Retirement Tool

Start retirement planning early in your career

admin — Tue, 08 Nov 2011 21:22:40 +0000

Women tend to pay less attention to their retirement planning once children come along. Many mothers choose to stay at home while the children are young. Some reenter the workforce once the kids are in school and others don’t go back to work. Some women had started 401K at work prior to staying at home, but stopped completely contributing or saving for their own retirement.

The cost of stay at home runs very high and can dramatically lower the retirement savings. However, you don’t have to choose to ignore it even if you’re staying at home. You can open an IRA and keep contributing on your own. The continuation of saving for your retirement is far more important than putting away large sum to catch up once the children are in college or after you finish paying for colleges. The earlier you start the better. Even if you put away $3,000 a year, after 20 to 25 years, the nest egg will grow.

Many women think that they should fund the children’s education before funding their own retirement, you can do both. Just split the savings into equal amount each month.

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.

Stay at one workplace long enough to receive retirement benefits

admin — Mon, 31 Jan 2011 01:22:03 +0000

Sometimes you might need to stay at one workplace long enough to receive retirement benefits. In some companies, you may have to work for 5 years to become eligible to receive retirement benefits. Employers now do offer retirement plans such as 401K when you first take the job as part of incentives. The problems that usually occur with women employees are changing jobs, quitting work, or childbirth. Some women choose to stay at home until the children are in schools. These common interruptions cause some women to fall short of the time required to become vested with the company.

Before you take a job, check with the HR and find out what are the options. Sometime there are not many options during hard economic times such as now since most people will take whatever they can find. Negotiating retirement plans is not an option. Just keep in mind, even if your employer doesn’t offer the plan yet, you can always start your individual IRA.

Source: U.S. Department of Labor

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

Few women participate in employer sponsored retirement plans

admin — Wed, 08 Sep 2010 03:57:03 +0000

There are roughly 62 million wage and salaried women between the age 21 and 64 who are working in the United States. However, even before the economic trouble and high unemployment, only45 percent of the employed women participated in a retirement plan. Many people don’t realize the importance of compounding which simply means the earlier you start, the less you need to save and the more you will have. Remember, even small amounts can earn interest and add up over time.

If you are waged and your employer doesn’t have a retirement plan, you can open an IRA. Start by talking to your bank and open an IRA account. Most of them have a very small minimum requirement. You can put in very little each month. Try to setup a small amount that you truly feel comfortable and stick to it and forget about it. If you have a land phone line that you don’t really need at home, cancel it and use that money to fund your IRA.

If you are 25 years old right now, open your Roth IRA with $250 down and put in $50 each month until you’re 65. At 8% of interest, you will have $173,300 of tax free money when you’re 65. You can’t retire happily on that, but if you have other investments, and social security checks, you can be comfortable. Plus that’s just the savings from your land line phone bill. How can you beat that? With the same calculation, image yourself skip movies, shop second hand, skip Starbucks and manicure and put in $200 each month, with everything staying the same, you will have $676,906. Now you can really live comfortably with that on top of your social security checks.

Now how about skip lunches and bring your own sandwiches, at $7 a day, you can probably invest another $150 each month. Now the monthly contribution is $350. At 65, you will have $1,180,511. Congratulation!

Women are more likely to work in part-time jobs that don’t qualify for a retirement plan

admin — Thu, 12 Aug 2010 21:04:47 +0000

Because women are more likely than men to interrupt their careers to start a family and to take care of aging family members, they are often more likely to work in part-time jobs. As a result, these part-time jobs don’t qualify for a retirement plan. Thus many women work fewer years and contribute less towards their employer sponsored retirement plans such as 401K.

Regardless the working status, women need to plan ahead. Even if you’re a stay-at-home mom, you can contribute to an IRA. The limit now is $5,000 a year. If you work full time and qualify, join a retirement plan now. The earlier you start, the less you will have to contribute. Waiting until children are off college or your 50s is not a good plan in retirement planning.