Investing in Bonds
When it comes to planning your financial retirement many people focus on the different types of accounts that you can use in which to defer payments or avoid taxes for a little while but very few people discuss in depth the specific things in which you can invest those funds that you have so carefully squirreled away for the important day that is to come in the dark dank future that seems as though it will never arrive.
Bonds are not your typical high risk-high yield investment but they are very likely to earn a return for you. If you are not in dire straights for retirement funds this is a slow and steady way to build a decent retirement for yourself over time. If you are in the final hour this is an investment strategy that might be more than slightly too timid for your specific needs. There are other more investment strategies that will be discussed elsewhere.
There are essentially three different types of bonds: corporate, municipal, and government.
Have you Properly Planned your Retirement?
Gone are the days of the past when people went from years of labor only to go home and live a rather stale and stagnate lifestyle until reaching death. Today’s retirees are more active than ever. Unfortunately, those activities take money and unless you’re planning to sit at home and wait for death you should be making plans to take care of all those things you wish you had done earlier in life once you retire.
While you are planning for your financial retirement you should also take the time to make plans for what you will do once you retire. Do you need to join a travel club now in order to have an established membership when the time comes to actually enjoy the benefits of belonging? How about that book of the month club? Many of these clubs are great to join while you have the extra ‘disposable’ income that goes along with working and having a career. You can take the time now to build up your library. Even if you read the books now, chances are that by the time you retire you’ll enjoy the ability to read them again.
What is a 401(k)?
When searching and sifting through copious amounts of confusing and conflicting information concerning financial retirement savings and plans it is quite likely that you have come across the term 401(k). You may have wondered if that was the newest robot in the Star Wars saga but the truth of the matter is that it is a type of retirement savings plans that is designed so that employees and employers alike can contribute to a fund that is set aside for your future retirement.
Many people invest pretax earnings into their 401(k) funds, which they then have the option to invest in mutual funds of many options. You will find these mutual funds in a wide array of choices from money market accounts to very aggressive and risky stock portfolios. If you work for one of the many companies across the country that offers the option of a 401(k) plan you would be literally robbing your future self not to take advantage of this offering.
There are 3 general types of contributions to 401(k) plans: matching contributions, elective contributions, and non-elective contributions.
Retirement Planning for where you Will Live
There are many things that people plan for when planning their retirement. They plan for the travel they wish to do, to have money for gifts for the grandchildren they hope to have, and all kinds of wise and practical thing. In the process, however, many people neglect to plan for where they wish to live upon retirement. We are seeing a growing trend of retirees moving to certain communities. This is all well and good. It’s nice to be around people of similar ages and interests and live in communities that cater to those interests. However, one thing is often overlooked during the process. The prices in these communities, and the average cost of living are quite likely to be different than the cost of living where you are. This is true unless you plan to retire where you live.
The fact is that there is a growing trend among retirees to migrate to certain population centers. The entire coastal region of Florida would almost qualify though not all communities in this area are equal when it comes to being retiree friendly. The problem is that most people who retire live on limited budgets and can’t afford the high dollar real estate that is part and parcel for these areas. One solution to that is to decide where you’d like to retire and buy real estate in that area early.
When should you Retire
Once you have all the wheels in motion for your financial retirement it is often difficult to wait for that great and liberating day but you must take the time to make sure that there is no detail that hasn’t been covered or has been overlooked in the planning process. Most of us worry over whether we’ll be able to maintain a certain level of income when we retire and little else. The problem is that maintaining the same level of income during retirement is often not enough to keep things going and take care of all your family’s needs during your retirement.
Have you checked out your insurance expenses? You should make a point of checking that all of your current insurance plans will either cover you during your retirement or at least that you have something in order until your Medicaid benefits kick in. This isn’t only about medical insurance. There are all kinds of insurance coverage that we need in order to avoid potentially huge amounts of debt during our retirement. Some of the common types of insurance you will need include the following: homeowner’s insurance, auto insurance, health insurance, dental insurance, long-term care insurance, and life insurance.
What are IRAs?
With all the three letter names floating around our society what is one more? Really? It’s not like we don’t have enough to worry about without adding this burden. However, when it comes to real life, these three letters will have a greater noticeable affect on people than many of the other three letter names that we here on a regular basis such as the CIA, FBI, NSB, ATF, and countless other abbreviations that are hidden behind three little letters. The good news is that an IRA isn’t nearly as insidious as its name would imply. This is a useful tool to most Americans who hope to someday retire from their life of work and life out a somewhat comfortable existence.
There are actually many different IRAs, which is the abbreviation for individual retirement account.
A Traditional IRA is the most common. The only requirement for this particular IRA is that you are employed and that you invest no more than 100%PRCTG% of your income or %4,000 per year, whichever is greater up to the age of 49. At the age of 50 your maximum investment is 100%PRCTG% of your income or %5,000 whichever happens to be greater. If you meet the requirements of the IRS to their satisfaction your contributions to your traditional IRA will be tax deductible. As a result, the funds are not taxed while in your IRA account but once the funds are withdrawn they are subject to federal income taxes.
Thinks to Consider when Considering a 401(k)
When it comes to financial retirement plans, the sad truth is that far too few people actually have a plan. It is estimated that somewhere in the neighborhood of 30%PRCTG% of employees who are offered a 401(k) through their employers fail to sign up for them. There have been instances in the past when unscrupulous administrators have taken advantage of the temptation that having access to those funds provided as well as many, many cases where the worst enemy when it came to 401(k) investing was the investor.
The good news is that like many things around the world we are learning from our mistakes and working to create a new and improved 401(k) for employees across the country. With this in mind and the advances that have been made very few people can honestly state that they are worried about the security of their money as a reason not to participate in their company offered 401(k) programs. The problem remains that far too many people believe in the sanctity of a now dieing system for retirement funds.
Insurance and your Financial Retirement
When planning your financial retirement there are many things you should consider before taking the plunge and not all of them are overtly financial, though in some large way they are all very financial considerations, particularly if you don’t take the time now to consider their importance later. Insurance is an important consideration when it comes to retirement. Depending on your age at retirement you may or may not qualify for Medicaid, which could leave you in a bit of a pickle when it comes to covering the high cost of insuring your health.
If you have a spouse that will continue working for a year or two you may want to consider the cost of being added to his or her insurance coverage. Chances are it will be less expensive than striking out on your own for health insurance coverage, which tends to increase in cost with age and according to health.
Money Management for Financial Retirement
Learning to manage your money while you have more disposable income is one of the greatest gifts you can give yourself when it comes to your retirement. One of the best things you can do in order to prepare yourself for living on a ‘fixed’ income that goes along with retirement is to establish a budget and spending limit each month and live within that budget. In fact, you might wish to establish a smaller budget than you actually think you will need in order to maximize the effect and add a little padding to your savings account. Over time, the little savings can either provide a nice boost to your retirement fund or a great night on the town as an occasional treat.
Living on a budget is one of the most difficult things that many Americans will ever face. As a matter of fact we have the nasty tendency to live at the very edge of our abilities and over extend ourselves heartily. A good method for learning to create and establish a budget is to make a list of all your monthly spending right down to your miscellaneous expenses and convenience store and break room snacks and stops. Then add up the totals and see where you believe you can cut costs. Of course it isn’t enough merely to say you want to cut costs in certain areas, you need to create a plan of action for doing so.
Roth IRAs for Financial Retirement
This is entirely an opinion based on the facts that I have available and should be viewed as nothing more than that. However, I feel I would be remiss in not pointing out the incredible value that Roth IRAs can bring to the table for savvy people who are planning their retirements. There are actually advisors that straddle the fence on this particular issue and I can honestly see the validity of both sides. For me, a Roth IRA is preferable to the Traditional IRA for one reason and one reason only. I would much rather face the evil that I know and pay taxes on that money now than the evil that I don’t know by paying taxes not only on the investment but also the earnings later.
I know what tax bracket I am relegated to at the moment. I know about how much I’m going to pay in taxes on the income I’ve labored to receive about 65%PRCTG% of. I know these things in terms of what a dollar means today and would much rather pay that price now than later when I have no idea what tax bracket I’ll be in or how much money I will actually see of my retirement earnings.