Retirement Tool » Retirement Planning

It’s not a good idea to carry a mortgage into retirement

admin — Fri, 07 Oct 2011 18:18:29 +0000

Many baby boomers are choosing to work a few years longer than the previously planned retirement age. There are a few advantages of that. First of all, you keep contributing to your 401K or IRA which helps building or recovering some of the losses you had in the past few years. Second, with a steady paycheck, you can pay off or at least pay down your mortgage. Many seniors are still carrying their mortgages well into retirement. It’s not a good idea. You want to be mortgage free in retirement. There have been cases where retirees find themselves in a bad financial situation with mortgage troubles. That’s the last thing you want in a happy retirement.

If you’re approaching the retirement age and have the extra savings that are sitting in a savings account or CDs, it is a better idea to dump these funds into your mortgage. Because the interest you earn on these are only 1% or 2% currently. Many people argue that you could invest the money and get better return. That’s true for someone who’s in his 30s or 40s. Not if you’re approaching retirement.

Is It Right to Continue Paying Mortgage During Retirement Years?

A. Bennett — Thu, 29 Sep 2011 12:29:33 +0000

Buying a new house is a significant event in everyone’s life. When people plan to buy a house, they raise several questions like “how will I afford to pay a lump-sum amount of money” or “how much house can I afford.” In order to answer all your questions, it is to say that taking a mortgage loan is the best possible option to raise fund for buying a new house. You need to make monthly payments for your mortgage loan and interest will be charged on the loaned amount until it is paid off. Some people prefer to pay off their mortgage as soon as possible, while some continue paying their home loans during the retirement years. As per the recent study of Boston College’s Center for Retirement Research, almost all households are quite well off, and have sufficient assets to pay off their loan. But retirees say that they hold on to their mortgage debt in order to get tax deduction or to maintain liquidity. But before you decide to carry your mortgage loan into retirement, you must consider several factors associated with it.

According to the Mortgage Bankers Association, the fixed interest rate of mortgage is currently 5.17 percent. Now some retirees hold their mortgage loan back with the hope of getting a higher rate of return elsewhere. But in most cases they can never beat that interest rate in low-risk investments like bank certificates of deposit, treasury bills and treasury bonds. There is no guarantee that mortgagees will earn more in stock investment than in mortgage.

People prefer to hold back on their mortgage loan with the hope of tax deduction. It is true that the interest you pay on your mortgage is tax deductible, but it involves certain criteria. If all your itemized tax deductions, including mortgage interest, charitable contributions, and state and local taxes, add up to more than the standard deduction then you will get the benefit of tax deduction on your mortgage. The standard deduction is $11,400 for married couples and $5,700 for singles in 2009. But in general, retirees usually do not have $11,400 or more of itemized items, so it is more sensible to pay off the mortgage loan before retirement.

Retirees are most likely to pay off their mortgage loan using their IRA. But withdrawals from IRAs are taxed as income. So if you withdraw a large sum from your IRA you need to pay hefty tax. For instance, if you need $100,000 from your IRA to pay off the mortgage, and if you are under 28% tax bracket, then you have to withdraw $128, 000. Moreover, if you withdraw money from an IRA before falling into the age of 59 1/2, then you also have to pay 10 percent withdrawal fee. So considering all these factors, it is better to pay off your mortgage loan with after-tax investment, before you retire.

Hence, it is to be concluded, considering all these factors, it is always advisable to pay off the mortgage loan as soon as possible, rather than carrying them into retirement.

Does your employer offer a retirement plan?

admin — Fri, 31 Dec 2010 23:14:32 +0000

If your employer offers a retirement plan, join it as soon as you can and contribute as much as the plan allows. People tend to distrust the stock and mutual funds during bad economical times. But the best time to invest is in bad economy and when the stocks are low. Even in a time like this, most employers offer 401(k) plans and match a fixed percentage of the employee’s contribution.

The most common match is 50 percent of the employee’s contribution up to a maximum percentage of wages or salary (usually 6 percent). Although many companies are cutting back on the matching, you can still expect the find somewhere between 2-4 percent. That’s like getting free money! Although most temp and part-time employees do not get matching 401K, but if your job does, then join without hesitation.

The younger you are, the better your long term savings returns. Your savings will grow and your earnings will compound over time. Time is the best and most important factor in retirement savings. If you wait until 35 to start, then you’ve already lost 12-13 years of compounding opportunities. If you just recently graduated from college and luck enough to have a job, start now. Even just little amount each month.

Source: U.S. Department of Labor

Retirement investing requires discipline

admin — Tue, 30 Nov 2010 04:05:07 +0000

When it comes to retirement investing, it’s not about how much you put in once in awhile, it’s all about saving a set amount constantly and regularly. When you decide on your monthly contribution amount, set it at a level that you comfortable. Don’t try to put in so much in the beginning and stop it when any hardship occurs. You should treat it as if it’s a bill, but a bill that pays to yourself.

Even at $50/month, you can expect a large return after 30 years’ of nonstop investing. If you’re just starting out, save little and gradually add as your life changes. Getting married and having kids can put your retirement on hold, but keep at it, whether through 401K or IRA, discipline is the most important message. Market goes up and goes down, but the return on your contribution is for the long term plan.

Women usually invest more conservatively than men

admin — Wed, 20 Oct 2010 02:48:42 +0000

If you find yourself choosing more conservative ways of putting your retirement, you’re not alone. Women usually invest more conservatively than men. There’s nothing wrong with that. The rule is to start early and invest regularly. Choose carefully where you put your money and learn how to make your investments grow.

The simplest retirement investing for women is the employer sponsored retirement plan. If your employer offers a retirement plan, join it as soon as you can and contribute as much as the plan allows. Most employers with a 401(k) plan match a fixed percentage of the employee’s contribution. You will find out about the employer retirement plan before you start your job. Study carefully and take advantage of it.

Remember, by saving early you have time on your side. Your savings will grow and your earnings will compound over time.

Source: U.S. Department of Labor

Women can expect to live another 20 years in retirement

admin — Wed, 29 Sep 2010 01:18:44 +0000

On average, a female retiring at age 65 can expect to live another 19 to 20 years. That’s at least 3 years longer than men who retire at the same age. Which makes it more important to plan retirement early and start saving early. Savings can increase your chances of having enough money to last during your entire retirement.

Many retirees are facing now running out of money towards the end of their lives. Many people are taking on part time jobs to help paying bills. Today’s 30 and 40 years olds will not be able to receive 100% of their social security income by the time they reach full retirement age.

The safest way for a women to plan for retirement is to save in 401K or IRA, or both. Stay-at-home moms should keep contributing to their IRA. Even if less than the maximum allowed amount of current $5,000.

Source: U.S. Department of Labor

Retirement planning sounds so far ahead, but you need to start as soon as possible

admin — Sat, 07 Aug 2010 00:45:26 +0000

For most people, retirement seems so far ahead. Every few women start thinking about their retirement planning until children are out of the house. Mostly in their late 40s and 50s. But keep one thing in mind, the earlier you start, the easier it is. It’s a simple number game. The longer you save and invest, the less you have save every month. Because you have all the years for growth and compounding.

Retirement planning should start early and continue throughout your lifetime. Here are four reasons why saving matters to women – and especially to you!

Women are more likely to work in part-time jobs that don’t qualify for a retirement plan. And working women are more likely than men to interrupt their careers to take care of family members. Therefore, they work fewer years and contribute less toward their retirement, resulting in lower lifetime savings.
Of the 62 million wage and salaried women (age 21 to 64) working in the United States, just 45 percent participated in a retirement plan. Remember, even small amounts can earn interest and add up over time.
On average, a female retiring at age 65 can expect to live another 19 years, 3 years longer than a man retiring at the same age. Savings can increase a woman’s chances of having enough money to last during her retirement.
By and large, women invest more conservatively than men. Choose carefully where you put your money and learn how to make your investments grow.

Source: U.S. Department of Labor

Roth on Roids For IRA – Retirement Plan Investing – CPA Or Lawyer Viewpoint

admin — Thu, 18 Jun 2009 19:46:53 +0000

By Rocco Beatrice

With a Roth IRA on Roids, you could contribute $5,000, $20,000, $50,000 and $100,000 depending on how much money you have and how much you want to contribute and when you want to begin to withdraw your money.

It is powerful wealth building tool. When I heard about this from Roccy DeFrancesco, I was completely overwhelmed because I spent my lifetime looking for tax-advantaged products that are safe, legal, that you can use, with very little risk. You are not going to get this from your lawyer or your accountant. Your lawyer’s stock-in-trade answer is “possibly, maybe or I’ll look into it.” And even if he knows he’s not going to tell you because, traditionally, he works on both sides of the fence.

Your accountant and lawyer would typically not look to at any type of these products because he could become an IRS target. Whenever there is a criminal investigation, his papers would be the first thing they go after, summonses. I work with accountants and I teach them and this is their usual stance on the matter. I teach lawyers and accountants for credits. They’re generally intimidated. For the price of preparing your income tax return, they’re not going to look at these types of wealth-building tools. The wealth-building strategies of this investment retirement planning are completely legal. You do not have to hide your money. You do not have to go offshore. You do not have to provide a lot of documentation, and you do not have to report your requirements to the feds.

With a Roth IRA on Roids the following basic information would be required: your age; how much money you wish to deposit into your account; when you wish to withdraw from the account. Based on this information, a specific financial chart can be drawn for you.

To summarize the main benefits of this wealth-building tool: your money never goes backwards; you’ll be able to take your money out tax free; there is a guaranteed return. So let’s discuss how you can fund your account using other people’s money.

Roccy DeFrancesco’s wrote a book, “Home Equity Management.” The book is very well written. Roccy is a very meticulous guy and I have a lot of respect for him. The book describes how you can reposition your home equity. Let us look at your home equity for a moment. If you are in your home with a 95% mortgage, does your mortgage diminish the value’s home? The answer is, “No.” If your home is fully mortgaged it would not diminish the value. But, if you live in an area like California, with mud slides, or Florida with hurricanes and tornadoes and you own 100% of your home (i.e. not mortgaged) then whose problem would it be if your house slides down the hill or it goes under water? It would be your problem. On the other hand, if it’s heavily mortgaged, then it would not be your problem. It would be an insurance problem and it would be a mortgage company problem.

So what is the relation of your home equity with your Roth on Roids? If you leverage your home equity and reposition it to fund your IRA account then, effectively, your money is sitting in this account and in investment opportunities and it’s safe. Real estate is the only leverageable asset class. Everybody understands that you buy real estate with 5% down, 10% down, depending on how well financed you are. It’s the only leverage that is recommended, people accept, people understand, the banks do it. So by repositioning your home equity in order for you to fund your account, financially you are using other people’s money. And this could also be accomplished with commercial real estate. If you have equity in commercial real estate, refinancing it in order for you to reposition your assets definitely makes a lot of sense. At the end of the day, you still have the same assets. If you have equity in your home or commercial estate, that’s an asset. If you have equity in Roth on Roids, or other investment opportunities, together they are the same number. You’re just repositioning. You are relocating your assets. That’s all you’ve done.

Best IRA Rescue provides services on your Roth IRA, IRA investments & traditional IRA and will help you reduce your inherited and beneficiary independent retirement account taxes in your estate assets. Roth on ROID™ is your advanced Roth IRA retirement planning strategy. It is Cash Value Life Insurance and one of the best IRA tax-savings strategies with benefits of a guaranteed death benefit, guaranteed principal, tax-free growth, and tax-free distributions from policy loans. Traditional IRAs and ROTH IRAs cannot invest in life insurance. Please contact us if you have any questions. Rocco Beatrice, CPA, MST, MBA

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Article Source: EzineArticles.com

Self Directed IRA Account – The Best Retirement Plan For Business Savvy People

admin — Thu, 18 Jun 2009 19:44:59 +0000

By Ricky Devel

It was in 1975, when an investment option was introduced and grouped in the lists of the individual retirement accounts, which is now commonly known as the Self directed IRA account. Many people who begin to study all the possible retirement investing selections, most of the time don’t take a good look on Self directed IRA accounts. But if you thoroughly examine the whole feature of this IRA, you may deem it as the best and the most effective retirement account for you especially if you prefer an account that provides you the right to take full control of your assets.

When you open a Self directed IRA account, you’ll be delighted to know about the wonderful opportunities it can give you as a contributor. As its name denotes it, you can build and establish all your investments through your direction and management. You can in real fact house your funds in assets that include real estate market, partnerships, franchises, mortgages and other kinds of investments.

If you are already decided that you want to invest your money in a particular business, the first thing that you should accomplish is to consult a custodian or an administrator, who will facilitate your paperwork needs and will buy the investments and assets that you want to take control of. Remember, that this doesn’t in any way reduce your power over your Self directed IRA because the management of your assets is ultimately your task.

One of the best investments for a Self directed IRA is the real estate market. You can also grab hold of the chance to lend funds in your retirement plan, so you can invest in some mortgages. Other types of assets that you can obtain through your Self directed account are franchises, companies and partnerships.

The other types of IRAs more often than not are not allowed to invest in industries that are high-risks; this somehow lessens the generation of high profits and gains. But when you have a Self directed IRA account, you can put your funds in non-conventional assets or high-risk businesses as long as they fall under the guidelines of the IRS.

There are numerous kinds of self directed IRA investment options that you can get hold of, especially if you have the comprehensive understanding on how you can run the business you chose to put your money in. Investing in high risks assets can be dangerous, though the gains and profits can be huge, particularly if the assets you’ve got perform very well in the market.

Many people are afraid to go for self directed account because they find it to be quite complex, but if you are a business savvy individual and you like taking risks then this may be the best individual retirement account for you. Another significant factor that you should have when you open this account is an all-inclusive and comprehensive business plan, so you can manage your investments well.

Always keep in mind that the success and profit generation of the Self directed IRA account relies on you solely. Learn the self directed investments basics before starting on any IRA or investment plan.

Article Source: EzineArticles.com

I Want To Catch Up On My Retirement Planning What Should I Do?

megdilts — Wed, 27 May 2009 15:13:57 +0000

Good question and even better, you’re thinking in the right direction about your future which is someday retiring. If you’re one of those people who haven’t saved any or very much money for your retirement, it’s never too late for you to start now! It’s important that you do start and soon. It doesn’t take long for age to slip up on you fast if you know what I mean! So, just get started on your retirement planning now while you’re thinking about it. You may want to consider some of these tips and information to get you started:

1) If the employer you are working for offers a 401K plan wherein you contribute a percentage of your earnings towards retirement, consider signing up for this plan! In most instances, the employer may match a percentage of the contributions you make to your 401K account. Your contributions can be made on a pre-tax basis which will help your money grow faster in your account.

2) You may want to consider taking a second job to add more income for your retirement. This will assist you in increasing the amount of money for your retirement fund. If you’re able to fit a second job into your schedule, make sure this would be feasible for you and your family without causing problems.

3) Save more of your money by cutting back on some of your expenses. You may want to reduce the number of times you eat out, go to the movies, shop, and any other areas you can cut back on to save towards your retirement.

4) Consider saving your change! That’s right, save your change. You would be surprised at the amount of money you can accumulate in a small amount of time by saving your change. Your change could be set aside for your retirement fund. So, start putting your coins away for your future!

5) Reduce or eliminate your spending on your credit cards. The less you pay on your credit cards, the more money you’ll have to save towards your retirement. So, if you can pay cash for that item you need to purchase, do that instead of charging it to your credit card. You’ll not only save yourself interest charges, but, you’ll have extra money to put away for your retirement.

6) If you have a home and are using it as a cash machine or atm by taking out your home equity via loans or a credit line, stop what you’re doing! Your home is one of your largest investments and will most likely be a retirement vehicle for you. You’ll either want to have your home paid off prior to retirement or be in a position to sell your home to obtain the equity to use as retirement income. If you have your home equity tapped out, then you will not be in the position during your golden years to enjoy your retirement. You’ll probably be still paying a mortgage that you may not be able to afford and will not have much money in your retirement fund.

It’s better late than never when it comes to starting your retirement planning. So, go ahead, start working on catching up with your retirement planning today, you’ll be glad you did!

About The Author

Nocita Carter is a writer and web designer that creates websites providing informative tips on various subject matter including personal finance tips on your personal finances at http://www.personal-finance-tips-for-you.com ; dating tips at http://www.mydating-tips.com and your choice of ebooks at http://www.ebook-corner-for-you.com