If you are nearing retirement but still working does your employer provide a retirement plan? If so, say retirement experts grab it! Employer-based plans are the most effective way to save for your future. What’s more, you’ll gain certain tax benefits. Employer-based plans come in one of two varieties (some employers provide both): defined benefit and defined contribution.
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There are two main ways for retirees to reduce risk. First, diversify within each category of investment. You can do this by investing in pooled arrangements, such as mutual funds, index funds, and bank products offered by reliable professionals. Some retired people want to be "stock pickers" and this can endanger your retirment funds. On the other hand pooled investments typically give you a small share of different individual investments and will allow you to spread your money among many stocks, bonds, and other financial instruments, even if you don’t have a lot of money to invest. Your risk of losing money is less than if you buy shares in only a few individual companies. Distributing your investments in this way is called diversification.
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How do you decide where to put your money? Look back at the short-term goals you should have written down earlier. Do you want to take a family vacation or the down payment for a retirement home. Remember, you should always be saving for retirement. But, for goals you want to happen within a year or so it’s best to put your money into one or more of the cash equivalents like a bank account or CD. You’ll earn a little interest and the money will be there when you need it. For goals that are at least 5 years in the future, however, such as retirement, you may want to put some of your money into stocks, bonds, real estate, foreign investments, mutual funds, or other assets. Unlike savings accounts or bank CDs, these types of investments typically are not insured by the federal government. There is the risk that you can lose some of your money. How much risk depends on the type of investment. Generally, the longer you have until retirement and the greater your other sources of income, the more risk you can afford. For those who will be retiring soon and who will depend on their investment for income during their retirement years, a low-risk investment strategy is more prudent. Only you can decide how much risk to take.
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Life is not over when one decides to retire. It is only an end to one chapter in a person's life and the beginning of another. There are some who have decided to start their own Internet business instead of lounging around at home while there are others who have devoted more time to family and friends. Whatever you choose to do after retirement, it all helps in making your retirement productive and physically active and to do this you need to have setup a retirments savings plan of some type. Not only do you need to set it up but you need to implement it.
• Start now. Don’t wait. Time is critical.
• Start small, if necessary. Money may be tight, but even small amounts can make a big difference given enough time, the right kind of investments, and tax-favored vehicles such as company retirement plans, IRAs, and SEPs.
• Use automatic deductions from your payroll or your checking account for deposit in mutual funds, IRAs, or other investment vehicles.
• Save regularly. Make saving for retirement a habit.
• Be realistic about investment returns. Never assume that a year or two of high market returns will continue indefinitely. The same goes for market declines.
• Roll over retirement account money if you change jobs.
• Don’t dip into retirement savings.
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Women face challenges that often make it more difficult for them than men to adequately
save for retirement. In light of these challenges, women need to pay special attention to
making the most of their money.
• Women tend to earn less than men and work fewer years.
• Women tend to change jobs or work part time more often, and they interrupt their careers
to raise children. Consequently, they are less likely to qualify for company-sponsored
retirement plans or to receive the full benefits of those plans.
• On average, women live 5 to 7 years longer than men, and thus need to build a larger
retirement nest egg for themselves.
• Some studies indicate women tend to invest less aggressively than men.
• Women are less likely to be financially informed than men.
• Women tend to lose more income than men following a divorce.
• Women are twice as likely as men during retirement to receive income below the
poverty level.
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High debt and misuse of credit cards make it tough to save for retirement. Money that goes to pay interest, late fees, and old bills is money that could earn money for retirement and other goals. How much debt is too much debt? Debt isn’t necessarily bad, but too much debt is. Add up what you pay monthly in car loans, student loans, credit card and charge card loans, personal loans — everything but your mortgage. Divide that total by the money you bring home each month. The result is your “debt ratio.†Try to keep that ratio to 10 percent or less. Total mortgage and nonmortgage debt should be no more than 36 percent of your take-home pay.
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Once you determine the number of years until you retire and the size of the nest egg you need to "buy" in order to provide the income not provided by other sources, you can calculate the amount to save each month. It’s a good idea to revisit this worksheet at least every 2 or 3 years. Your vision of retirement, your earnings, and your financial circumstances may change. You’ll also want to check periodically to be sure you are achieving your objectives along the way. There’s one simple trick for saving for any goal: spend less than you earn. That’s not easy if you have trouble making ends meet or if you find it difficult to resist spending whatever money you have in hand. Even people who make high incomes often have difficulty saving.
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Will you have other sources of income? For instance, will you receive a pension that provides a specific amount of retirement income each month? Is the pension adjusted for inflation? What savings do I already have for retirement? You’ll need to build a nest egg sufficient to make up the gap between the total amount of income you will need each year and the amount provided annually by Social Security and any pension income. This nest egg will come from your retirement plan accounts at work, IRAs, annuities, and personal savings. What adjustments must be made for inflation? The cost of retirement will likely go up every year due to inflation — that is, $35,000 won’t buy as much in year 5 of your retirement as it will the first year because the cost of living usually rises. Although Social Security benefits are adjusted for inflation, any other estimates of how much income you need each year — and how much you’ll need to save to provide that income — must be adjusted for inflation. The annual inflation rate is 3.3 percent currently, but it varies over time. In 1980, for instance, the annual inflation rate was 13.5 percent; in 1998, it reached a low of 1.6 percent. When planning for your retirement it is always safer to assume a higher, rather than a lower, rate and have your money buy more than you previously thought. Retirement calculators should allow you to make your own estimate for inflation.
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Here's a great age-relevant search engine site cRANKy.com. It is targeted towards +50 year olds (seniors and baby boomers).
They intend to provide information on specific topics like jobs after retirement, how to get to 100 years of age, how to make new friends, etc. Some of the searches are neatly sorted in categories on the frontpage. There's a section "How to make friends" as people in specific phases of their lifes are only adding specific types of new contacts to their network of friends. This is a fact of life when you retire because you won't see your co-workers on a daily basis anymore, your routines are changing and you might loose some of your previous contacts.
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What if retirement is just around the corner and you haven’t saved enough? Here are some tips. Some are painful, but they’ll help you toward your goal.
• It’s never too late to start. It’s only too late if you don’t start at all.
• Sock it away. Pump everything you can into your tax-sheltered retirement plans and personal savings. Try to put away at least 20 percent of your income.
• Reduce expenses. Funnel the savings into your nest egg.
• Take a second job or work extra hours.
• Aim for higher returns. Don’t invest in anything you are uncomfortable with, but see if you can’t squeeze out better returns.
• Retire later. You may not need to work full time beyond your planned retirement age. Part time may be enough.
• Refine your goal. You may have to live a less expensive lifestyle in retirement.
• Delay taking Social Security. Benefits will be higher when you start taking them.
• Make use of your home. Rent out a room or move to a less expensive home and save the profits.
• Sell assets that are not producing much income or growth, such as undeveloped land or a vacation home, and invest in income-producing assets.
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