Personal Finances and Retirement

Today we live in an economicworld more difficult to predict. This was not the case for our parents. Today future retirees benefit from the power of planning more than ever.

It may be more difficult to get from here to there than we think. Some future retirees will be successful with saving money, lots of it, working as long as they can, hanging on to their health insurance and then living comfortably on their pension or social security checks. Perhaps their accumulated savings are such that even with a significant erosion of their buying power over time they still will be successful; perhaps leaving substantially less to their heirs than previously expected.

Unfortunately too many future retires have lost critical savings in the 2008 collapse, face lay-offs, illness or disability, care for an ailing spouse, and or parents. Perhaps they are looking at tightening their belt, maxing out credit cards, tapping into 401k’s, bankruptcy, foreclosure, short sale or state assistance. They may be losing sleep over how they will live in older age in an economic world they can’t predict.

According to a study by Bankers Life and Casualty Company of middle-income boomers between ages 47 and 65 with incomes between $25,000 and $75,000 found:

14 percent have no pension and no retirementsavings.

55 percent have no pension and have saved less than $100,000.

67 percent say they are behind where they expected to be at this point in their lives in terms of financial readiness to retire.

75 percent expect to work in retirement.

48 percent don’t expect to pay off their mortgages before they retire.

60 percent envy their parents’ pensions.

Transamerica Study Reveals the New Retirement: Working

Transamerica Center for Retirement Studies® Finds Significant Number of Americans Plan to Never Retire, yet are Unprepared if the Choice is Made for Them

LOS ANGELES – May 17, 2011 – Research released by the non-profit Transamerica Center for Retirement Studies® (“The Center”) underscores how American workers are largely unprepared for retirement and further, how relatively few have a backup plan in the event they are forced into retirement earlier than planned. The results of the 12th Annual Transamerica Retirement Survey—conducted among 4,080 American workers—found that for many Americans, the foundation of their retirement strategy is simply to not retire or to work considerably longer than the traditional retirement age of 65.

According to The Center’s research, 40 percent of respondents now expect to work longer and retire at an older age since the recession began. Altogether, 39 percent of American workers plan to retire after age 70 or not at all, and over half (54 percent) of workers plan to work in retirement. Of those who plan on working after retirement or age 65, the most commonly cited reasons are out of necessity (44 percent).

While many workers may plan to work past the traditional retirement age or never retire, unforeseen circumstances could force them to stop working before they planned. The survey found the majority of workers are unprepared for this scenario—70 percent agree they could work until age 65 and still not have enough money saved to meet their retirement needs. This sentiment spans across age and income:

69 percent of those in their twenties and 72 percent of those in their thirties agree they could work until age 65 and still not have enough money saved,

80 percent of those with a household income (HHI) of less than $50,000 agree,

74 percent of those with an HHI $50-$100,000 agree,

And, 59 percent of those with an HHI over $100,000 agree.

Meanwhile, about a third of workers (31 percent) anticipate not just needing to provide for themselves in retirement, but for additional family members as well.

“With all of life’s uncertainties, planning not to retire is simply not a viable retirement strategy,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies. “Planning to work past age 65 is an important opportunity to continue earning income, save more, and help to alleviate a retirement savings shortfall; however, it’s important that workers be proactive in setting a retirement savings goal, saving and investing for retirement, and having a backup plan if they are forced to retire sooner than expected.”

7 Steps to Financial Retirement Plan Development

1. Quantify assets and net worth

2. Identify risks and insurance coverage options

3. Compare retirement expenditure needs against anticipated income

4. Realistically compare amounts needed in retirement against total assets

5. Invest wisely, safely

6. Relate investments and returns to living all throughout one’s retirement years

7. Keep your written retirement plan current

10 Not So Sexy Ways to Get Rich

  1. Really see what you really spend, what you really owe.
  2. Place more emphasis in your life on doing stuff instead of buying stuff.
  3. Expect the unexpected.
  4. Pay with cash as much as possible.
  5. Bring restaurant food home.
  6. Own an older, but nice used car – that’s paid off.
  7. Mow your own lawn.
  8. Balance your lifetime checkbook today.
  9. Err on the side of caution no matter how much money you make.
  10. Be conservative with your money and be proud of it.

12 Good Monthly Money Habits

  • Tracking your income and expenses.
  • Opening your bills when you get them.
  • Paying your bills online when possible.
  • Keeping the money in your wallet to a minimum.
  • Spending less than you earn every month
  • Reviewing your credit card statements for errors and erroneous charges.
  • Keeping a budget
  • Setting, and then regularly reviewing and updating your savings goals.
  • Ignoring the temptation to keep up with the Joneses.
  • Remembering to comparison shop whenever possible.
  • Regularly checking your credit report for errors
  • Maintaining an emergency fund.

Houston We Have a Problem!

10 Steps to Become Debt Free

  1. Understand your true debt, list all your debts thoroughly and honesty, and list your income sources as well. Then list your monthly expenses. Ideally, your income will exceed your expenses; otherwise tailor your lifestyle to your income. Paying down your credit card debt is a top priority. Learn to manage your money, develop a budget, and stick to it. Avoid stupid debts, such as time shares, gambling, and addictions. Find your spending blind spots and eliminate them!
  1. Learn about the loans you must and must not have. Always try buy with cash – you’ll spend less money this way as you feel your wallet growing thinner. Reserve a portion of your paycheck for debt repayment, and don’t back out of your repayment plan. Develop a repayment schedule and stick to it. Negotiate your debt! Call creditors and ask them to wave fees. Ask creditors to lower your interest rates and settle for less money. Creditors are willing to work with you if it means they get paid. Sell unneeded extras, like big screen TVs and motorcycles – yes, you can part with them. Whenever making a purchase, ask yourself, do I really need this? Can I downsize? Shop around for deals, and shop for gifts early to always find the best deals. Set aside Saturday for family day, and choose inexpensive activities. Having fun doesn’t always mean spending lots of money. Come up with new hobbies that don’t include shopping.
  1. Buy used cars – you don’t need them new. Remember, a new car loses 20-40% of its value as soon as you drive it. Always pay your mortgage on time. This is your most important expense. If you own your home by the time you retire, this will drastically cut retirement living expenses. Avoid refinancing and home equity loans at all costs. Downsize to a smaller place if you can’t afford your current home, and/or rent out any rooms you’re not using. Owning a house comes with great responsibility – don’t mess it up!
  1. Always know how much money you have left. Carefully keep track of your spending patterns with daily, weekly, and monthly records. Some good tools include Mvelopes, Microsoft Money, and Microsoft Excel. Expect that tracking your budget won’t be perfect in the beginning. It will take a couple of months of adjusting to get it just right.
  1. Emergencies are inevitable. You never see surprises coming. That’s why you’ll need to set up a minimum of three month’s (6 is recommended) income contingency fund for emergencies.
  1. Insurance is important, but don’t get ripped off; shop around for the best deals and know which insurances are worth having.
  1. A freedom account is useful for irregular expenses, such as repairs. Once out of debt, begin building this.
  1. To stay out of debt, always save for a purchase before buying anything. Know where your money is going and stick to a plan. Avoid impulse shopping, invest responsibly, and learn secrets of the rich.
  1. A good credit score is crucial. Request your score from your creditor, and make sure that there are no errors in the report. Your credit score is made up roughly like this: 10% type of credit, 35% payment history, 30% amounts owed, 15% length of history, and 10% new credit. Rebuilding credit is tough, but doable. Pay off debt instead of moving it around. Don’t close unused credit card accounts. Learn to set up your credit card configuration to increase your credit score. Avoid bankruptcy at all costs – it is not the solution, but the beginning of a new set of problems.
  1. The pressures of living with money can be immense. This is why balancing your personal health, relationships, and finances are crucial to prosperity, abundance, and personal peace. Take life one day at a time. Keep a positive attitude, learn to cope with emergencies, and remember that money cannot and will not solve emotional problems. In romantic relationships, each partner should receive an allowance for freedom of spending. Ensure that both people contribute to and are comfortable with guidelines you set together. Never hide your spending habits, and keep communication clear and open. Don’t blame relationships on money, and never use money as a weapon in an argument. You may consider opening separate accounts.

About Roger O'Keefe

My background is in education and finance. I'm a published author and photographer, former radio talk show host, and creative retirement planning expert. My work is a love of labor, I do not sell any products of any kind. I've appeared as a guest on more than 50 national and local television and radio shows. With a Masters in education, I'm a licensed educator and author of the “Future Bright Program” and the California State Department of Education “Teacher Appreciation Program.” I'm a member of the American Association of Retired Persons and the National Care Planning Council NCPC. I'm currently writing my second book and reside in the Rocky Mountains of Colorado. My mission is to reshape retirement planning one person at a time. Please visit my website and take advantage of the many complimentary online seminars, resources, and retirement planning tools.
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