortgage, your monthly expenses will go way down and you will have a significant surge of retirement capital that will come from the sale of the house.  And you are not raising kids, putting them through college or having to support the lifestyle and wardrobe of a working person.  All of these things offset the inflation issue.

Retirement plans Night Mare

When you are looking down the road to retirement, the images that spring to mind can vary from the pleasant and fun to those of fear of the unknown.  The image we get from the front cover of AARP magazine is one we want to envision for ourselves for our golden years.  That idea of retiring in luxury to a life of golf, maybe roving the country in an RV or pretty much living on cruise ships is fun to look forward to and let it bring a smile to your face even if retirement
is a ways off.
But many people in those years leading up to retirement also have to be of assistance to aging parents and you see the realistic side of the golden years as well.  So that changes how you think about retirement and how to prepare for it.  On the darker side of thinking ahead to retirement and the years of decline, there is one dread that outweighs all the others pretty much universally.  That is the dread of ever having to go to a nursing home.

The concept of the horror of a nursing home has not been helped in our modern times by stories of nursing home abuse and horrible experiences older people have in those institutions.  So the idea that we all might end up in such a place can be quite terrifying and create a lot of anxiety about ever retiring and letting someone take over your care that might put you in a nursing home.

Many of the terrors of nursing home life are the result of myth and stories and the media who love to portray nursing homes as torture chambers,   But if the fear of a nursing home gets you in the mode to prepare for retirement and start doing your research well in advance, then that is a good fear because it is mobilizing you for doing something good for you and your family.

The good news is that a lot has changed maybe even since you had to deal with nursing homes when your own parents were aging.  There are a lot of new formats for where an elderly person might go live once continuing to live alone in their house stops being an option.  It is no doubt the surge of elderly people into the system caused by the graying of the baby boomer generation that has fueled a revolution in elderly car.  Now there are all kinds of levels of care and the kinds of places you can look forward to spending your golden years in may resemble an apartment complex or resort more than a nursing home.

You can do a lot to reduce your anxiety about retirement by starting now and going to visit some of these retirement apartment complexes, assisted living centers and senior centers. You will be pleasantly surprised at how nice and comfortable the options are out there that you can look forward to taking advantage of in your retirement years.

But there is another important change in how you view retirement that looking into alternatives to nursing homes will bring about as well.   That is the area of planning to finance these kinds of retirement options.  There are many forms of retirement insurance and you may already have started paying on a policy that would provide care for you in a nursing home or a place where medical care was available in the event you had a medical decline in your golden years.

By getting a good idea what kind of facility you might prefer once it is no longer feasible or desirable for you to keep a full house going, you can anticipate preparing for that move financially as well.  You can check on your insurance and if the funding you have set aside for retirement will not help out with assisted living centers, make those changes now so that insurance can accumulate value for you.

The administrators at assisted living centers can help you prepare for your move to their facility.  They will be thrilled to meet someone thinking that far in advance about your future needs and because these folks are in the business of helping people like you and I move comfortably into retirement, they can help you know about programs, financing and other ways you can prepare so you are fully ready to go to a wonderful future.

Retirement Plans

One of the things that often keeps us from mentally crossing that bridge into retirement is the sheer volume of “stuff” that you have accumulated during a life of raising kids and just buying things over several decades of family life.  If the kids have moved out but you and your spouse are living in the home you have occupied for years, the layers and layers of accumulation can be tremendously intimidating to think about going through and deciding what to keep and what to give away.

Now there is no reason not to go ahead with plans to retire from your job and start that lifestyle as soon as your finances are able to let you do that and you are ready to step out of the working world.  But for many of us, the real transition of becoming fully retired happens when we pare down our possessions, sell the family estate and move into a quaint bungalow, retirement apartment or assisted living center to begin enjoying a life of fewer responsibilities and a lot more fun.

The first step of taking on the challenge of how to attack the mountains of stuff is to get a rough inventory for what you have and what you can get rid of.  You can start on this quest as early as you feel ready to put your retirement planning on the front burner.  Many start on it as soon as they enter the “empty nest” phase of their life and the kids are gone and you can begin to convert their rooms into usable space for you and start getting their stuff out of the house as well.

So your kids are the first line of defense or rather of offense of attacking the sheer volume of stuff you own.   Now is the time to start the inheritance process early.  There is no doubt many things in your family possessions that the kids cherish from their upbringing in your home and that you will want to pass along to them.  So let them know that over the next year or so, you are going to expect them to come along and get the stuff they want before you sell the house.

This can be a progressive process.  If the kids live far off, you can use visits for the holidays to go through closets and box and ship their precious memories and mementos from their childhood years so those things can start living at their homes and not at yours.  This is a big step toward getting rid of all the stuff.

Next you should start to think about the amount of space you will have in your new space and what you are going to need and use regularly when living in that smaller living quarters.  Be pragmatic here so you are only looking at things from a usability point of view.  On your first pass, many things will make the cut to be saved because they are either useful or nostalgic or both.

But also begin to go through the house room by room and separate things into “keep’, “give away” or “trash”.  You will find lots of stuff you can give to Good Will or to charities which gives those things a new life and you a small tax write off for next year.  But be brave about throwing away things that just have no real value any more.  Remember, if you don’t get rid of it, you are going to be living with it for another twenty years and that is what we are trying to get away from.  By giving yourself some time to get ready to move into the smaller space, this process of paring down the possessions can be rewarding and fulfilling and a good next step into your next phase of life.

Retirement Plans

Do you see planning for your retirement as your responsibility or something someone else should do for you?  That is a pretty shocking question isn’t it?  It is the kind of question that makes it sound like if your retirement funds are under the care of your employer, that you are not being a responsible person.

Of course that is not the purpose of the question.  If you have taken the step of participating in your employer’s retirement program or 401K, then you are definitely showing plenty of personal reasonability for your retirement planning.  But when you think about it, what happens to your 401K funds once they are given to your employer?  Most of us don’t know.  We know that we get statements that show that what we invest is gaining in value and that the principle is safe and for us, that is often enough.

But it is easy to trust your employer that the funds are being managed well and that it all will be there when the time comes for you to use that 401K for retirement. The truth is that your employer probably has nothing to do with how well your retirement portfolio performs once the funds are taken out of your paycheck.  In most cases, your employer hires a professional retirement planner who invests those funds to give you at least a modest return on investment.  And that service is also taking a fee from your funds which is something that is done without giving you the chance to evaluate if they deserve the money they are making.

You have some rights when it comes to your retirement funds.  So part of your rights is to see that people that work for you, such as a retirement planner, know what they are doing and are held accountable on a regular basis for the outcome of their financial management of your retirement funds.  At the employer level, you probably won’t fire the financial planner.  But you can demand to meet with them and communicate your financial plans.  You can get a name of is responsible for what happens with your money.  And if you find out who they really are, you will have more success in getting them to be accountable to you.

But you may also find yourself engaging a financial planner for funds that fall outside of employer 401K plans.  For example if you leave a job, you can roll your 401K into a private IRA account and engage a financial planner to invest that money so it continues to grow steadily until you need it at the time of retirement.

Develop some standards by which any retirement planner you engage must be judged.  A good way to pick a good financial planner is to use people you know and trust to give you guidance.  If family members or close associates already are using a good financial planner, get that person’s name and phone number and schedule an interview.  You can also find out if your bank, insurance company or credit union provides this service.  They already work for you the good reputation of these trusted financial services people can pay off when you use them for financial planning for retirement.

Put some time and effort into researching if the retirement planner you are considering is capable and has a good reputation.  They should have no trouble giving you references and documenting their success to show you that they can be trusted to take good care of your retirement funds. And if you do some up front due diligence, in the end you will be able to entrust this important resource to them knowing they are good stewards of the money that is going to give you a happy and peaceful retirement life.

Employees Retirement

You know one thing about an employee that takes interest in your company retirement program.  That is that he or she is taking a proactive interest in staying with the company long enough to retire.  This is not a given for every employee.  It used to be in the generation that was in the workplace of the nineteen fifties and sixties that staying with a company for thirty or more years and retiring with full benefits was the norm.  That is not the norm any more.

We cannot just blame the job hopping ways of employees for the change of culture away from going for the gold watch and retiring in a company.  From the corporate side, so many companies have eliminated retirement packages entirely that there is a strong belief of “do it yourself” retirement in the working population.

A company offers retirement benefits for employees for one purpose.  That is to aid with retention.  When you have a pool of talented, well trained and energetic employees, that is a corporate resource.  So if you can keep those employees all the way through toc, that is a real value to any corporate entity.

So if your company does offer these benefits to your employees, its important that you take advantage of them in more ways then just sponsoring them.  A retirement package for aging employees sends a message to the employees that the company cares about them and about their families.  And this may be true in  your company that you have a corporate culture of being involved with your employees at a personal level and maintaining that “we are family” feeling for people who work for you.  If that is the case, it makes sense that you would extend that feeling to care for the retirement planning of any employee that you have that shows signs of being a long term value to the company.

You should highlight the company retirement package as early as the interview with your prospective employees.  Remember that an interview is about more than you looking for qualified people.  It is also about qualify people interviewing you.  And that is exactly where the value of a strong retirement package is of greatest value.  If a job hunter who is looking for a place to work that they can retire at knows that you have a good plan to help them with their retirement planning, that will draw the brightest and best to your HR department.

Your HR department should not let the retirement issues of employees lie idle for very long at all.  The more you help your employees plan for and participate in a retirement program, the happier they will be and the more engaged in their work they will be.  Hold regular retirement planning meetings to have employees review their level of participation in the program.  This is where you will put in front of the employees your most empathetic HR employees to show genuine interest in the employee’s retirement issues.

Above all be sure to show particular concern and caring for aging employees.  And when an employee finally crosses over into retirement, throw a party and go out of your way not only for the company to help the employee transition to retirement but to demonstrate to all employees that the company lives up to its claims to be faithful to employees all the way into retirement.  In an economy where so many companies throw people away, your employees will notice that this is not that kind of company.   And your faithfulness to retiring employees will result in a rich crop of faithfulness from ongoing employees who stand behind you because you stand behind them from the day they start work in the company all the way through to retirement.

Retirement Savings

Planning for retirement is a project that you do for virtually your entire adult life.  The earlier you start putting money back for retirement, the better your golden years will be.  And if you have been faithful in participating in your employers 401K plan, you can start to some serious money begin to build up as you realize the vesting of the employer matching funds and you continue to make your contributions month after month.  It can get pretty exciting when you get those statements and you see your retirement fund really start to take shape.

But your career in business can take a lot of twists and turns along the way.  And sometimes you change jobs for a lot of reasons.  But the question comes up then, “What happens to my 401K money if I leave before retirement?”  The good news is that you don’t lose it.  The 401K program is federally monitored and once those funds go in there, they are yours if you are vested in them.

But if you move jobs several times during your career which is very common in the modern business marketplace, if you don’t take some action, you can end up with retirement money scattered over all of your last jobs which is messy and makes for a nightmare to keep track of.  It would be better if you can make your retirement money walk with you so you know where it is and you can keep all of your retirement planning funds in one place so you can take advantage of them all at once when you are ready to retire.

When you first leave your employer to go to another company you are given a couple choices of what to do with your retirement funds.  One option is to leave them behind to catch up with them decades later when you are ready to retire.  In addition to wanting to keep this important asset with you as you travel from job to job, you have no idea if that employer will even be in business when you are ready to retire.  You don’t need that kind of uncertainty when it comes to your retirement money.

Another option that is offered to you is to cash out your 401k and withdraw the results. While this may be attractive if you are between jobs, it’s really a bad idea.  For one thing, the laws governing the 401k call for you to pay a large penalty if you withdraw them before retirement age.  Not only that, once you take that money out of your retirement funds, it’s gone and your retirement planning will suffer a serious set back.

A very good option that is available to you is to roll your current 401K over to your new employer.  Now if you left the last job without a new employer either through termination or leaving to start your own business, that may not be an option.  If you are looking for a new job and think you will have one in the next year or so, you can leave your 401k money where it is and transfer it later though.  In that way, your 401k continues to accumulate as one fund, not many.

But a third option is to roll the 401k money into a tax sheltered privately owned retirement fund.  You own this account and you usually have an investment management company helping you with the investment and protection of that money until it is time for you to retire.  This is an outstanding option because that investment company works for you so you call the shots about your retirement money.  And if you use this option, you can still start with a new 401k fund at your next employer knowing you have a place to put the funds in the event of another change of jobs.  And that puts you in the driver’s seat which is a very good feeling when it comes to retirement planning.

Retirement Plans

There is no magic to getting financially ready for retirement. We all wish we could come up with some amazing way to put money back for retirement such as the famous genie in the Aladdin’s lamp.  But if that genie came up and we asked him for a way to get ready financially for retirement, his answer would be short and to the point – “Start Saving!”.

But for millions of people in the working world, it’s hard to save.  You need every dime you have to pay the bills, get the kids through their dentist bills and clothes for school and have a little left over at the end of the month for matinee movie with a small popcorn.  So how can we ever find a way to put money back for retirement under these circumstances?

The key to savings is to take advantage of changes in your income to start a savings program.  For example when you start a new job with a new salary.  Before you get used to that paycheck, set up a direct deposit of a small amount of money into a tax deferred financial fund such as an IRA.  The money goes straight in there and you never see it in your paycheck.  The funny thing about how we all think is that you live up to the level of money you are getting.  So if you never see that $50 or $100 in your paycheck, you will adjust your lifestyle accordingly and suddenly you have a program in place to save for retirement.

You can apply the same principle to payments you may have automatically deducted from your account.  If you are paying a car payment or you have a health club due taken directly out of your account, when those things come to an end, think about whether you want to see those direct withdrawals stop entirely.  If you are not used to having that money in your budget, you may be able to have your bank direct deposit some or all of that amount directly into your retirement account.

Just think how great it would be if you could put a car payment a month into retirement savings. You would see a very significant amount of money build up in that account in no time.   And when you start seeing the financial reports start coming in from your bank or whoever is managing your retirement funds and you see it really start to build up, the vision of a secure retirement future for you and your spouse will begin to become a reality for you.

Another fun way to build up that retirement account is to make a project of it.  You and your spouse could take on the challenge to do some form of contract or temporary work every month or so and put all of that money into your retirement fund.  Maybe he can go out with friends and cut wood and sell it around town for firewood.  Maybe she could use her artistic skills to make original art works and sell them at the local crafts fair or flea market.

There are lots of ways each of you can find odd jobs or part time employment just to build up that fund.  You can work department stores at Christmas time or sign on with Manpower and go on one day assignments every once in a while.  You can even find ways to make money on the internet if you have technical skills.  Tap your talents and find that work and the amazing thing is that it will be fun because this is not working extra because you are in financial trouble.  It is building for a secure retirement together and making it a challenge and a game is a way of putting your creativity into the process.