Many will lose their jobs in 2009 due to redundancy exercises. If this happens to you, the very first thing you must do is remember not to take it personally. Job layoffs are usually about dollars and cents and not about personalities and job performance. Times are tough and companies are therefore forced to restructure. Get counselling if necessary if you have difficulty with the situation and to help you to move on to the next big thing in your life. Just as important as understanding that the redundancy is not really about you and is not to be taken personally is to very quickly determine how best to preserve your retirement benefits.
Recall a pension plan is not there to provide you with a lump sum in a redundancy exercise, its aim is to give you a stream of income upon retirement. You should therefore not follow the herd and take a lump sum if you don't have to. You should instead take steps towards ensuring as best as possible that your retirement benefits are preserved and not foolishly spent upon redundancy.
If you are a Member of an Approved Superannuation Fund, under the Pensions Act Schedule 1 you are entitled to a Statement which meets the information requirement stated in the Act. You will need this to understand what your rights and benefits are. The TD&R is the document that contains the rules of the pension plan and it is a requirement under the law that all who request a copy or to view a copy be allowed to do so.
You may be entitled to take early retirement and start receiving a retirement income immediately. Your TD&R will tell you if this is possible.
You may be entitled to leave your funds in the pension plan. Each pension plan has its own rules but usually if an employee has been contributing to a plan for more than 10 years, they can leave both their contributions and the employer's contributions in the plan until they reach the age of retirement. The benefit of this is that the deferred member will benefit from the employer's portion which they will not get if they choose to take a lump sum.
You may wish to transfer your accumulated contributions to another plan. The current pensions legislations provides that you may transfer your accumulated contributions to another Approved Superannuation Fund or Approved Retirement Scheme. This only refers to your own contributions. You should submit a written request to the Trustees regarding a transfer of the employer's contributions if you are a vested Member at your redundancy or Termination Date.
If you decide or are forced to take a lump sum you should be aware that you will only be able to get your employee contributions. The law only allows for the employer's contributions to be paid out in the form of a pension. Remember however that although this may be the option that is initially presented to you, it is not your only option.
You may contact the FSC if 'you are of the opinion that your benefits are being jeopardized'. You can go online at www.fscjamaica.org or call them at (876) 926-3917, 754-9581 or visit their offices at 39 - 43 Barbados Avenue, Kingston 5. Before you visit them go to their website and get the information they require to pursue your complaint.
Decide what it is you want and then act accordingly. It may seem a little overwhelming considering the major change you are going through but remember that life is an ever changing dynamic and at times a little strength is required. You can do it.
For customised direction on how to preserve retirement benefits post redundancy, call or contact us at 755-2093 / milestoneslifestyle@gmail.com or info@milestoneslifestyle.com
]]>
Vesting addresses whether or not after your termination date you will be eligible to a benefit which is based on the Employer's contribution and payable at disability, old age, and death. Vesting rules for an Employer's contribution are not the same for Employer-sponsored Superannuation Funds and Employee-sponsored Retirement Schemes.
]]>
Before outlining the ‘sources of income’ checklist, it is appropriate to restate some basic guiding principles. Planning for the future is about: (i) planning for you, your spouse, dependents and extended family members; (ii) having a clear vision about both financial and lifestyle issues; (iii) what if scenarios. For example, what if you have to make changes to your current standard of living and downsize? Have you decided what is or is not an acceptable level of downsized living? (iv) Monitoring strategy: Will you need your spouse or children to help you to monitor your retirement assets on a monthly or quarterly basis? Have you clearly defined your income targets in the event of disability, old age and upon death the lifetime income to your heirs and preservation of your estate? Have you determined whether your income targets should be 70% to 100% of your current and future income or some lower level? (v) Estate preservation: Do you have enough liquid assets in the form of cash or life insurance to pay for estate duties and taxes to ensure that your assets are passed on to your heirs?
There are six main sources of income that needs to be included in your financial plan that will be grouped into 4 categories. No one source is of greater or lesser in significance than the other. Together they provide the total income target you desire for meeting your future income and lifestyle goals: (a) State benefits – NIS and NHT. These plans require a contribution by both you and your Employer or you only if you are self-employed; (b) Approved Retirement Savings: these are Superannuation Funds and Retirement Schemes. An employer who has 10 or more employees establishes superannuation Funds on a discretionary basis. An Employer is not required by law to establish such a plan for its employees. Retirement Schemes are established by an individual (employed and not a Member of a Superannuation Fund or self-employed). You should become familiar with the retirement ages and vesting benefits for each Fund or Scheme in which you participate. (c) Personal savings and investments: this would include any investments that are earmarked for retirement only i.e. these are long-term investments and include life insurance and annuities. (d) Inheritance: as you would notice the word used is inheritance and not ded lef. This requires an attitude of preserving what one’s forefathers and mothers have acquired and having a strategy of how to enjoy it today while preparing to pass it on to your next generation.
Why not start today by answering the following questions and taking action: Where is my written plan located? Do I need help to write a plan? What monitoring strategy will I use? Who will be a part of my planning team? Do I have an up-to-date Will or Trust? What is my time horizon? Planning for the future affects so many lives, including your own. Remember, One one-coco full basket.
]]>
Disability: This can be temporary, partial or permanent. Have you ever felt so ill that when someone visited with you good health was experienced in that moment of fellowship? Recovery from a disability is a team effort: ‘We’. Even if you had maximum income to pay for medical treatment and other services, you will need someone to assist you through your period of disability.
Death: There’s a saying in the insurance industry that ‘life insurance is for the living’. The purchase of life insurance is not motivated by an ‘I’ strategy but the ‘We’ factor. The ‘We’ factor avoids one’s assets being frittered away and strategies will be put in place to provide enough liquid assets which pays for those final debts, provide an income for heirs and there will be a properly executed Will and/or Trust. Apart from individuals, persons who own businesses must also think of the ‘We’ factor. One such organization that readily comes to mind is JMMB …everyone knows who Joan Duncan was. Clearly, her vision was not only a successful JMMB but it included the ‘We’ factor. The outcome is that not only her heirs have benefitted but most importantly the people of Jamaica. A ‘We’ factor leaves no room for family squabbles over ‘ded lef’ but focuses on preserving the inheritance for future generations.
Divorce: When one gets married the minister usually pronounces that the two are now one. Upon the happening of this event the parties should end their ‘I’ approach and start a new thinking towards life for this oneness. Therefore the word ‘We’ becomes a major factor in financial planning. When a marriage ends in divorce some individuals see it as an opportunity to legally claim all the assets for themselves: a sense of ‘I’ satisfaction. Others see it as an opportunity to act in an equitable manner: ‘We’ factor. Even in divorce there’s a ‘We’ factor that needs to be planned for, especially where children are involved.
Arguably, your financial plan does have an ‘I’ status but only as it refers to defining your responsibilities. Otherwise, it’s the ‘We’ factor that makes planning worthwhile. In your retirement plan have you identified who belongs to your ‘We’ category?
]]>
Since retirement requires some measure of financial planning for the future, the earlier you begin to visualize the future the easier it will be to accumulate a meaningful guaranteed lifetime income. So begin to think through this question: (i) what are my sources of guaranteed lifetime income? Most persons have seven main sources of retirement income. Three of which are: state benefits (NIS), employer or individual-sponsored approved retirement savings and personal savings and investments.
Even with these income streams, there are still uncertainties such as whether the income can keep pace with inflation and your desired lifestyle. Most people see NIS as insignificant. Arguably, since you are required by law to be a participant, it should be considered as a foundation benefit plan: combined contributions from you and your employer is less than 10% of your gross taxable income and to a statutory maximum income level; the benefits are based on a formula. It is on this foundation that you build other savings and investments to provide an income of at least 80% to 100% of your actual income at your actual retirement date and an indexation of say 5% or 10% per annum.
Changes in the economy in recent times have seen fewer companies establishing Superannuation Funds (Fund). If you are a participant of a Fund, here's what you must do and know: obtain a copy of the Trust Deed and Rules and read it; make the maximum 10% tax-deductible and tax-deferred contribution; know the benefits payable as a result of disability, old age, death, winding-up and the vesting schedule. The foregoing areas equally apply to Approved Retirement Schemes.
So now that you have the first two sources of retirement income, what are you left with? Finding ways to save and invest more of your current income for retirement. Investing requires knowledge of your risk profile as well as your investment options and diversification to get the best overall return.
Time is your greatest asset, but only if you use it wisely. Start today to plan for the future and your retirement.
]]>
Perhaps you are thinking that you have just graduated, with student loan to pay, an entry level paying job, and just trying to make ends meet while still having fun. How then do you start to plan for retirement, when the time just doesn’t seem to be right? The good news is you are in your 20s and have over 40 years to accumulate the funds you needs for your retirement lifestyle. So if you start by saving just about any amount that you can afford to set aside, you will see yourself reaping the benefit in the later years, with tens of thousands of dollars in savings.
Let us look at what your checklist should be like to guide you on the exciting adventure as you plan your retirement future:
1. Start Saving: Begin with your employer sponsored superannuation fund. Take advantage of the plan offered by your employer and ensure that you are saving the maximum allowed. This money is automatically withdrawn from your salary so it is easy and convenient means of saving. If your employer does not provide this benefit then look at Individual Retirement Schemes, which will allow you to save for your retirement. Once again ensure that you are saving the maximum amount allowed under law. Don’t just stop there; set aside funds in other investment vehicles, first looking at those that offers tax free returns to maximize your earnings. You also need to create a fund, which will allow you a financial cushion in case of an emergency, and thus preventing you from dipping into your retirement savings. You should have 3-6 months of basic living expenses in short term savings set aside in your emergency fund.
2. Control your Spending: Create a budget and work with it. Track your spending so you can understand what you are spending on and how you make additional funds available that can go towards your retirement savings. Ensure that you pay yourself first, i.e. set aside the percentage you have decided on from your earning, as this is where the bulk of your savings will flow from to your investment funds.
3. Educate yourself: Make sure you take the time to understand the key concepts of retirement planning. In your 20s, the two main key success factors are regular contributions and asset allocations. As you move into your 30s onwards, you will need to understand what are the key success factors required to allow you to continue on the correct path for you to achieve your goals. Learn about the investment options available, the risk associated with each and when is the best time to take advantage of each and at what level of funding is required to achieve the best results. Make sure you understand your employer sponsored Superannuation Scheme or your Individual Retirement Scheme and the benefits that you can expect on retirement.
4. Use your borrowing power wisely. Keep your debts under control; limit your credit card debt. Pay down high interest debts as quickly as possible and as you reduce your debts use the available cash to increase your investment for your retirements and other goals. Consider using borrowings to finance investments. Ensure that the interest paid on these borrowings does not exceed the interest earned on the investment purchased, thus allowing your portfolio to receive gains in the long term.
5. Determine your Retirement objectives. What do you want to do when you retire? In your 20s these do not need to be permanent goals as you may want to make changes as your life evolve, but you should at least have a general sense of what you want to achieve. You will need to determine whether or not you expect to work during retirement, and if yes will it be part time or will you begin a new full time career. Other items you may which to give consideration to are: Will you own your own home and if yes will you still have mortgage payment when you retire. What will your lifestyle be like? Do you want to travel extensively, pursue hobbies and what are the costs associated with these activities? Remember the financial choices you make now will impact on your retirement lifestyle.
6. Estimate when you will retire. Whether you want to retire early or work until you are 75 years of age, you will need to look at how to fund the remaining years, when you no longer have a source of income from employment. The earlier you begin to save towards retirement the earlier you can retire as you would have earn soon rather than later the funds you need to support your lifestyle.
7. Evaluate. Along with a professional, ensure that you evaluate your retirement income resources on an annual basis. This will allow you to make sure you are on track and can make any changes required to your investment portfolio or retirement plans as early as possible to maximize the benefits that can be gain. Evaluation will also be required as you move into another decade of your life and life-changing events occurs.
8. Safeguard your financial future. Even if you are saving regularly, spending wisely and investing strategically, you are not adequately managing your retirement investments if you have not taken steps to protect your retirement and other assets as well as, your earning power, yourself and your family with insurance and a will. These financial instruments will help you to avoid the negative effect that can occur on the event of losses associated with accidents, illness, fire, theft or death. Bear in mind that the younger you are, health and life insurance coverage are usually more cost effective and hence it suits you have purchase these in your 20s.
9. Seek Professional Advice. As you go through the checklist and begin to implement some of the action items seek professional advice. Speak with your financial advisor, your attorney, your retirement consultant to name a few, so that you can receive the assistance you need to set retirement goals and develop an appropriate strategy for reaching each of them.
10. Stay on track. You are starting your retirement planning when you are young but it is an ongoing process and therefore you need to stay on track on to yield the desired results. You can do this by managing your finances wisely, sticking to your budget, periodically reviewing your retirement goal and ensure they are still applicable; adjusting your saving and investment plans as needed, increasing your retirement savings as your income increase and updating your insurance coverage to reflect the changing stages of your life. Remember at all times, your retirement saving is not extra cash for a vacation, to fund educational expenses and definitely not an emergency fund. Don’t think about withdrawing from it or borrowing against it; just pretend it is money you don’t have and you will be better off in the long run.
Make the move today; your retirement future is in your hands. The sooner you get started, the longer your money has to grow and work for you. By beginning the planning and investing now, you will soon be well on your way to achieving your retirement goals.
]]>
If you are just beginning your retirement planning, you will find yourself in one of three financial positions. You will either have no debt with no savings, no savings and debt, or a family, house, car, and everything that goes along with life at this stage in the game. Even those individuals, who have already started to save, possibly through their employer sponsored superannuation fund, still fall more or less into one of the three categories. Don’t despair however, always remember that it is not how old you are when you begin saving, but when you plan to use the money that counts.
So if you are just beginning, while the situation is far from dire, you do need to move quickly to take advantage of opportunities that will improve your financial position, bearing in mind your overall retirement plan.
Action plan for individuals with no debt and no savings: If you have no debt and no savings; there are some simple solutions to your retirement plan. Begin by building an emergency account. Do not worry about starting with a large sum of money, just start with any amount of available cash as you can increase this over time. The main point is to ensure that you consistently save to build this fund and not withdrawing amounts to fund regular living expenses.
Next, if you haven't done so already, look into beginning to save for retirement with a tax-deductible and deferred retirement account, such as your employer-sponsored superannuation fund or an individual retirement scheme. If you are currently saving in one of these funds or schemes look at increasing the amount, if you have not done so already, to the maximum allowed under the Income Tax Act.
Action plan for individuals with no savings and debt: If you have no savings and debt, a much more common scenario, you can also be saving and surprisingly, without too much pain. You may be living somewhat beyond your means, as you have financed your lifestyle with money you didn't have. The simplest way for you to get back on track is to build a spending framework in the form of a budget. Budgets are like road maps; they will provide you with an overview of where you are now. They will detail your income and what you owe, showing you how much you have left to spend or save in a given period of time; usually this is done for a one-month period. Bear in mind that your money is not working for you if you are servicing debt. It is therefore important that you stick to the budget so you can begin to have more funds available for savings and earning income as soon as possible. There are assets you want to purchase, such as a home; asset of this type will serve you well in future years.
Action plan for individuals with family, house, car and no savings: If you fall into this last category: family, a house, a car (possibly two) and no savings, now is the time to change that. It now becomes vitally important to begin to use your employer’s sponsored superannuation fund to jump-start your financial plan for retirement. Most fund of this type will see the employer matching your savings, which immediately provides a return on your funds. Work on living within your means, improving your earning power, which will in turn increase your savings and investment potential, even as you enjoy yourself.
What if you are amongst the few individuals who actually started planning for retirement in their 20s, what do you need to do now in your 30s? You continue to keep on track. Even as you focus on today’s opportunities and challenges, be sure to keep tomorrow in sight. It is important that you continue to build a foundation today for the kind of life you want in retirement.
As you establish your career and your earning power increases, your 30s are a great time to further build your retirement savings foundation. You will want to revisit your overall retirement plan as you start to support a family, make long term purchases such as a home and pay off debts that may arise during this period, and give consideration to other changes in your life.
Your checklist in your 30s should include the following:
1. Continue saving: Review whether you are still paying yourself as much as you can afford to save. Target to save at least 10% of your income every month. Consider adding a portion of or all of your net bonus or other lump sum payments to your retirement savings fund. This will allow you to accelerate your savings. Continue building an emergency fund, having up to a year worth of funds to cover expenses will help you weather any emergency without dipping into your retirement savings. Do not reduce the amount you are currently saving in your company sponsored superannuation funds or individual retirement schemes despite the additional expenses you may be incurring during this period.
2. Watch your spending: Keep debt down, do not get derailed by debt even as you seek to raise your family or purchase a home. Continue to manage your expenses using a budget to ensure that you are not reducing your savings to cover expenses without realizing it or determining how you recoup later on.
3. Put your investments in the right places: In your 20s you may not have put too much thought into the amount of risk you are willing to take with your savings. Now, as you develop a better idea of your needs and expectations, take the time to make sure your investment strategy aligns with your risk tolerance and your time horizon for retirement. As your savings grows, it is important that you review and understand the asset allocation between the various types of investments. It is also important that you seek professional advice to ensure you are maximizing your opportunities.
4. Don’t let a better job derail your retirement plan: If you getting ready to change jobs during this period or seeking opportunities overseas don’t let your retirement fund take a hit for that decision. Too often, individuals on leaving a company opt to take cash out of their retirement savings instead of leaving it for a deferred pension on retirement. Bad timing is also another factor that can be a costly trap. Company sponsored superannuation funds normally requires that you work for a number of years before you are eligible for full benefits, i.e. eligible to receive the funds contributed by the employer. This is known as vesting. If you are about to pass a vesting milestone that will enable you to keep more, or all, of your employer’s contributions and pension benefits, it may be well worth it to wait before you leave for a better opportunity.
5. Ensure that you are safeguarding your financial future: As you start a family and take on additional responsibility in your 30s you need to review the safeguards you have in place to ensure that are still adequate for the changes that have occurred in your life. You may need to increase your health insurance coverage to include your family, life and disability insurance coverage. Planning for the distribution of your estate needs to be revisited and this will include updating your will.
6. Refine your retirement plan: Revisit your retirement goals and the plan you created. Are they the same as in your 20s? If you have since married does this plan now include the goals of your spouse? Check your investment assets and your liabilities; are you still on target?
7. Continue to seek Professional Advice: Continue to maintain a close relationship with your professional advisers. More than ever you need to have a great team of professional to support you as you continue to build your overall retirement plan. Your Financial Advisor, Legal Advisor and Retirement Consultant, amongst others, will all have a role to play in ensuring your successful retirement at the end of the day.
8. Continue to stay on track. Remember this is an ongoing process and you need to stay on track to yield the desired results. There are a lot of changes occurring during this decade of your life, but you have to remain focus on the long-term goal – a successful and financial secured retirement. Continue to manage your finances wisely, stick to your budget, periodically review your retirement goals and ensure they are still applicable in light of the changes that may have occurred in your life; adjusting your saving and investment plans as needed, increasing your retirement savings as your income increase and updating your insurance coverage as required to ensure financial stability at critical times.
The attitude you bring to life is more important at this stage than ever. You can see the future and have made tentative plans on how you will get there. You need to look forward to forty, and fifty, and even sixty as something worth achieving. Making the right retirement moves now will allow you to move forward with no regrets.
]]>
Even if a woman is covered by her spouse's pension plan, 80%-90% of all women will be responsible for their own finances for at least part of their lives. It's also true that most women who were financially fine while married live in poverty once widowed, as usually their husband took care of the financial planning and therefore, they are either unable to carry on or have no idea what is happening. Females therefore need to recognize that retirement planning for women is for ALL women, not just for single women.
Women who are married usually believe that even if they have no pension of their own, they can rely on their husband’s pension, but they are so wrong. Think about it. A couple is living on the husband’s pension, and the woman dies. In this scenario the husband suffers no financial loss and though grief stricken, financially life goes on much the same for him, as he continues to collect his full pension. Let’s look at the other side of the coin. The husband dies first, and this is usually what occurs. His wife will probably get a 50% survivor benefit, which won’t come close to providing the income she needs to carry on with the same life style. Alternatively, she could receive as his beneficiary, a pension depending on the number of years remaining on the option chosen. What she will receive and for how long is not within her control. Unlike her husband, his death affects her financially so unless she has another source of income when this occurs, she runs the risks of entering into or close to poverty.
There is no reason why a woman cannot plan for her retirement on her own, even if she is married. She can create a road map for her retirement and then can then be incorporated into a plan for the couple. It would ensure that should she live longer than her husband that additional period is taken care of in the plan. It is not a task for one partner, but for both and women need to recognize that they too have a responsibility for their own future, their retirement future.
Many a time, women postpone retirement planning because they feel daunted by the sheer magnitude of the task. There is no need to feel overwhelmed, once this task is started you will realize that it is not really as hard to complete as you initially thought. The activities involved in retirement planning for women are about the same as for men retirement planning. You have to think about your future and what you want to accomplish when you are ready to stop working and start enjoying life a little more. You need to think about this because you need to think about the amount of money that you rely on to get you where you want to be when retirement arrives, whether it is a few years away or twenty years down the road. You have to start planning so that you are ready and prepared with no worries for when the day finally comes.
You should seek help from the various professional advisers, such as a retirement consultant, financial planner or investment advisor, so that you are ready and able to retire when the time comes. These individuals will be able to assist you in figuring out how much money you are going to need to have for retirement and how to invest your money properly so that you are secure. Every woman needs to know that they are secure and have taken the right steps to prepare themselves, as well as their family, for what lies ahead down the road.
Whether you are married or not, here are a few steps to guide you as you take on this challenging task:
Make retirement plans a priority when you consider accepting a job offer
Make a good retirement plan one of the major benefits that helps you to decide on whether or not you take a job. Look for employers who will match part or all of your saving in a contributory plan, whether it is a pension fund or retirement scheme. Sacrificing some of your current salary now to achieve your retirement goal in the future will be well worth it.
Work as long as you can at the highest salary you can
Work for as long as you can, and in particular ensure that you work as long as you can at the highest salary that you can achieve. The older you are when you retire is the fewer years you will have to fund. The higher your salary is the more you have set aside in your retirement fund to which compound interest will apply. The same will apply to your National Insurance Scheme (NIS) and National Housing Trust benefits.
Make sure you stay at a job long enough to earn retirement benefits
Each employer will have different periods for vesting i.e. the time period in which you will have to work at that company to be able to access a pension. Most companies are now at 5 years; you will need to ensure that you obtain this information on employment, as it can vary. Too often employees, especially women, quit work, transfer to another job, or interrupt their work lives just short of the time required to become vested.
Taking responsibility for your own pension on retirement
If you are not employed or can access a company pension fund, you can take on the responsibility for your own retirement benefit fund by saving in a retirement scheme, which will provide you with a pension on retirement.
Understand the effect on NIS benefits of divorce and remarriage
If you divorce, you are not entitled to a widower payment based on your ex husband’s NIS payment. If you are receiving a widower’s pension and remarry or enter into a common law relationship this will cease, with receipt of one year’s lump sum payment from the date of the marriage/new relationship. Even though you lose this right under these circumstances, you'll be entitled to collect payments based on your new husband's or common law partner’s benefits. Make sure you are aware of the state benefits that are applicable to you and the conditions attached to them for payment to be made.
Put money away for retirement on a regular basis
It does not matter if this was not a priority before, start today and start now. Use the 10% of your salary rule or less if you cannot afford to save as much as 10%. The important thing is to begin saving so you can build a nest egg for the future. Begin to treat this as another one of your family expenses, which must be dealt with as any other on the list. At the end of the day your family will also benefit from you having taken this approach.
Learn about your finances
Begin to pay attention to financial matters that affect you and your family. Make sure you understand them and can manage the activities associated with them. Get your professional advisors to explain anything you do not understand.
Identify your financial assets and debts and begin to save for your future by paying down debt and budgeting.
If you are married, be sure that you and your husband each understand what you own and what you owe, and use insurance to plan for the possibility of death or disability. These will all play a role in completing your retirement financial plan.
It’s up to you; you no longer have an excuse not to take charge of your retirement planning. Start Now!!
]]>Bear in mind that retirement planning in your 40s will perhaps be the single most important step you will take to prepare yourself for your retirement years. If you are just beginning to start the planning phase, you will have some serious catching up to do. On the basis of better late than never, how do you get this done? Let us look at some of the items that should be included in your action plan:
You have no time to waste and cannot afford mistakes. Begin by educating yourself – ensure your knowledge is up to speed on what you need to do to ensure a successful retirement. Contact professional advisers such as financial advisors and retirement planning consultants to help you create a plan and implement the retirement strategy best suited to your pre and post retirement lifestyle.
Next, if you haven’t done so already, look into beginning to save for retirement with a taxdeductible and tax-deferred approved retirement savings plans, such as your employersponsored superannuation fund or an individual retirement scheme. If you are currently saving in one of these funds or schemes consider increasing the amount, if you have not done so already, to the maximum allowed under the Income Tax Act.
At this stage of your life retirement savings must be your top priority. More than likely you are at the peak of your career, earning more than you did in your 20s and 30s. Put that salary increase to good use and invest wisely in assets that will increase the value of your investment portfolio and improve your income earning power at retirement. Begin to focus on lowering your living costs. The lower your living cost becomes the more money you can set aside for investment and the faster your retirement savings will grow. One way of doing this is paying down the mortgage on your home and reducing your monthly payments.
A similar action plan should be taken with high interest rate credit card debts. Be careful with your investments, stay close to your investment adviser and don’t be overly aggressive in your investment action. Determine your risk profile and use it to manage your investment portfolio. Remember you cannot afford to make an error at this time as you will not have sufficient time to recover. Review your savings portfolio performance at least twice per year to ensure you are on track and taking advantage of all opportunities. Actively manage your portfolio which will include your long term retirement savings, your retirement investment savings, your short term fund, your superannuation fund or retirement scheme savings, as well as, your emergency funds. Is there anything you could have done differently? Is everything on track?
Do you need to make any changes? There is still time in your 40s to make changes or rearrange your savings strategy in areas that have not worked out as expected or even those whose performance exceeded your expectation.
Providing for your children’s university expenses and at the same time you are just beginning to save for retirement can prove to be very challenging, but in the final analysis don’t allow yourself to make the choice of foregoing your retirement savings to provide this good start in life for your children. Bear in mind that financing a university education can be done by using grants, scholarship and even loans, but none of these will be available to fund your retirement. Act wisely, start your research on what is available to fund a university education and begin to plan in advance so when the moment arrives you will not be dipping into your retirement savings.
Begin to look at how to protect your savings by ensuring that you have in place sufficient life and disability insurance to cover unforeseen events such as longdisability which can lead to early retirement. In the case of a couple (married or cohabiting) the loss of a spouse could reduce income levels and impact on retirement savings and guaranteed lifetime income. Additionally, the occurrence of natural disaster could result in the loss of one of your major assets such as your home.
Always remember you are trying to create wealth in your 40s and your efforts must be focused on accumulating as much as possible, closely mirroring what you would have accumulated, had you started in the previous decades. For those of us who had began thinking and planning for retirement in our 20s and 30s, now that you are in your 40s your game plan for this decade will be to maximize your opportunities, continuing to refine your strategies and begin to implement action plans that will reap benefits as you approach the next decade.
Your checklist will include the following:
Continue saving: By now you earnings have increased, instead of improving your standard of living to match your increased income, place that extra fund in savings, as if it never existed.
Continue to improve your emergency fund aiming to have a savings balance which will cover one year’s worth of living expenses. In addition you now need to start creating your medical fund which will take care of medical expenses not covered by your current health insurance plan, whether from your company or the state.
Continue to keep your debts under control: The idea is to completely eliminate debt, so create and begin to implement a plan that will allow this to happen. The best debts are those that allow you to earn an income such as the purchase of an investment property which can be rented or a loan which is placed on investment earning more than the loan interest rate.
Put your investments in the right places: Even as you shift into high gear with your investment portfolio bear in mind that you now need to actively manage your investment portfolio. You now have a better idea of your lifestyle at retirement and you need to determine the funding required for supporting this lifestyle, as well as any gap in your investment portfolio. Your emphasis now should be shifting from growth to income preservation options. It is also important that you continue to seek professional advice to ensure you are maximizing your opportunities.
Saving for college: You will want to assist your children with their university education, but not at the expense of your retirement savings. If you have not done so already begin to set aside funds specifically designated as college fund. Do this as tax efficiently as possible. Work with your child to identify alternate source of funding their education and remember at all times, your retirement fund is not available for use on any other expense but your retirement.
Preparing to assist elderly parents:
Don’t wait until your elderly parents are in need of your support financially or otherwise before you begin to create a plan for them. Create that plan now and determine how it will be funded. Do they have savings of their own? Do you need to supplement it? Do they have sufficient insurance coverage whether life or health coverage? Do they have an estate plan? What will your responsibility be? Ensure that you do not allow this to negatively impact your retirement plan.
Remember don’t let a better job derail your retirement plan: This is a decade in which you can anticipate changes, whether from within yourself or even your company.
As your reach this cross road you may begin to want to make a change in jobs or even careers as you look toward the future. Create a plan of action to ensure that you do not derail your retirement plan and you take advantage of opportunities that will arise to safeguard your retirement plan. Opting to take out your funds from your company superannuation fund should be a last resort and only if you are sure that you can manage this more effectively to generate the required level of income to support your retirement lifestyle. If you are a member of an approved superannuation fund and terminating employment either for a better job or redundancy ensure that your departure is within the time period required by your superannuation fund to be vested i.e. eligible to receive the funds contributed by the employer and full benefits from the fund.
Once you pass a vesting milestone while you are with your current employer you have more or less secured a guaranteed source of income available at retirement. To ensure that you do have this benefit, you should check the vesting conditions in the Rules of the plan. Ensure that you are safeguarding your financial future: By now a lot of changes have occurred in your life. Have you reviewed your financial safeguards?
Do they adequately
cover the changes that have occurred in your life? You may need to increase your insurance coverage for items such as life, health and disability insurance coverage, as well as, insurance coverage for your assets which can be affected by unforeseen events.
Start Estate Planning: By now you would have acquired most of your assets, and hence it is time to begin thinking about your estate and how you will transfer them to your beneficiaries. Aprofessional such an attorney can be very helpful in this process. An attorney will be able to advise you on the various tools available to carry out this activity, such as trusts and wills.
Reinvest in yourself:
Retirement as we know it as changed. What are you plans to deal with these changes? How about reinvesting in you? It is possible that you could be on your third or fourth jobs and possibly looking into a new career all together. Maybe you just want to improve on your skills and job knowledge. Investing in yourself doesn’t always means money, it could be as simple as joining a charitable group or becoming a mentor to develop a broader view on life and demonstrate acquire skills and interest that round out your profile. Whether it is a financial investment or not, this decade would be a good time to begin to invest in skills, knowledge and opportunities that could be of benefit to you in the future.
Refine your retirement plan: Revisit your retirement goals and the plan you created. Are they the same as in your 30s? Do you need to revisit your planned retirement age, determine whether you will retire at an early, normal or late age? At this point of your career, you will have an excellent feel for when you would like to retire, how much you will need when you and where your current career is likely to take you. Base on this you should be able to refine your retirement plan to more accurately reflect your planned lifestyle. Review your investment assets and your liabilities; is there a gap between what you require to fund your retirement lifestyle and what you are likely to earn at that stage of your life? Continue to seek Professional Advice: At every stage of your life continue to maintain a close relationship with your professional advisers. More than ever you need to have a great team of professional to support you as you continue to refine and monitor your overall retirement plan. Your Financial Advisor, Legal Advisor and Retirement Consultant, amongst others, will continue to have a role to play in ensuring your remain on track to achieving a successful retirement Continue to stay on track. The process continues and you need to remain on track to yield the desired results. With the knowledge you have gain over the last two decades, as you go through your 40s it is easy to be derailed as you grappled with homeownership, children’s education and the care of aging parents, even as you seek to pay down your debt. You must remain focus on the long term goal as you now have less time to recover from missteps.
Continue to manage your finances wisely, stick to your budget, periodically review your retirement goals and ensure they are still applicable in light of the changes that may have occurred in your life; adjusting your saving and investment plans as needed, increasing your retirement savings as your income increase and updating your insurance coverage as required to ensure financial stability at critical times, and begin your estate planning.
As you get ready to face the challenges of this decade, keep in mine that it is not too late to get started on your retirement plan or to begin to make changes on your plan if you believe it no longer meets your goals. You still have important decisions to make and plans to fulfill before you retire. Even so you now have a greater sense of who you are and what you want to achieve from life. Use that knowledge to make the most of the years ahead, for yourself and your family, and create your dream retirement
]]>Of course, the trick part is the dangers around. Funding higher education for your children can put a dent in your retirement saving, illness and disability, as well as, layoffs are real possibilities. These, along with high debts, can cripple finances. Poor planning, insufficient insurance protection and adult children who return home, all pose additional risks to your financial retirement security. If you had not commenced planning and saving in the previous decades, did not plan properly or just did not save enough, you now need to make crucial decisions, such as the timing of your retirement, where you will live and the lifestyle you can afford, in order to get yourself in the best financial shape possible at this milestone.
Some of the factors you will want to take into consideration are: Putting your retirement on the front burner. You may have other obligations relating to your immediate family such as your children’s education or providing for you aging parents, but saving for your retirement still needs to be your priority, more so now than ever. You are close to the finish line but there is still a bit of way to go. Begin to actively plan for the lifestyle you want to have and determine what it will cost. Think about factors such as what age you want to retire, where you will live, what will activities you will now get involved with on retirement.
Reconsidering your career choices. If you have just started to save for retirement the longer you are employed the less you will need to save. Work can have social, emotional and economic benefits, but what if you hate your job and was looking forward to leaving? Now would be a good time to determine if part time work in another field would be right for you or would it be better for you to start your own business on retirement. Despite the benefit to be gained from going back to school and learning a new skill or increasing your knowledge, your 50s would not be a good time to do so on a full time basis by using borrowed funds or dipping into your retirement savings. You are unlikely to recoup the investment and you could end up saddled with educational loan repayment well into your 80s. At this stage of your planning if you are going to reinvest in yourself do so out of current earnings. If you are going to start a business do so now while you are employed to test if it is viable for the long haul.
Accelerating debt payment. If you are just starting to save ever extra dollars should go toward your retirement savings, but where you have met your saving goals and have received additional funds use these to pay down your debts. This will allow you to be able to live on less when you retire as your expenses will be less. Start off with your credit card, doing this by stop paying just the minimum payment each month and applying as much as possible to your card balances.
Begin to save and invest aggressively but not recklessly. It cannot be said often enough: ensure that you are saving the maximum allowed in your employer-sponsored superannuation fund or a retirement scheme. If you are not doing this already, begin to do this now. If you are already doing so then start to take a look at other saving options and top up the funds you are setting aside, including your emergency fund. Don’t be too conservative, as you still have several decades for your retirement earnings to grow. Note that this depends on when you decide to retire, as well as when and how much of your retirement fund you draw down in the years ahead.
Consider downsizing your current lifestyle. Your focus now is on preparing yourself for the future. You may wish to consider relocating or downsizing your current housing accommodation. If you are living in a property which requires high maintenance, including mortgage payment, you may wish to sell and purchase a smaller less expensive home, or rent it either partially or in full, identifying cheaper but comfortable accommodation which will allow you to save more. In doing this, you would have been able to take out the equity existing in your home. This would have a major impact on boosting your ability to invest more in your retirement saving fund in a short period of time.
Having implemented some or all of the strategies above to jump start your retirement planning or if you had done so in your 20s, 30s or 40s, don’t just stop there. Your 50s is a time for focusing on income growth and reducing risks, consolidation and refining of your retirement assets with your retirement goals and ensuring that any gap that now exists is plugged. These are important years for preparing for your retirement. You have to start preparing yourself psychologically, socially and financially, staying on top of your planning by continuing to follow your checklist.
Your checklist in your 50s should include the following:
Continue saving: Your earning power and ability to save are at their highest. Make the most of this opportunity. Bonuses and other lump sum payment should be earmarked for savings, your emergency fund is now aiming to exceed a balance which will cover one year’s worth of living expenses. Your medical fund should also be in place, as well as, funding to cover expenses relating to your children education and maintenance of your parents and other dependents.
Continue to keep your debt under control: Begin to maintain a lifestyle which will allow you to create as little debt as possible, while you continue to work at eliminating those that you currently have.
Ensure that you have credit insurance in place in case the unforeseen occurs such as lost of job or disability. This will prevent you from having to repay these debts from your emergency or retirement funds. Revisit your investment and tax strategy: As you move into the stage where you will begin to see the benefits from your investments, ensure you are withdrawing wisely and tax efficiently. Investing at this stage typically tends to be a bit more cautious. Time is working against you since you have fewer years to make up any losses. Ensure that your investment portfolio is now positioned to ensure that you earn sufficient income in the years ahead. You should be revisiting your assets allocation, giving consideration to putting more of your higher risk investment into less volatile assets, bearing in mind that you will still require assets in your portfolio that will allow you to stay ahead of inflation and preserve the purchasing power of your income. It is important that you continue to seek professional advice to ensure you are maximizing your opportunities.
Begin to work out your retirement income strategy: Start planning how you will convert your assets to a dependable income that can last your lifetime. Within your portfolio you will have various asset types some of which are not readily convertible to cash such as real estate and others such as stocks which can be sold in a relatively short period time, compared to those that can be considered cash but to obtain maximum value must be encashed in accordance with their contract. By this time you will have decided when you want to retire, how much income you will need and be able to determine what your current retirement savings are projected to be by the time you retire.
Use this information to identify your sources of income for retirement and assess what your monthly expenses will be. Understand the risk of how longevity will impact on your plan, as well as healthcare and inflation. Use these factors to determine what your retirement paycheck needs to be and create a withdrawal strategy that’s right for you.
Do a benefit check up: Bear in mind that you may be accessing benefits from your company superannuation fund or a retirement scheme. Understand these benefits, as well as the role guaranteed income with annuities can play in helping you to meet essential expenses in retirement.
Encourage your adult children to be financially responsible: If your children are out of school and not disabled, they should be economically independent. If they are still reliant on you for financial support they are putting your retirement future at risk financially as well as their own. Take steps to prevent this from occurring now.
Review the safeguards in place for your financial future: Always ensure that you are protected from the unexpected. Review your insurance coverage to ensure that your family is adequately protected as well as your assets. Life Insurance will ensure that they have replacement income in the event you don’t outlive your spouse or vice versa. Disability income insurance will ensure that you continue to have a source of income should you become disabled before your planned retirement age. This will prevent you from accessing your retirement savings before the due date. Your home and or other real estate investments are important retirement assets within your portfolio and you need to ensure that at all times that they are sufficiently covered with homeowner’s insurance to secure you against any losses.
Complete Estate Planning: Ensure you have taken steps to protect your legacy and minimize the tax consequences for your beneficiaries. Awill should be in place or a trust for the distribution of your assets in accordance with your wishes.
Consider giving a trusted person durable power of attorney to make financial and other such designated decisions for you in the event that you are unable to do so yourself. Seek the assistance of a professional such an attorney to guide you through this process and develop the various legal documents.
Revisit your retirement lifestyle plan: Is the lifestyle you envisioned in your 40s the same one you want to continue to plan towards as you now get closer to retirement?
What about your spouse? Have you shared your vision with him/her and are their goals a part of this plan? It is important that you both discuss and work out any difference in lifestyle from now. Are you now contemplating early retirement and the cost involved in doing so? Can you afford the lifestyle you are thinking about based on your current savings and expected benefits, as well as investment balance at retirement?
These just some of the questions you need to begin to ask yourself as you review and refine your retirement plan. This assessment needs to be carried out as quickly as possible as it will impact how and if you can fund your retirement goals when the time comes to do so.
Practise your retirement lifestyle plan: You may be thinking of starting a new career, moving to a new parish or country, doing social work or just taking on a new hobby. Practice is the only way you will know for sure that you will enjoy doing these things for a lifetime.
Visit the place you are planning to live on retirement, do so at varying times, so you can get a good feel of what it would be like to live there. Get involved with the various social and charity clubs and begin to play an active role. Start that new business part time, which will give you the bonus of additional income now, and allow you to easily incorporate it in your lifestyle. By doing this you are well on your way to creating the lifestyle you envisioned.
Continue to seek Professional Advice: Your 50s is no different than the other decades before. As you get closer to retirement your need for professional advice increases.
Continue to maintain a closer relationship with your advisers as you seek to refine and monitor your overall retirement plan, to ensure success. Continue to stay on track. It is more important than before that you remain focused; one wrong move could spell disaster for your retirement lifestyle plan. Continue to manage your finances wisely, reduce your expenses/debts, periodically review your retirement goals and ensure they are still applicable in light of the changes that may have occurred in your life. You are at the peak of your earning power, make sure that you use this to your advantage to increase your retirement savings and ensure financial stability at all times.
Good retirement planning changes as your life progresses based on your circumstances and life events. Your strategy must always be open to ongoing monitoring and adjustment. The most important step in preparing for retirement is developing a plan that fits your lifestyle and in your 50s you will have refined what that lifestyle will be. There is never a right or wrong retirement plan, just one that suits you and your family.
]]>Your 60s is the time to prepare for the changes retirement will bring, most importantly the financial changes that will occur. Instead of earning a pay cheque, check you will now create that paycheck pay cheque for yourself. If you have not been saving this decade, now really is the last opportunity to put aside retirement dollars, so all is not lost. Your financial position could be better than you think. You may have no major expenses, such as mortgage, children expenses, or even if you do, they will soon be behind you.
Perhaps you even have an inheritance and no other dependents. You therefore have funds you can begin to invest to create your retirement income.
It can be overwhelming to realize that you are not financially prepared for retirement when it looms around the corner. Put your worries aside and begin to take action now, focusing on the time you have left. To build or increase your retirement saving during this decade, you will want to take into consideration the following:
Working longer. Bearing in mind that individuals are now living longer, you and or your spouse can expect to live up to 30 years after retirement. You want your retirement income to last as long as you and hence early retirement will not be an option for you. The longer you remain employed, the more funds you will be able to accumulate and the fewer years you will have to worry about funding your retirement lifestyle. If you are unable to continue working full time, you can consider part time employment.
Decide on your retirement lifestyle. You can no longer put this off, as the lifestyle you and your spouse decide on will drive the amount of income you will require on retirement. Calculate what your dream retirement will cost and review your investments to determine if you can afford that dream and if not, how can you fill the gap.
Maximize your savings and Investment potential. If you are comfortable in taking risk, it may benefit you to look at investments that are generally considered risky but on which the returns will be higher.
Discuss your portfolio with your investment adviser, bearing in mind that you can lose money as well. Use this strategy wisely, not recklessly.
Once again, if you are not saving the maximum in your company sponsored superannuation fund or a retirement scheme begin to do so now. If you are not participating in any of these retirement vehicles, then start right away, setting aside the maximum allowed. This you can continue to do throughout the remaining years of your working life.
Invest wisely: Even as you attempt to maximize your investment earnings, make sure you are taking advantage first of tax deferred investment such as retirement schemes and non -taxed investment options.
Eliminate debt and manage expenses. You don’t want to enter into retirement with lots of debts as that reduces the amount available to allow you to live your retirement as you had envisioned. In addition, unless you have significantly reduced your debts and are now actively managing your expenses you will find yourself with fewer less funds available for investment in your retirement funds. As you move towards retirement and the possibility of losing your payc chequeheck, you will be better off practicing practising from now to live on less.
Sticking to a budget will allow you to get the most out of your income now; with the up side being practice and you will be perfect on retirement.
You may even want to consider downsizing your living accommodation, allowing you to take out the equity in your home and relocating to more budget- friendly accommodation.
Healthcare checkup. You can do without a surprise health care crisis when you retire, especially if you no longer have health coverage. If during your working years your or your employer were or yourself was making contributions to the National Insurance Scheme, you will be able to enroll as a member under the government health scheme, NI GOLD.
Also available are health care and prescription drug benefits under the National Health Fund and JADEP. This however may not be sufficient to fully take care of your medical expenses. You can avoid those expenses by beginning to take care of your health. Setting aside funds to cover this type of expenditure is also another means of ensuring you can take care of this without withdrawing from your retirement savings.
Always keep in mind that retirement decisions last a lifetime. You therefore need to make sure that every decision you make regarding your retirement, whether financial or otherwise, is carefully thought out, and made only after ensuring that you have all the facts you need to do so.
As you move forward toward retirement, guided by your vision of the lifestyle you would like to have at that time, remember it is important that you continue to be guided by your checklist, which should include the following:
Review and update your retirement plan: You may decide to enter retirement when you are in your 60s or wait another decade to do so.
Your decision will be determined by your retirement plan: the vision for your lifestyle and the funding available to allow you to achieve this vision. Revisit your plan – do you still want to achieve this lifestyle? Is your saving sufficient to allow you to do? If not, what do you need to do now?
Develop your income plan:
Create or review your withdrawal strategy that will be used to provide you with an income in retirement. Even if you are a few years away from retirement, this information can be critical in helping you to determine if you are ready to retire. In developing your income plan you will need to determine what your living expenses will cost, as well as, expenses to cover the activities you will undertake during retirement.
You will need to determine how you will access these funds, whether you will purchase annuities which can provide a guaranteed income or access only the interest earned on investment, while preserving your capital. In arriving at your income don’t forget to take into all sources of income that will be available to you on retirement including your state benefits.
Continue saving: It never ends! You still have time to maximize your retirement savings and you need to continue to make the most of every opportunity to do so. Don’t ever make the mistake of thinking that the benefit you will obtain from saving in your Company’s superannuation fund or a retirement scheme will be sufficient to fund your lifestyle on retirement. Continue to explore additional saving options. Maintain your emergency and health fund as well as other designated saving accounts, topping up whenever possible.
Debt assessment and expense control: Remember, as you move toward a fixed income, there will be a limit as to the value of the expenses this income can cover. You will need this income to cover essential living expenses and debt should not be one such expense. Before you retire, it is recommended that you eliminate or significantly reduce your debts to manageable level based on the income you will have during retirement. This needs to be high on your list of activities to complete before you retire. Life is full of uncertainties. I, as in your 60s, ; you are closer to the end of the planning stage and hence will not have the luxury to recover from reduction in income in later years. Always keep in mind that you need to be frugal to ensure that your income lasts throughout your lifetime.
Revisit your Investment asset allocation: Asset allocation needs to be undertaken with a different mind set from the previous decades. Your investment should be so structured to take into account the fact that you are transitioning into retirement. While you will still be focussed on capital growth, your optimal asset allocation may change as you now begin to take into consideration your income plan and withdrawal strategy.
Emphasis will be on protecting your savings, while guarding against purchasing power risk, inflation risk and longevity risk. It is important that you continue to seek professional advice to ensure you are maximizing your opportunities and your investments are on track to meet your retirement goals.
Create your retirement budget: As you move to a fixed income pay chequecheck, it becomes critical that you are spending your funds wisely. You may have fewer financial responsibilities on retirement, but you will always have to be financially responsible for yourself and your spouse., You have to manage this fund. You will need to include in your budget living expenses, health expenses, and retirement activities. Budgeting will assist you to prioritize and address your expenses in an affordable manner, while maintaining the kind of lifestyle you want to have.
Update your estate plan: During this decade it is important, more than ever, as you move into retirement to ensure that you have all your finances and financial documents in order. Retirement brings with it unique challenges as well as opportunities and it helps to be prepared. Take time to update your will or set up a trust.
Make sure that appropriate updated beneficiary designations are on insurance policies and your superannuation fund or retirement scheme accounts, as these will take precedence over a will. Decide if you will need a durable power of attorney created for your finances and health care and appoint someone you know you can trust to make the appropriate decisions on your behalf if you are not able to do so. Make sure important documents are properly stored and easily accessible when family members need to have access to them. Ensure that your estate plan is prepared in such a manner that it will minimize the tax payable on death or transfer of assets.
Ensure that you are safeguarding your financial future: Be prepared for the unexpected. Revisit the insurance coverage you had taken out in previous years and ensure that they are sufficient to protect your assets and your family. Begin to look at how you will deal with issues such as Health care and illness that may require hospitalization or prolonged care. Look at the various insurance products available that can be used to fund these expenses.
Continue to practice practise your retirement plan: Begin the transition towards retirement, start to cut back on the number of hours spent at work and begin to participate in the activities you want to do when you retire. Educate yourself on the opportunities that lie ahead and mentally begin to prepare yourself to take advantage of them.
Continue to seek Professional Advice: This is your most valuable resource. As you get ready to implement your retirement plan, your Financial Advisor, Legal Advisor and Retirement Consultant, amongst others, will continue to have a role to play in ensuring you achieve your objectives.
Continue to stay on track. You are almost there. As you get ready to reap the rewards of your hard work it is important that you complete the final stage of your planning and get to the end of the track. Do not undertake activities that will increase your debt portfolio or reduce your capital as you will automatically be reducing the income available to you. Your 60s are a time when you need to ensure that you have the savings necessary to provide for the cash flow you will need in retirement. Now is not the time for risks; play it safe; stay on track.
While financial planning is an important part of your overall retirement planning, preparing for retirement is so much more encompassing.
As you move into your 70s and beyond, take time beforehand to assess your readiness for retirement, taking into consideration habits and attitudes, particularly as it relates to social support and health care. Plan wisely and you should be able to live comfortably throughout your retirement years. You have earned it
]]>
For some people, retiring early or at normal retirement age is already planned and they have already made provisions for this stage of their lives. Unfortunately, when that particular day starts, it suddenly dawns on them that what they previously thought would be sufficient to maintain them is no longer applicable. What’s the solution?
Don’t underestimate your natural talents and abilities such as cooking, gardening, writing, painting, to name a few. Any of them could possibly be your avenue to becoming an income earner. Always focus on doing something that you love and look forward to spending your time on, otherwise the project may not be as fulfilling as you would like.
So let’s look at how you could take advantage of your hobbies for financial rewards.
· If you consider yourself a good cook, enter your dishes into a cooking competition to win cash prizes or teach cooking classes in your community. Take pride in using your mother’s cooking recipes that you enjoyed and then add some extra spice to it. Do you remember the name Colonel Saunders and the business called Kentucky Fried Chicken now KFC? This renowned international successful business started with Colonel Saunders when he retired and looked at his paycheck. Will you be the next colonel Saunders and leave a rich legacy for your heirs.
· Is writing poems, short stories or more up your street? Look into competitions where you can submit articles or stories that will reward you for your creativity and who knows, maybe even publish your work. If you do go the publishing route, it would be advisable to do it yourself online versus going through a publishing house as you get to keep 100% of the profit and can profit from retaining control over the marketing of the books/stories as long as enough viable buyers exist. Check out www.createspace.com, which is a great tool for authors and creative artists to publish their work and receive royalties.
· Have a knack for giving good advice or have any unused skill? Like information technology, engineering even medical technology or education. With the global recession forcing many to rethink how and what they focus on to compete with the other players, these skills could be beneficial as a consultant to some companies especially small and medium sized ones.
· Collecting Antiques is a hobby that many people find therapeutic while earning some income on the side. You could utilize craft fairs or garage sales to pick up some antiques or even sell them yourself. Using E-Bay as another sales channel option can also prove worthwhile, as it will open your antiques to a much wider niche market.
· Jewelry Making - if you have a love for jewelry, precious stones or shells, maybe using them to make jewelry for resale is just what you need to do in order to make some extra money. This pastime doesn’t require a big financial outlay for tools or materials and it can be confined to a relatively small space to start with.
· Photography - Do you have a digital camera sitting at home hardly being used? Do you love the outdoors? Do you love to travel? Turn that camera and innate love for the above into a residual income earner by taking some quality pictures of the sights and images that you come across which people would be interested in buying and create a mini-exhibition of them online; enter photography competitions or at art/craft exhibitions. A picture says a thousand words! Start clicking!
· Freelancing - If you were a good writer, teacher, designer, researcher, child minder, etc, you could look at selling your service online by creating samples of your work and talking to friends and family who can refer you to potential clients who have an interest in what you do. Your talents and skills that you learned during your lifetime can be vital to those who are in need of them.
· Use your home as an income earner - Remember that the extra room/s in your home is/are cash cows for earning residual income on a monthly or weekly basis, especially with the present seller’s market out there. If you live near to a university or college, call them and find out the options for renting your room/s to a student. Maybe look at the option of renting to tourists who are looking to experience living with a local as opposed to a hotel-type setting.
· Teaching - Your business, technical, vocational skills and/or knowledge can be a source of retirement income as an e-distance tutor even without a teaching degree. Once you have access to a computer, your vast experience can be utilized to teach what you know to the next generation. There is also the possibility of being an external examiner if you are familiar with the subject to be examined and have a Master’s or PHD.
Earning an extra income in retirement is as easy as turning your hobbies into cash rich business. Running a business is not only about income for yourself but also paying your taxes. So find an accountant who can organize your business in a professional manner, who will look at your revenues, expenses and profits. At this stage of your life earning an income continues to have the same objective: to provide an income for yourself and your heirs. If you have no heirs you could consider being a donor to a non-profit organization or even setting up a charitable organization.
You should not do a business that is stressful and will not allow you to spend time to be with your family and friends. Enjoy it all and give thanks.
]]>
Where a retiree is not employed there has to be thought towards earning additional income that can keep pace with inflation. Investing extra income that may be available usually satisfies this need[SP1] . But before one starts any investment it is wise to complete a risk profile analysis. I can hear you saying that ‘I did that when I was working, so why should I do it now in retirement?’ The answer to this thought is that as a retiree your risk profile would have changed to low, medium or high and you will need to match your investment with your risk profile. Additionally, your guaranteed lifetime income to meet your daily expenses may have changed. If you visit www.milestoneslifestyle.com you can download a FREE risk profile analysis.
In real terms what is the meaning of low, medium and high-risk profiles? Let’s look at each one:
Low risk profile: this is an indication that you can only invest in low risk investments such as bonds, Treasury bill (T’Bills), foreign currency investments, savings accounts at the bank, building society or credit union and any low risk low return investment. Usually these types of investments provide for returns which are a little below the inflation rate and the risk of losing your capital is low. Investments in this category are for those individuals who do not have additional income in excess of their guaranteed monthly income.
Medium risk profile: this means that you can take a little more risk than the low risk profile. Hence, you may be able to invest in blue chip stocks, medium risk bonds and real estate. These investments provide for higher returns than the low risk investments but they also have a higher risk of losing your principal or capital sum invested. This could be detrimental to your mental health and if a retiree has any fear of loss and how it will impact on everyday income required to meet expenses, this is not for you. However, if after reviewing your guaranteed monthly income and there’s enough to meet the month’s expenses and there’s surplus of say more than one month’s income, medium risk investments could be considered.
High-risk profile: this means that you have at least one year’s guaranteed income in excess of what you need and you have an appetite for the risks of loss associated with investment gains. You would therefore be looking at investing in Hedge fund, International Equities and FX Trading, which while volatile, can produce high returns. Retirees in this category usually have income from a family trust, which is in addition to their guaranteed retirement income. The financial sector usually refers to these individuals as high net worth clients. We all know that investing in stocks provides can be high risk. James Jorgenson in his book ‘It’s Never Too Late to Get Rich’ provides the following guideline for investing in stocks for persons over age 60: Invest 100 minus your age in the stock market. This means that for a 70 year old investing in stocks there should be no more than 30% of your investment portfolio. You can apply this to any class of investments and use it as a guide.
But be careful. Regardless of what your risk profile summary reveals about your appetite for risk, at the end of the day you need to know yourself in terms of how traumatized you will be if you learn that there’s a loss with one of your investments. Therefore, if you would have to be hospitalized as a result of the news of an investment loss, high-risk investments are not for your portfolio even if you could afford to do so.
The reason retirees invest is no different from employed persons: to earn additional income that can keep pace with inflation and to contribute to the vibrancy of the economy. One of the requirements of investing is keeping records. You will need to have an organized method for keeping records of your investments. Why? In your retirement years you are not only investing for yourself but also for your heirs: children, grandchildren, other relatives. Therefore, you must have in place a valid Will. Another requirement is to know the rate of inflation and the tax rate, if any, which is applicable to the earnings on your investment. Whether you are low, medium or high risk you should ensure that your investment returns are at or above inflation.
Now that you have some fundamentals to work with in designing your strategy, the final step is writing down your goals and objectives for your investments. This should include when and how you plan to draw down your earnings on your investment. This is where you get the thrill of investing: don’t think that as a retiree you should deny yourself of those happy thrilling moments and investment returns can be one of them. Writing down your investment strategy will provide knowledge for your next generation.
When you have your written strategy this provides you with an approach of how to respond to requests for investing your money. Your questions should be: what is the risk profile of the investment – low, medium or high; what is the investment return; is the request from a reputable organization; what are the tax rates on the investment returns and therefore the net gain on the investment. If you were encouraged to invest in a medium or high-risk investment, can you survive the news of a loss of your capital? If the answer is ‘no’, don’t invest in medium or high risk even if you can afford to do so. Remember, you always have the right to cash out a high-risk investment and move to a low risk investment. Greed usually leads to losses. Be realistic about your gains.
Investing in retirement should be enjoyable since you should have more time to track the progress of your investment gains and losses. Go online and learn more about investing. Buy books and attend local seminars and online webinars. Knowledge is power. Know your risk profile and invest for yourself and your heirs. The result is additional income for yourself and a rich legacy for your heirs. Enjoy.
]]>
You may be thinking – why worry about retirement activities now? Retirement is years or decades away. Thinking ahead and creating a lifestyle plan as part of your retirement road map will help you to lead an interesting and rewarding life after retirement. Persons who wait until they have retired, rarely begin to develop new interests and often go on to lead an unfulfilling existence during that stage of their life.
It is never too early to create a plan for your retirement; in fact you can begin right now. Take a few minutes and write down all the things you want to be actively involved in. Watching television, reading, exercising does not count. Activities such as these are fine but unlikely to keep you energized and interested for long. Be as specific as you can, think about the activity – “I want to get involved in charity work” – go one step further and identify the type of charity that you would work with and what you would do. Make a note as to when you want to get involved in these activities before retirement so that it is easier for you to continue when you retire.
Keep in mind that getting involved in just a few activities won’t create an interesting and fulfilling life. You need to vary the activities and ensure that they align with the lifestyle you perceived at retirement. Let yourself dream, then decide what is possible. You need to allocate time to these activities, as even though it may seem that you have lots of time to do everything, not allocating time can prevent you from achieving your objectives. There is no more time off from work to carry out activities. Remaining active at retirement is now work.
You may need to reorganize your home; your life to accommodate your new interests at this stage of your life. Think about how you need to do that and don’t leave it all on your first day of retirement.
Without good health you cannot achieve all you dream about or enjoy the benefits of your achievement. If you have not yet begun to do so, pay attention to your health, make it one of your top priorities. Taking care of your health now will allow you to live a longer and better life at retirement, as well as reduce the amount spent on costly health care at that stage of your life. Some things will be unavoidable, but if you stop now to think of your family health history, research the health issues that can affect you as you move from your 30s, to your 40s, to your 50s onwards. Formulate a plan of action to mitigate or eliminate these issues where possible.
So you have covered the basic planning in your road map and are now ready for the meat of the matter. What will you do at retirement? How will you overcome boredom? Your listing of activities will assist you with the specific and here are a few ideas you can include:
1. Start a new hobby- travel is a terrific one if funding allows or something closer to home such as painting, photography or even a book club, if you love to read. Do something new that you will enjoy and look forward to doing every day. If you already have a hobby, retirement is a great time to revive your interest and devote more time to it.
2. Learn something new- Enroll in a computer class and learn how to connect with the world via the internet. You will be amazed at the number of persons all over the world that share your interest. Visit a new country through their eyes.
3. Start new career – work full or part time. Have you ever wanted to get into the Health Sector but never had the time to train for the various career? Here is your chance to take that step; it is never too late to do what you have always wanted to do. It is even better when you determine a date before you retire to begin to learn the new skills required or make plans for a business opportunity as on retirement you will simply be stepping into your new role instead of starting at the beginning.
4. Volunteering. Volunteer opportunities are everywhere, whether with a social club such as Kiwanis or Rotary, or your church, your alma mater, or the school in your neighborhood, help is always needed. Not only will you be staving off boredom you will be making new friends and developing new interests that will keep you active. Start now to explore your options and narrow down your selection of organizations that you may want to be involved with; begin to attend their meetings without any commitment and use this to determine if they will fit you and your lifestyle when you retire.
Even as you begin the process of relaxing in retirement, it does not mean that your life will not continue to be meaningful and enjoyable. With prior planning, you can have the best of both worlds. A relaxing and productive retirement, filled with purpose. Realize that life doesn’t stop on retirement but it is the beginning of a whole new world filled with excitement, empowerment and freedom to be and do all you dream of, all you planned for.
“Retire from work, but not from life. M.K. Soni”
Where a retiree is not employed there has to be thought towards earning additional income that can keep pace with inflation. Investing extra income that may be available usually satisfies this need. But before one starts any investment it is wise to complete a risk profile analysis. I can hear you saying that ‘I did that when I was working, so why should I do it now in retirement?’ The answer to this thought is that as a retiree your risk profile would have changed to low, medium or high and you will need to match your investment with your risk profile. Additionally, your guaranteed lifetime income to meet your daily expenses may have changed. If you visit www.milestoneslifestyle.com you can download a FREE risk profile analysis.
In real terms what is the meaning of low, medium and high-risk profiles? Let’s look at each one:
Low risk profile: this is an indication that you can only invest in low risk investments such as bonds, Treasury bill (T’Bills), foreign currency investments, savings accounts at the bank, building society or credit union and any low risk low return investment. Usually these types of investments provide for returns which are a little below the inflation rate and the risk of losing your capital is low. Investments in this category are for those individuals who do not have additional income in excess of their guaranteed monthly income.
Medium risk profile: this means that you can take a little more risk than the low risk profile. Hence, you may be able to invest in blue chip stocks, medium risk bonds and real estate. These investments provide for higher returns than the low risk investments but they also have a higher risk of losing your principal or capital sum invested. This could be detrimental to your mental health and if a retiree has any fear of loss and how it will impact on everyday income required to meet expenses, this is not for you. However, if after reviewing your guaranteed monthly income and there’s enough to meet the month’s expenses and there’s surplus of say more than one month’s income, medium risk investments could be considered.
High-risk profile: this means that you have at least one year’s guaranteed income in excess of what you need and you have an appetite for the risks of loss associated with investment gains. You would therefore be looking at investing in Hedge fund, International Equities and FX Trading, which while volatile, can produce high returns. Retirees in this category usually have income from a family trust, which is in addition to their guaranteed retirement income. The financial sector usually refers to these individuals as high net worth clients. We all know that investing in stocks provides can be high risk. James Jorgenson in his book ‘It’s Never Too Late to Get Rich’ provides the following guideline for investing in stocks for persons over age 60: Invest 100 minus your age in the stock market. This means that for a 70 year old investing in stocks there should be no more than 30% of your investment portfolio. You can apply this to any class of investments and use it as a guide.
But be careful. Regardless of what your risk profile summary reveals about your appetite for risk, at the end of the day you need to know yourself in terms of how traumatized you will be if you learn that there’s a loss with one of your investments. Therefore, if you would have to be hospitalized as a result of the news of an investment loss, high-risk investments are not for your portfolio even if you could afford to do so.
The reason retirees invest is no different from employed persons: to earn additional income that can keep pace with inflation and to contribute to the vibrancy of the economy. One of the requirements of investing is keeping records. You will need to have an organized method for keeping records of your investments. Why? In your retirement years you are not only investing for yourself but also for your heirs: children, grandchildren, other relatives. Therefore, you must have in place a valid Will. Another requirement is to know the rate of inflation and the tax rate, if any, which is applicable to the earnings on your investment. Whether you are low, medium or high risk you should ensure that your investment returns are at or above inflation.
Now that you have some fundamentals to work with in designing your strategy, the final step is writing down your goals and objectives for your investments. This should include when and how you plan to draw down your earnings on your investment. This is where you get the thrill of investing: don’t think that as a retiree you should deny yourself of those happy thrilling moments and investment returns can be one of them. Writing down your investment strategy will provide knowledge for your next generation.
When you have your written strategy this provides you with an approach of how to respond to requests for investing your money. Your questions should be: what is the risk profile of the investment – low, medium or high; what is the investment return; is the request from a reputable organization; what are the tax rates on the investment returns and therefore the net gain on the investment. If you were encouraged to invest in a medium or high-risk investment, can you survive the news of a loss of your capital? If the answer is ‘no’, don’t invest in medium or high risk even if you can afford to do so. Remember, you always have the right to cash out a high-risk investment and move to a low risk investment. Greed usually leads to losses. Be realistic about your gains.
Investing in retirement should be enjoyable since you should have more time to track the progress of your investment gains and losses. Go online and learn more about investing. Buy books and attend local seminars and online webinars. Knowledge is power. Know your risk profile and invest for yourself and your heirs. The result is additional income for yourself and a rich legacy for your heirs. Enjoy.
]]>