Tag Archives: Planning Retirement

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.

Make the Most of Your Retirement Years…Even When Facing Challenges

Make the Most of Your Retirement Years…Even When Facing Challenges

Most Americans begin planning for retirement many years in advance.  We look forward to those hard-earned years of relaxation and recreation, and we plan accordingly.  However, unexpected events can occur that may cause financial stress as well as mental and emotional hardship.

When these unplanned events, such as health and medical problems, divorce, or death of a spouse or other family member occur, your previous plans may no longer apply to your current situation.  Hardship can force you to re-think and re-plan, and perhaps even give up, some of your pleasant retirement dreams.

So as you think about your retirement, be aware that even the most careful planning does not always allow for the unexpected challenges life can send your way.  Plan accordingly.  Allow room for some flexibility so that, if necessary, you can adapt to the issues or crises that may occur later in life.  Let us examine your plan more closely.

A good place to start is to plan for a potential disability. Just considering this possibility may evoke fear, but don’t let it.  Instead, recognize that having a disability does not necessarily mean losing your independence, or even changing the life you have worked hard to have. However, it may mean that you will need additional resources that cost money.  Many practical devices and other aids are available to make life easier for someone with special needs to maintain their daily routine.  Make sure you consider this need when planning retirement for both you and your spouse.  Think about the social, vocational, and recreational changes that are likely to occur with a disability.  For example, you may need assistance with everyday tasks such as dressing and bathing.  Make sure you have the insurance coverage and funds available to cover yourself in the event a disability does occur.

Have you considered the possibility that you or your spouse may become a caregiver for someone else during your retirement years?  What if an older relative or other family member becomes ill?  If this occurs, that family member will undoubtedly need medical and possibly financial help.  While you cannot change someone’s medical condition, you can work to understand their condition, and, in turn, help him or her to better cope with it.  As a caregiver, you may be surprised by how quickly you feel overwhelmed and overloaded. This can be remedied by organizing your time and planning doctor’s visits, grocery store trips, etc., accordingly. You will need to plan for the daily needs of your relative including bill payment, and maintenance of a clean and safe home environment.  Just as important, learn to delegate to others you trust in your circle of family and friends. Seek out resources within your community, and be sure to set aside time for yourself.  After all, you cannot care for someone else if your own needs are neglected.

Another event that can dramatically change your retirement years is the onset of a chronic illness. Your finances will likely become strained if you or your spouse becomes mentally, emotionally, or physically ill.  The first step should always be to attain proper medical care. Work closely with your physician to understand your illness and to map out a treatment plan.  Do all that you can to understand the illness and be patient.  A chronic illness can change every aspect of your life, and learning to adjust, and to hopefully thrive, can be very challenging.  Look into the resources that are available – medical, support groups, community-based, even church related help.  You may gain useful information by reading books and magazine articles about the illness.  Some of this literature will explain how others have handled your situation and may be an excellent source for helping you to better cope.

Sadly, another possibility to plan for, is that your spouse may die before you.  This scenario can be devastating, especially if it happens just as the two of you are retiring and looking forward to spending your golden years together. If this unhappy event occurs, you may want to explore other ways to spend your time.  For instance, you may want to join a support group, learn a new hobby, take a class, or become a community volunteer. Invest additional time in other relationships, such as those with friends, children, and grandchildren.

Unfortunately, some marriages do not last into retirement.  You could find yourself single and retired at the same time.  If this happens, you may need to return to work either part-time or full-time to offset the expenses associated with a divorce and life as a single person again. You may also have to face finding a new home and consequently developing new friends and support systems. Again, be patient, and realize this is not the end of the world.  Chances are, if you are of retirement age, you know change is inevitable.  By this stage of life, you are most likely accustomed to making changes and adapting. In retirement, apply many of the same survive-and-thrive techniques you used to deal with past changes in your life. Take steps to make the best of your golden years, regardless of your circumstances.

Re-Evaluate Retirement Goals Based on Longer Life Expectancy

Re-Evaluate Retirement Goals Based on Longer Life Expectancy

There are many unknowns when planning for your retirement, especially regarding how long you can expect to live.  Most financial planners base calculations on a life expectancy of 90 to 95 years, but what is your real life expectancy?  What impact will a longer life have on your retirement?

Federal government statistics reveal that the life expectancy of a male born today is 73 years and a female is 79 years.  However, these numbers are somewhat misleading, because if you make it to retirement age, then you can expect to live longer than the average.  If you are a man who turned 65 in 1995, you could expect to live an additional 15.6 years – to age 81.  A woman who turned 65 at the same time could expect to live an additional 18.9 years, to almost 84 years.  Every time we reach a new milestone, our overall life expectancy increases.  The increases in longevity prevailed throughout the 20th century, and there is every indication that the upward trend in average lifespan will continue.

Another twist in the life expectancy calculation is that half of those who reach a milestone age will live beyond that age.  As the government continues to collect and analyze data, we see that the 65-year-old man in 1995 has an even greater chance of living beyond age 81.  In fact, living into your 90’s is no longer rare.  When looking carefully at the numbers, we see that almost one-third of men and almost one-half of women who reach age 65 will reach age 85!

How do these calculations fit in with your retirement planning?  They assist you in avoiding a worst-case retirement scenario – outliving your savings.  During your golden years, you will be living from money in your 401(k) and IRAs, and maybe from a pension.  If you are one of the lucky 65 year-olds that live to be 85, but you only planned to live to age 73, you may be struggling to make ends meet.   Using this reasoning, it is vital that your retirement planning extend beyond your expectations, and then some.

Since people are living longer, retirements are lasting longer, which may require some adjustments.   For instance, you should be cautious with spending in your early years of retirement so that your resources last longer.  Another idea is to be more aggressive with investing, or even head back into the workforce with a part-time job.  You may also wish to consider purchasing long-term care insurance to cover the high cost of late-life health problems.  No matter what decisions you make, be sure to do so in such a way that you can enjoy every minute of your retirement.

Long-Term Care Planning: A Pre-Retirement Decision?

Long-Term Care Planning: A Pre-Retirement Decision?

In the past, new and soon-to-be retirees generally assumed that they could put off long-term care planning until their later years. However, a new study shows that people who purchase long-term care insurance (LTCI) before retirement may stand to benefit greatly.

The study, conducted by the American Association for Long-Term Care Insurance (AALTCI), reveals significant advantages to starting the long-term care planning process in your 50’s, or even earlier. The study was based on information collected from more than 250,000 consumers who purchased LTCI in 2007.

The AALTCI examined data from 10 leading insurers to determine the percentage of applicants who qualified for preferred health discounts on LTCI. The Association also looked at the percentage of applicants who did not qualify for insurance because of a pre-existing condition.

The Eye-Opening Statistics

Here are a few of the interesting statistics released from this enlightening study:

·   On average, 22.9% of applicants between the ages of 60 and 69 were declined coverage because of a pre-existing condition

·   42.2% of applicants between 70 and 79 were declined

·   69.8% of applicants over 80 were declined

·   On average, just 13.9% of applicants aged 50 to 59 were declined

·   51.5% of people between the ages of 50 and 59 who applied and were accepted for coverage qualified for preferred health discounts

·   66.8% of applicants between the ages of 40 and 49 qualified for the discount

These numbers clearly suggest that consumers may be better off if they apply for LTCI before retirement, when they are less likely to have a pre-existing medical condition.

Not only are younger applicants more likely to be accepted for coverage, but they also stand a better chance of receiving a valuable preferred health discount. These discounts can reduce the cost of long-term care insurance by 10% to 20% annually, which can amount to savings of hundreds of dollars a year for a couple. Additionally, these discounts last a lifetime. Once an applicant qualifies for a preferred health discount, the insurer cannot retract it should the applicant’s health change in the future.

Losing At the Waiting Game

Still, the vast majority of consumers wait until after retirement to apply for LTCI. According to the AALTCI, approximately 400,000 people obtained LTCI coverage in 2007, and 84% of them purchased a policy before the age of 65. However, based on this new study, consumers may want to consider purchasing a policy even sooner.

“Many people still wait too long to start the planning process only to discover they can’t get coverage no matter how much they are willing to pay,” Jesse Slome, Executive Director of AALTCI, said in an association press release. “Planning for long-term care is similar to retirement planning. There are significant advantages and reasons to start early. Your health when you apply is probably the most important.”

More Preferred Health Discounts All Around

The new AALTCI study also shows that, in general, more people qualified for preferred health discounts in 2007 as compared to 2005. This may be a sign that our nation’s population is a little healthier than it was just two years ago.

However, most LTCI applicants who received preferred health discounts were younger in age, according to the study. For example, 66.8% of applicants between 40 and 49 received discounts in 2007 as compared to 53.7% in 2005—a 13.1% increase.

Better Shop Around

However, the AALTCI points out that each insurer follows a different set of standards when it comes to deciding who qualifies for discounts and which applicants will be accepted or declined for coverage. Additionally, discounts and insurance rates vary greatly depending on your age, marital status and health. Therefore, if you’re considering buying LTCI, you should shop around before settling on an insurer.

“It pays to speak with a knowledgeable long-term care insurance professional who can offer coverage from more than one insurer,” Slome said in the AALTCI press release. “The difference in cost can be as much as 30 percent or more annually and since it rarely is advantageous to change policies, it pays to get the best coverage for the best price from the onset.”

Retirement Planning: The Advantages of Fixed Annuities

Retirement Planning: The Advantages of Fixed Annuities

A fixed annuity is a contractual obligation rendered by an insurance company with a pledge to disburse income to a recipient based on a fixed return on investment. Therefore, they are ways for the holders of such instruments to be guaranteed future dividends or a source of income. That’s why, when selecting from the variety of annuities available, annuities are a logical choice to make for retirement planning.

Fixed annuities have a rate of return or ROI that is equal to the rate of return of the market. Therefore, they offer a lower risk to the consumer and, as a result, more financial security. Comparatively, variable annuities incur more risk for the consumer. Variable annuities typically glean a higher return rate although the holder of these types of instruments is also more vulnerable financially. Therefore a greater risk is supplied. Subject to market rates, you can possibly lose a portion of what you invest.

On the other hand, fixed annuities offer the convenience and comfort associated with a lower-risk instrument. The holder of the annuity simply opts for a lower rate of return. You might say a fixed annuity can be likened to a CD, except you realize a far greater return on your investment because your money is committed for a far longer period of time.

Investing in fixed annuities is financially sound from a tax standpoint as all deposited funds in such annuities are tax-deferred until which time you decide to receive income from the annuity. At that time, taxes are taken out only on the income growth, thereby making these types of annuities ideal for retirement planning.

Because of the tax advantage, these products are used primarily for long-term planning purposes. In other words, income cannot be collected from the annuity prematurely, which means before the age of 59 ½, as the holder can be assessed taxes, fees, and penalties. Also, surrender charges are imposed if you choose to cash in your annuity before the specified time. The charges can be excessive so one should consider them for long-term investment purposes only.

If you are truly serious about planning for retirement and are someone who needs a financial product that provides a minimal amount of risk, a fixed annuity may well be worth your consideration.

Take time out to contemplate all the pros and cons of owning such an instrument. For retirement planning purposes though, fixed annuities are ideal because, as previously stated, they offer a tax advantage for the consumer.

Additionally, the opportunity to invest in other enterprises is increased because of the annuity’s tax benefits. You can become prosperous with your short-term investments while investing in a solid financial product in order to secure your future income needs.

In summation, fixed annuities provide the kind of financial security you need now to realize monetary growth in other areas, and the assurance that you will be provided an adequate future return on your investment.