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Key Elements You Need To Know About Financial Planning Before And After Retirement

Key Elements You Need To Know About Financial Planning Before And After Retirement

Senior finances is a hot topic. Thanks to advances in medicine and better living conditions of modern society, people are living longer. Of course, the downside to living longer is that more money is needed. The conundrum that living longer causes in relation to financial freedom and retirement planning has been addressed by innumerable experts. While some are professional experts, others are scam artists trying to build their nest egg off the back of pre-retirees and retirees.

There are some key elements about financial planning before and after retirement that are recommended by most professional experts:

Eliminate Debt

Keep in mind that if you aren’t planning on working after you’ve retired from your primary career, then your income will be fixed. There won’t be anymore overtime, bonuses, holiday pay, commissions, or raises to supplement your income. Make sure that you’ve planned well and eliminated major sources of debt prior to retirement. Your home and credit card debt should be completely paid-off before retiring. In the event you still have a considerable mortgage remaining, you might consider downsizing or taking out a mortgage with a longer term to lessen the payments. Don’t charge more than you can entirely payoff each month if you continue to use credit cards.

Have A Realistic Budget

There’s a serious problem if you’ve retired and find yourself going over budget each month or drawing on principle. There’s also a problem if you’re a pre-retiree whose expected fixed income isn’t congruent with expected expenses. You need to be realistic and decide how to get your spending under control so that you can live within your fixed income.

Save, Save, and Save

Most experts recommend saving at every opportunity. This may mean that you need to change your lifestyle and make sacrifices to be financially secure during your retirement years. Cutbacks can be made in ways that you don’t feel like a huge sacrifice is being made. For example, if you eat out four times a month, then try only eating out twice a month. Those already retired should also look at their spending habits and budget to see if any money can be put into savings.

Keep Your Job As Long As Possible

Remember, each extra year you work increases your Social Security benefit and is that much longer that you get to take advantage of health insurance, life insurance, and other perks that your employer might offer. Working longer also gives you more opportunity to save and decreases the number of years your retirement income must cover. If already retired, you might consider a part-time job.

Plan Ahead for Retirement With a Winning Game Plan

Plan Ahead for Retirement With a Winning Game Plan

If you’re like most people, you’re probably imagining days of leisure; visiting loved ones; traveling; and lots of time doing all you’ve dreamed of, but never had time to fit in, as you contemplate finally making the transition into your retirement years. You want to plan ahead for retirement, but just be careful not to get ahead of yourself and get tripped up by your own feet. Before you hit that time clock for the last time and say your goodbyes to the workweek, you’ll need to make sure that you have a game plan for the future.

Of course, you’ve got to know how the bills are going to get paid before you can say goodbye to your paycheck. However, many retirees forget about the potential psychological and emotional challenges they could face when they’ve retired and are suddenly faced with alternatively filling their days. Some retirees may find the extra free time isn’t as happy as they imagined, but instead incites feelings of boredom, uselessness, depression, or isolation. Like any other major change that life holds, a smooth retirement transition clearly takes a lot of psychological, emotional, and financial preparation. Here are some steps that you can take to help make your transition into retirement as smooth as possible:

* Make sure your retirement budget is current – you might have made your retirement financial plans long ago, but you need to do one final budget check to ensure that you actually have enough funds to last you through your retirement years. Determine the amount of money you’ll need each month to maintain your current lifestyle over the next 25 to 35 years. If what you have isn’t congruent with what you expect you’ll need, then your retirement strategy might need an amendment. Such a scenario doesn’t mean all is lost. You could postpone a full retirement and only partially cut your work hours, add or change to a part-time job to continue building your nest egg, or consider an entirely new and exciting second career.

* Figure in health care expenses – you’ll need to have a sufficient amount of funds set aside to pay for health insurance, even if you have a retirement health plan available through your employer. Since the cost can be increased and availability terminated for these retirement health benefits at any time, you’ll need to have all your bases covered and be capable of paying for an alternative, possibly more expensive, health insurance policy.

* Stick around a little longer – it’s tempting to run for the hills immediately after your retirement announcement, but both you and your employer can benefit if you stay around long enough for your employer to hire and train a replacement for your position. Your employer will be very appreciative that you didn’t leave them with an employment void, and you will be able to make a more gradual and easier transition into retirement.

* Get a jump start on government aid – eligible retirees can wait 90 days or more for government aid, such as Medicare and Social Security benefits, to take effect. If you’re at least 65-years-old and are expecting to receive any government benefit, then make sure that you sign up for the benefits with the appropriate agencies several months before you actually retire.

* Plan for the emotional and psychological pitfalls of retirement – you can help yourself avoid feeling bored or isolated by planning how you’ll stay active and fully enjoy the rewards of retirement. Make a list of the feasible hobbies; recreational activities; classes; groups, clubs, or committees; volunteer work; and other activities that you’d like to pursue. Remember to pick meaningful activities that make you feel happy and help give your life a sense of purpose, not just keep you busy. You might also ask your employer if they offer an alumni group to help you stay in contact with your former coworkers.

Tips for Saving Money in Retirement

Tips for Saving Money in Retirement

In youth, retirement is often idealized as a return to carefree days of leisure. However, as it actually approaches, this ideal fades to reality.

Retirement is a phase of life where there’s a limited amount of money and limited ability in determining how long it must last. This is a mathematical problem that requires observant spending in order not to outlive the money, but still have enough for those things that are most important.

Plan Ahead

Financial advisors highly recommend for retirees and those about to retire to have a current snapshot of what their spending looks like. Advisors also warn that spending often rises at the onset of retirement as individuals begin to do all the things they’ve deferred while working. As these desired activities get accomplished, leisure spending often subsides. However, other expenses, health care for example, may increase. None the less, it’s vital to realize this increased spending stage of retirement and budget accordingly so that your nest egg isn’t overdrawn in the process.

Facing Realty Reality

Often one of the most emotional decisions is whether or not a housing downsize is needed. Many retirees may find themselves realizing that they undertook an unsustainable mortgage or spent too much on rental properties. These over-extensions can create a negative cash flow. While there may be emotional attachments, there needs to be an open and honest conversation about whether existing housing is sustainable or desirable in the long-run. One important point to remember is that selling isn’t cost free; there are any number of costs involved, including real estate commissions. The average closing costs were $3,741 on a 200,000 home in 2010. There may also be potentially higher property taxes from moving.

Expense Accounting

In retirement especially, the golden rule on spending should be to spend what you’ve planned and plan what you’ve spent. According to financial planners, one of the most significant retirement mistakes is not having a budget where you know fixed costs and discretionary costs. Discretionary spending is an area where it’s fairly easy to cut back on incurred costs during retirement, but you need to know what is discretionary and how much it totals. When tracking this type of spending, many find that dinning out is an area where a significant portion of money can be saved without feeling like a significant sacrifice has been made.

Stay Financially Solvent

It’s natural for parents and grandparents to want to financially assist their family, but this should never be done if it jeopardizes financial solvency. After looking at cash and expenses that are being covered for family, such as private school tuition and annual holiday gifting, and how those expenses fit into the above budget, it might be necessary to make significant deductions to avoid the risk of running out of money.

Decide What’s Most Important

During and before retirement, personal spending goals need periodic reevaluation. Start with core goals – what’s most important to you. Then, look at what the financial reality is to accomplish those goals. When the two aren’t congruent, it may be necessary to look at discretionary spending or housing. This is when the retiree will need to decide what’s most important. For example, some may be willing to give up portions of discretionary spending to maintain housing in close proximity to their family, while others may feel that helping a grandchild through college is worth a housing change. Either way, a game plan must be in place to simultaneously accomplish what’s most important and maintain financial solvency.

Bargain Driving

Outside of housing and health care, vehicles are usually one of the retirees greatest expenses. Aside from any loan amount on the vehicle, there’s the ongoing cost of operating, maintenance and repair, and insurance. Cutting back to just one car, downsizing, and avoiding wear and tear can save money.

Don’t Let Long-Term Care Needs Take You By Surprise

Don’t Let Long-Term Care Needs Take You By Surprise

One of the most pressing concerns for seniors is ensuring they have adequate health insurance, especially since the government is providing less and less and the cost is going up and up. Long-term care is one area that is taking many seniors by surprise.

There has been a longstanding gap between the long-term care needs of seniors and what’s really covered by Medicaid and Medicare. Of course, the latest restrictions that limit the availability of nursing home coverage through Medicare doesn’t help. The bottom line is that seniors simply can’t afford to ignore this issue and let it take them by surprise.

Of course, finances are going to greatly impact the approach to long-term care.

Sadly, those with a minimal income and assets have few affordable options available to them. They will usually quickly go through their limited funds and qualify for Medicaid rather easily.

On the other hand, those with incomes over $75,000 a year and that have over $500,000 worth of assets are facing an endless cycle of out of pocket expenses. Even those that have planned well for the future can watch as their nest egg drastically depreciates from years of long-term care expenses. A nursing home bed alone can cost thousands of dollars each month. Purchasing long-term care insurance to pay for these costs is a prudent choice for this group.

A third group is the middle class. This group is comprised of those with moderate incomes of $30,000 to $50,000 and assets not exceeding a few hundred thousand dollars. This group often isn’t well off enough to afford long-term care insurance, but is too well off to quickly qualify for Medicaid. Long-term care needs of one unhealthy spouse can eat away at savings to the point that a healthy spouse is left impoverished for the remainder of his/her life.

If the funds simply aren’t there to buy long-term care insurance, there are some other options. For example, an existing life insurance policy may be sold through a life settlement, a reverse mortgage, or simply downgrading homes can all be additional sources of money. None of these may be pleasant thoughts, but they are methods that can free up cash for long-term care needs. However, it may be a smart decision to use these new funds to purchase long-term care insurance instead of paying long-term care costs directly out of pocket.

The benefits of assisted living facilities, nursing home care, and skilled and custodial home healthcare are invaluable. And there are many issues, from emotional to financial, that influence how long-term care needs are addressed. More often than not, when a spouse, parent, or loved one is no longer able to care for themselves, the healthy spouse, child, or relative isn’t so quick to spend savings on caregivers and skilled nursing care. Instead, the healthy person risks their own health to care for their incapacitated loved one. This can create a serious physical or emotional burden that words cannot describe.

When early steps are taken to ensure appropriate long-term care is available, life can be much easier for the senior and their family. With appropriate long-term care planning, the spouse, child, and so forth may focus their energy on providing attention and love instead of completely altering their life to become a primary caregiver.

Predicting what future medical needs will be is impossible in most cases. Some seniors may never reach the point that they need long-term care needs. However, statistics show that almost half of all senior citizens will eventually need nursing home care. Even those that don’t require nursing home care will usually still require some type of skilled, semi-skilled, or unskilled assistance. So, it’s vital to protect your health, as well as the health of your family, by planning ahead for these times of uncertainty.

Long-Term Care Knows No Financial Distinction

Long-Term Care Knows No Financial Distinction

Ensuring adequate health care is one of the top concerns for seniors. With costs skyrocketing and government purse strings tightening, planning for long-term care has never been more important. Don’t let the costs of long-term care take you by surprise.

In the area of long-term care, there is a huge gap between what seniors need and what Medicare and Medicaid cover. Combine that with new restrictions limiting the availability of Medicaid nursing home coverage, and it’s clear to see that seniors and those nearing retirement simply can’t afford to ignore this important issue.

While your approach to long-term care may vary depending on your economic situation, the benefits of custodial and skilled nursing in-home care, assisted living facilities and nursing home care know no financial distinction. Unfortunately, for those with low incomes and little assets there are few choices. Most likely, should the need for long-term care arise, you’ll quickly spend down your assets and easily qualify for Medicaid.

For those with an annual incomes exceeding $75,000 and with assets of $500,000 or more, you could simply pay for it out of pocket. But with nursing homes costing thousands of dollars a month and some seniors needing years of care, even a well-lined nest egg could experience a drastic drop in value. A more prudent approach would be to purchase long-term care insurance and use that to pay for any long-term care you or your spouse may need.

The real quandary is for those of moderate means, with incomes between $30,000 and $50,000 and assets of a few hundred thousand dollars or less. Long-term care needs could gut your life savings and impoverish the healthy spouse. But long-term care insurance can be very expensive and hard for these seniors to afford.

If purchasing long-term care insurance isn’t an option, there are still some strategies you can use to cover yourself. Selling your life insurance policy, called a life settlement, is one option. Reverse mortgages can also free up needed cash. Selling your home, however unpleasant that may be, can also provided needed funds. But in all of these strategies it is better to leverage those proceeds by using them to buy long-term care insurance, if possible.

For now, let’s consider some issues that will greatly influence how you address your long-term care needs. The reality is that when someone is no longer able to care for themselves, usually the healthy spouse (if there is one) will take over. Regardless of wealth, few people are quick to dip into their savings to hire nurses or other caregivers to help out.

Often, the result is that the healthy spouse sacrifices their own health and well-being to care for the sick spouse. The caregiver becomes exhausted and emotionally spent trying to meet the overwhelming needs of their spouse.  Sometimes adult children can step in to help shoulder the burden. You may know some families who have lived this for years, with sons and daughters spoon feeding their parents and changing their diapers. The emotional toll on the family in these situations is indescribable.

Life can be so much easier when seniors take active steps to provide for this type of care properly. The family can spend their emotional and physical strength on cherishing their loved one, without disrupting their own lives in the process.

No one can predict what their needs will be as life draws to a close, but the fact remains that nearly half of all seniors will need nursing home care and those who don’t, are likely to require at least some outside help.  Be smart and plan now for how you’re going to provide for your long-term care. Your health, and the health of your loved ones, depends on it.

Fill Up Your Buckets for a Stream of Retirement Income

Fill Up Your Buckets for a Stream of Retirement Income

If you’ve heard it once, you’ve heard it a million times: when it comes to retirement planning, diversification is key. Everyone knows how important it is to build up a healthy nest egg—but if you put all your eggs in one basket, you are putting your financial well-being at risk.

Look at it this way: if you throw all of your funds in one investment or market sector, what happens if that sector takes a nosedive? Your retirement savings will go down the tubes right along with it. However, if you spread your investment funds across a variety of different assets, you will greatly decrease your risk.

So, how can you possibly protect yourself from financial devastation and still save up plenty of funds for a comfortable, happy retirement? Simple. It’s time to fill up your buckets!

The art of bucket planning

As Americans are living increasingly longer lives, one of the greatest risks today’s retirees face is the possibility of outliving their income. That’s why financial experts recommend that retirees adopt what’s called “bucket planning.”

Bucket planning is the act of spreading money across various pools income to ensure you have a lifetime stream of income. This strategy is growing increasingly popular in the retirement planning field. As a matter of fact, approximately 52 percent of financial advisors recommend the bucket planning method to their clients, according to Gallant Distribution Consulting.

Collect your buckets

There are a few different bucket planning methods. Some financial advisors recommend three buckets while others say you should fill up four. However, the most basic bucket planning strategy includes the following three pails:

Bucket #1: This bucket holds into low-risk investments, such as short-term Treasury bonds. This pool provides a stream income for the first five to seven years of your retirement.

Bucket #2: This pail should be filled with indexed annuities, which offer guaranteed income with an upside potential if the markets do well. This bucket will provide income for years 8 through 15 of your retirement.

Bucket #3: This is the bucket for long-term investments that will provide a guaranteed stream of income in your later years.

Another version of bucket planning includes investing in three or four different fixed or fixed indexed annuities, each which has a unique set of terms and benefits.

In either strategy, each bucket represents a different stage in your retirement. The primary objective of your first two or three buckets is to create an annual income stream during your first 15 years of retirement. When those 15 years are up, the last bucket still holds plenty of guaranteed annual income that will last throughout your lifetime. Because you have a bucket of income set up for each retirement phase, your cash flow will never run dry.

An endless stream of income

Bucket planning has skyrocketed in popularity because it can create an endless stream of income that you won’t outlive. If you set up your buckets properly, you won’t lose money, you’ll always be accumulating money and you’ll always have a guaranteed stream of income. That means you’ll live a comfortable and financially stable retirement without having to worry about outliving your assets.

In other words, if you fill up your buckets, you won’t run out of money before you—well—kick the bucket.

Liquidated earnings are subject to ordinary income tax, may be subject to surrender charges and, if taken prior to age 59 1⁄2, may be subject to a 10% federal income tax penalty.

Guarantees and payment of lifetime income are contingent on the claims paying ability of the issuing insurance company.