Saturday, January 31, 2009

Social Security should not be a retirement plan

Posted by Po-cheng Huang

As I search for general American public’s plans for retirement, I learn that the Social Security program is a big part of general Americans’ retirement life. While looking into the structure of Social Security program, I came across the criticism on Social Security being the greatest ponzi scheme of all time since the Berni Madoff’s 500 Billion ponzi scheme were discovered in late 2008 and ponzi scheme is again on the headline. The way some articles described it is that Social Security simply uses the current worker’s income to pay off current retirees. That is exactly what the ponzi scheme is like, paying the previous victims with new victims’ money, and the game will keep going as long as there are enough new victims coming in. Unfortunately, this is the reason why lots of people are calling for Social Security reform because now the system is facing significant financing problem since the U.S. population is ageing and Social Security will eventually run out of money to pay the retiring baby boomers, and thanks to the advances in the medical field, people now lives longer and healthier which will ended up making Social Security shorthanded if no changes are being done and will most likely have significant affect on future retired Americans. So here is what I think, is either people start saving for their retirement and forget about Social Security and have a comfortable retiring life, or depend on Social Security and suffer when it collapse as the result of government failed to make changes to it or step up to help.


Friday, January 30, 2009

Wednesday, January 28, 2009

Annuities no longer a sure thing

by Boyce Watkins

Retirement investors have long viewed annuities as an effective way to protect their nest egg. But the recent financial crisis has highlighted an inherent paradox: While annuities offer safety and guarantees, their benefits are tied to the financial strength of an insurer. If the company fails, you could be looking at a loss in the very part of your portfolio that you were counting on to be rock solid.

So at a time when one of the world's largest insurers, AIG, has needed government help to stay solvent and other insurers have seen their stocks drop 70% or more in just a few months, should you still consider putting a portion of your retirement assets in an annuity?

Apprehensive Retirement Planning

It seems that in today’s economic state, retirement is slipping away into oblivion, being pushed back further and further into Americans golden years. It has brought to our attention the importance of saving our income so that we may draw from it when we need it most. In this day in age, it pays off to be more conservative with your money, especially when the economic climate is so bleak.
Today, many young Americans are apprehensive about investing into a retirement account because of the economic climate and the rates they will be receiving. This is understandable, but a representative from TIAA-CREF would submit that that apprehension is a short-term way of thinking. (watch video) He, along with other speculators, is confident that our current economic condition is only temporary, merely part of the ups and downs of our economy. To anticipate the economies eventual rebound from this downturn is to think in a different way about retirement investments. Instead of being apprehensive, one should invest confidently into retirement plans, and may end up paying less now for them than they would have if the economy was healthier.
Today, people are feeling more apprehensive, however, rather than confident. “Only 28 percent say that they will be able to retire comfortably. One-third (33 percent) say they'll have just enough finances to get by when retired. Nineteen percent say they are afraid they’ll never be able to retire” (Bankrate Survey). The international foundation recommends to young retirement planners to save two percent more than originally planned in order to retire comfortably in this economic state. (international foundation)

-Matt Smith

Retire or Not?

By:Jeffrey Kam

In today’s workaholic society, retirement may soon be a chance to begin a new career. People’s lives revolve around their work, less and less baby boomer wants to retire. Work does not mean spending hours in the office and receive pay check anymore in many baby boomers eyes. Baby boomers find work as an accomplishment, rewarding, a goal in life and refuse to leave the work force. Many retirees experience empty handed when they have stopped working. Besides physicals meanings work also have a lot of physiological benefits to it, surveys have shown a majority of the baby boomers desires to stay in the work force is to stay mentally fit.

Saving up for retirement is also critical to many people, now a day, delaying your retirement may lead to a more secured financially, and shorten your retirement span. Often times one may ask “When is the best time to retire?” One can start to save for retirement at the age of 20. Having the right strategy will help your retirement saving less difficult. Avoiding certain fees will save a huge amount of mount in your 401(K). One percent in fees will change cash dramatically. In addition, creating a emergency fund will help your retirement planning for paying unexpected medical expenses, and other emergency expenses. In conclusion, some may find retirement is a start of a new career; others are planning early to save for retirement.

Staying Smart in Times of Crisis

By: Steven Muller

With the economy the way it is today, it is understandable if one is scared of investing and saving for retirement. There are other things to worry about like maintaining a job and making sure there is enough money for necessities more immediate expenses like paying for college. This is all understandable and perfectly acceptable, but what happens when you get to the finish line? What’s left for yourself? You may never be able to retire because you didn’t save money to live off of when you’re unable to work anymore. That’s why it’s important, no matter what the economic situation, to at least have some plan in order to save for retirement.

The typical way most people choose to save for retirement is through their employer’s 401(k) plan. This allows you to defer part of your pay check towards your savings and is then matched by your employer. If this option is offered to you, I firmly believe that everyone should accept it. It’s basically a free way to double your normal savings at no cost to you. Now there are other defined contribution plans like SEPs and SIMPLE plans, but 401(k) still remains the best option.

In this time of economic crisis people have decided against these types of plans in favor of receiving all their paycheck and keeping their money out of investing. I say that little bit of money taken out of the paycheck can go a long way in the future when you’re old and want to retire. It’s important now that people remember this even with the economy the way it is.


5 New Investing Rules for Retirement

By: Steven Muller

In this aritcle from Yahoo! Finance, the author talks about how conventional wisdom on retirement planning is no longer suitable in today's world. She has come up with five new ideas how to save and be prepared for retirement.

Many of the old rules for retirement investing no longer apply. Facing longer life spans, increasing healthcare costs, and a market in crisis, retirees will need more growth in their portfolios during the coming years and decades. At the same time, they need the assurance that a 37 percent market drop--as we saw in 2008--won't completely devastate their remaining nest egg. A growing number of financial planners are rethinking the conventional wisdom. (Remember the old adage that you should subtract your age from 100, and devote that percentage of your portfolio to stocks?) Here are five new rules to consider: Separate your investments into different pots, don't reach too far for yield, make it a muni, go for dividends, and consider "alternatives".

Tuesday, January 27, 2009

Retirement Planning in a Financial Crisis

Posted by: Amina Isakovic

A TIAA-CREF representative talks about retirement planning at Duke University.

Don’t delay, start investing today

Post by: Amina Isakovic

Here we are, in our early twenties, about to graduate from a prestige school and be thrown into the “real world”. What’s your plan after graduation? What will you do with that bonus ABC company offered you? Are you going to spend it on a new car, a new Dolce & Gabbana bag, or put it in a Roth IRA? Is it too early to think about retirement? The best time to invest and be aggressive is when you are young. Would you believe me if I told you that you could net at $3.5 million at age 72 if you invested $5000 in the market at age 18 and left it alone? See for yourself here.

There are so many excuses as to why not to invest early. From “I don’t make enough to put anything away,” to “I still have college loan debt.” But these excises are huge mistakes. With the social security fund quickly running out money, the personal retirement 401(k) fund, will be the main source of income for most people, and most certainly for our generation.
So where do you start? There are a few steps you can do today as a young college graduate, to ensure a large fund in the future. Besides having a balance sheet for your personal financial record keeping, and putting away as much money a year as possible, once you have a position with a company, here are the things you should do:

1) Be aware of all your tax-related benefits
2) If you’re getting a tax refund this year, use the money to fund an IRA
3) Think about using a so-called target-date retirement fund in your 401(k)
4) Take full advantage of the company matching contributions
5) Use any annual raises to add to your 401(k)

More detail to these points can be found here.

Now that you know a little bit more about the opportunities of saving at a young age, what’s your next move?

Recent Doubts towards Annuities and Retirement

Post By: Dana Sunderlin

For a long time, retirement investors have considered annuities to be the ideal route towards protection and security. An annuity is essentially a contract between you and a particular insurance company. It involves making a lump-sum payment, or series of payments, which the insurer agrees to pay to you at some point in the future. Annuities can be either fixed or variable and generally offer a tax-deferred growth of earnings.

Despite the fact that annuities are thought to offer safety and guarantees, they are ultimately tied to the financial strength of the insurer. If the insurance company failed, you would face a large loss towards your investment. For this reason, in light of the recent financial crisis that has ensued, many people are concerned with whether they should continue to put a portion of their retirement money and assets into an annuity. Many critics believe that annuities do indeed continue to play a crucial and valuable role in retirement, based on their unique features that give them the ability to turn a person’s savings into a lifetime of payments. However, it is more important than ever to shop around when purchasing an annuity and ensuring its security.

On the other hand, many potential problems have been found with the use of annuities. The first is that early withdraws can result in a double penalty. When money is taken from a premium, you are charged for penalties to both the government and the insurance company. Other problems involve the way that funds are taxed and also whether or not it is actually a cheaper way to save.

Although the importance of annuities in retirement planning is debated, it is clear that if you do plan on investing in an annuity for the future, it is important to look into and truly know what you are buying.


Retirement Planning in Your Thirties - A Great Time to Increase Your Retirement

Copied and Pasted by Daniel Powell

If you’ve been hoping that saving would be easier by now, yet haven’t begun to save for retirement by your thirties, time is now critical. Every year you delay now may affect not only when you’re able to retire, but also what your retirement will look like. If you haven’t yet created an IRA, do so. If you haven’t yet participated in a 401K, now is the time to begin.

If you have contributed to an IRA, can you contribute more this year? Can you make your contribution earlier in the year to take maximum advantage of the tax-deferral benefits? If you’ve been participating in your 401K plan, ensure that you’re aware of your vesting schedule before you leave your current job. Leaving without taking your employer matching contribution could mean the forfeiture of thousands of retirement planning dollars.

Given you’re twenty or more years until retirement, you’ve got a very long-term time horizon for investing. This means that bulk of your retirement money should be invested in stocks (or mutual funds or ETFs that are invested in stocks). Despite the increased risk that is associated with stock market investing, stocks offer the greatest long term potential for your money. With over twenty years to ride out the expected fluctuations, you can benefit from the higher expected returns. Keeping all your money in the bank leaves you with another risk: one that the purchasing power of your money will not keep up with inflation, let alone grow enough for you to retire comfortably.

This article is not geared as much towards students, but to people who have reached thirty and really need to start planning for retirement. Overall, it stressed the importance of retiring and to invest while your young! The link to the original article is below and at the bottom of that page are many other interesting articles. Enjoy!

Retirement Planning In Your Thirties – A Great Time to Increase Your Retirement

Retirement Planning for Those who Start Late

By Daniel Powell

There are many articles offering tips for those who are starting off late when it comes to saving for their retirements. It is an unfortunate fact that 28% of workers 55 or older have less than $10,000 saved. Those who have waited too long should not grieve about the past and take action as soon as possible. The road to having a retirement will not be an easy one and some sacrifices need to be made. It is a lot harder to start saving after 35 but even when this is the scenario, people still need to come up with a magic number or the amount they want to acquire by retirement. For example, someone who is 55 years old and earns $40,000 a year would need to save 27% of their income to be able to retire at 65.

Those who have waited to retire now need to put away as much as they can. To be in the position to put away more money, a person may have to relocate to find a higher paying job, pick up an extra part time job, and cut other expenses. Some suggestions for cutting expenses include selling your house to rent, selling off excess property you don't need, and eating at home instead of dining out. Other recommendations lean towards working until 70 because it gives you more time to save and your actual retirement length will be shorter. Along with working longer comes the option of waiting to receive social security. If you wait until your full retirement age, the social security benefit will not be reduced. This reduction can reach 30% if you choose to take it early. There is also an option to delay your benefit until after your full retirement age which can increase it by up to 8% a year.

For specific retirement options, it is still not to late if you are 50 or older to start an IRA. Even though you will not be able to take full advantage of compound interest, the money can still experience nice growth before being tapped. People over 50 who are saving in a regular or Roth IRA can save an extra $1,000 a year bringing the total allowed savings to $6,000 annually. Likewise, individuals who are 50 and over that have a 401k can save an extra $5,000 a year making the maximum contribution $20,500. While IRAs and 401(k) plans have tax deferred growth, the Roth IRA has tax free growth. While these are great options, you actually need to be making the money to save. For those who can't, social security should not be underestimated and may replace up to 25% or more of your current income.

Origninal Articles:

Last Minute Retirement Planning

55 and haven't saved a dime? Yikes

Last Minute Retirement Planning - Same Title, Different Article

Why you’ll work through your retirement

Post by: Jeffrey Kam

There is a major social and cultural message in the current economic collapse for the future retirees of America: Forget retirement.

That's right. The recession is making clear what we've suspected for a long time. The concept of not working and embracing leisure for the last third of one's life isn't practical for most people.

Put it this way: Survey after survey has shown that a majority of aging baby boomers plan on working in retirement. Well, that plan is coming true.

Click to Read More

Ben Stein Talks Retirement -- Part 2

By: Jeremy Radnor

Ben Stein examines how to successfully prepare for your retirement.


Monday, January 26, 2009

Retirement savings

Post by Po-cheng Huang

In the economy that has consumer spending being accounted for 2/3 of the GDP, Americans are encouraged to spend. When their spending exceeds their income, the financial system provides easy access to credit so they can borrow. Then therefore ended up paying the monthly minimum payments to the banks to keep the game rolling.
The question we should be asking is “how did people put themselves into this?” Research survey showed that 1/3 of participants do not save at all, 1/3 doesn’t save enough, and only about 28% report that they have met their monthly saving targets. Then the question on how do people even start saving, if they are simply using their paycheck to pay the monthly interests? I tend to think it’s the environment that is influencing the people. It makes them admire luxury goods they saw on commercials, going after the life style that they can hardly afford through borrowing, and ultimately when time is bad, they go bankrupt, with everything they thought they own got taken away from them.
To fix the problem with retirement in America is simple, effective retirement planning is essential, but people need to realize that they can not spend money that they don’t have, and learn to properly allocate their income, until then they can start talking about saving for retirement.

Avoid these Retirement Planning Mistakes

Post by: Dana Sunderlin

The turmoil in the economy today is enough to make us want to avoid putting money away for retirement for fear of needing it now. That's natural. Most Americans feel they need to have all of their money available now.

We often are scared of locking up our money, or we have the attitude that putting away even a little won't be enough to build a decent retirement - so why bother? But those who do let go now and invest for the future understand that a little can go a long way, thanks to the power of compounding. For example, saving $100 a month for 10 years at 4 percent interest will build to almost $15,000.

For longer time frames, more monthly savings and higher returns, that not only can build up a retirement fund, but may create a longer and happier life. Research in the Journal of Financial Service Professionals found evidence that financial strain in retirees is accompanied by depression and negative feelings, while financial security exudes improved health and contentment.

Click to Read More

Sunday, January 25, 2009

Retirement Savings? What savings?

By: Jeremy Radnor

With the current economic conditions, many people (especially baby boomers nearing retirement) are becoming increasingly more concerned with their retirement savings and 401(k).  In general, saving and adding to your 401(k) is always a good idea.  Unfortunately, in the past year alone, investors with the most saved have lost the most.  Investors with at least $200,000 in savings have lost over 20% while investors with $50,000-$100,000 lost 13%-15%. The losses are significant but investors can find some comfort in knowing that since 2000, savings portfolios have seen an average increase in their value by 161%.  However, when the market is facing such turmoil one is left to question what to invest in? 

 Upon contemplating what to invest in, one must take two sets of two very important questions into consideration.  The first set of questions would be, “How much risk am I willing to take?” and “How much risk do I need?”  The set of questions to follow should consist of, “What are my financial goals?” and “How far am I from accomplishing these goals?”  Once an investor has answered the second set of questions, the answers to the first set should become obvious. 

 If an investor is far from retirement and distant from their financial goals, the investor most likely choose to invest in riskier ventures such as stock.  If the investor is near retirement and near their financial goals, they will most likely choose to place their money in safe investments such as bonds.  Ultimately, every investor is different and each investor needs to find the balance which suits them best.  This will lead to a successful and happy retirement.  


Saturday, January 24, 2009

Two-thirds of Americans don't save enough

Post by Po-cheng Huang

Americans face immediate financial concerns on a day-to-day basis, and these take priority over long-term retirement goals. In Bankrate's retirement savings poll, taken in mid-September, seven in 10 Americans (68 percent) said they are not able to reach their monthly retirement savings goal because of other financial responsibilities.

About one-third said they are putting some money away, but not enough. Another third aren't saving anything at all. Only about 28 percent said they are meeting their monthly retirement savings target.

Click here for more