Thinking About Early Retirement?

Filed under Planning & Money

(ARA) – If you’ve delayed planning for retirement because it makes you feel a) old or b) financially inept, think again. With a little foresight, you could be out there enjoying life like other people — maybe even before you reach the so-called “retirement age.”

Like many people in the prime of life, it’s not unusual to think of retirement as such a distant idea that you avoid saving for it until next week, next year, next job. After all, who’s got time to think about the “R” word? In reality, it’s never too late, or too early, to start planning for retirement.

Retirement used to be defined as what a person was no longer doing. More and more, however, retirement has come to mean what a person is can do. Choosing a second career. Traveling to see the world. Volunteering in the community. Taking on a new hobby. Taking care of grandchildren.

If Mondays find you heading for the highway to work, but you’d rather be heading for the golf course to play, it might be time to consider your financial future — even if you’re among the three out of four Americans who hate financial planning.

“You don’t need to be a financial wizard to start thinking about early retirement,” says Randy Schuldt, vice president with, a Web site devoted to the 75 percent of Americans who hate financial planning. “With some simple steps, you can take control of your financial future before it starts controlling your dreams.”

To help better understand what’s involved in retirement planning, has developed a 10-minute quiz — an early retirement calculator of sorts — that will help determine your state of readiness. If your score points to a lifetime of enduring the daily grind, a visit to or a meeting with a financial planner might help perk up your financial future.

Early Retirement Readiness Questionaire

1. I dream about my retirement
a. All of the time
b. Only when work drives me nuts
c. None of the time

2. I know exactly what I want to do when I retire
a. Yes — in fact I’ve identified the date
b. Too many choices to decide
c. No — I’ll be too old anyway

3. IRA stands for
a. Individual Retirement Account
b. Irish Republican Army
c. IRA — you mean my cousin Ira?

4. I regularly contribute to my 401(k) at work
a. At the maximum amount of money allowed
b. As much as I can afford
c. Never

5. I expect my health insurance costs to decrease as I get older
a. False
b. I’m not planning on getting older
c. True

6. If I pay off my mortgage before I retire I will be able to
a. Pocket up to $250,000 in tax-free profit on the sale of my home
b. Barely scrape by on my other bills
c. Guffaw loudly because only rich people can afford to do that

7. I can phase into retirement if I
a. Plan ahead for big ticket items that might tempt me to draw on investments too soon
b. Take a one month leave from my current job to test the waters
c. Just up and quit

8. The cost of inflation
a. Is expected to rise from 2 to 4 percent per year
b. Is always changing
c. Will have no effect on retirement plans

9. The nation’s Social Security program
a. Will eventually run out of money
b. Will cover only some of my retirement costs
c. Will always be there for me, just like it was for my parents

10. Disability income insurance is
a. A good idea, since there’s a 42 percent chance I’ll become disabled between the ages of 30 and 50
b. Something you should buy if you have a disability
c. Only for old people

11. A fixed-rate annuity is
a. A contract with a life insurance company designed to provide for a regular stream of payments at a later date b. Too complicated for me to worry about
c. Considered to be a risky investment

12. The key to early retirement is
a. Having a retirement goal
b. Having a job with a good retirement plan
c. Winning the lottery

Give yourself 3 points for every “A” answer; 2 points for every “B” answer; 1 point for every “C” answer.

36 points: Kiss work goodbye? You may be headed straight for the beach. We’d tell you to pack suntan lotion for when you leave, but then, you’ve probably already planned that, too.

25 to 35 or more points: So near, yet so far. While you may have a good understanding of what a retirement plan needs to include, it’s time to put your ideas into action. Check out for some easy to understand, non-intimidating ways to fill the gaps of your plan.

16 to 24 points: Minimum effort may not get you where you want to go. Your plans could still use some fleshing out. You may want to consider talking with a professional to help solidify your dreams. Keep your retirement goals in mind and get a financial plan that will keep you headed in the right direction.

12 to 15 points: Early retirement, or any kind of retirement, might not be in your future. Get thee to a financial professional! If the mere thought of it makes you queasy,

Article courtesy ARA Content

Accurate Results with a Retirement Calculator

Filed under Planning & Money

Most of us look forward to the day that we can retire. For many of us, we may consider it to be a time when we will finally be able to relax from all of the years of hard work. It is an unfortunate reality, however, that without the proper planning, it can be difficult getting the most out of your retirement years. One thing that you should do to make sure that you can retire comfortably, is to use a retirement calculator.

Very simply, a retirement calculator is an easy way for you to be able to determine how much you need to earn between now and the date that you retire so you can live comfortably for the rest of your life. There are some basic variables that need to input into almost every calculator, and some specific variables depending on which calculator you use. It is important that you accurately provide this information in order to get the most accurate results.

Generally the first information that a retirement calculator requires is your current age and the age that you plan to retire. Try to be as accurate as possible about this information since even a difference of a year or two can make a large difference in the final results. You may want to run the numbers using several possible retirement ages so you can see the impact it will have on the results.

Something else that needs to be considered is whether your current income will remain fairly stable until retirement or if it is expected to change. Although this may be difficult to know for certain, most of us have a rough idea of how stable our income is. If you are far away from retirement, you might want to give this some consideration since your ability to invest for retirement over the long term can make a big difference on how much you’re going to be able to put aside.

Some of other variables that are often required are the percentage of your income that you plan on putting aside as well as whether you’re going to include Social Security and other benefits in your calculations. If the results don’t meet your expectations, you can run the numbers through the retirement calculator again with a some adjustment of the variables. You will see that small differences in each of these variables can make a large difference over time. It can be a very useful planning tool that allows you to see how comfortable you will be after you retire.

Article by M. Paulson

Building Retirement Fund Just the Begining

Filed under Planning & Money

You’ve worked. You’ve saved. You’ve invested. You now have accumulated a significant retirement nest egg. It appears you have a “lock” on a secure financial future. Still, for many either nearing or in retirement, you can’t help but wonder, “Is it really enough?”

This nagging question reveals one unavoidable fact: Building a significant retirement fund is no longer the “end game” of financial security; it is a beginning point.

Five challenges make it imperative that those in their 50s, 60s and 70s carefully manage their retirement dollars:

• Due to increased life expectancies, many boomers will have retirements lasting 20 years or more. In fact, the National Center for Health Statistics reports that the median life expectancy for someone age 65 is 18.6 years. This means about half the population will live longer in retirement. With increased longevity comes increased risk of potentially outliving one’s retirement assets.

• Retirees need to account for inflation. Inflation is the sustained increase in the general level or prices for goods and services over time. As inflation rises, every dollar owned buys a smaller percentage of a good or service. As prices go up over time due to inflation, the value of investments can erode. This is particularly true over a long time period, like 20 or 30 years.

* Responsibility for funding retirement is shifting from the employer to the employee. Many traditional company pensions (defined benefit plans) are being phased out or frozen, even by financially healthy companies, and are being replaced with defined contribution plans (like 401(k) and 403(b) plans). This means the burden of managing one’s retirement income is increasingly falling on individuals.

* Unplanned personal “life events” will happen. No one can know what lies ahead in their retirement journey. While everyone hopes for good health and the ability to determine “when” to retire, life holds no guarantees. Planning for one’s retirement years must include consideration of life events that have the potential to complicate their retirement years.

* Investment markets will continue to fluctuate (up and down). Typically, investments generating the potential for greater returns also have greater potential for loss.

“Funding your retirement years is a financial balancing act among playing it safe, taking risks and spending wisely,” says Ann Koplin, director of Retirement Marketing for Thrivent Financial for Lutherans. “If any of those areas gets out of whack, troubles may result.”

Koplin says products offering a guaranteed income – like annuities and certificates of deposit – may help retirees establish an income floor they cannot outlive. Ideally, individuals can add to this income base over time as they experience investment gains and convert a percentage of their assets from equities (and growth) to income. This is also dependent on the retiree’s personal circumstances and spending.

Koplin also notes that certain protection products – like life insurance and long-term care insurance- are also needed during one’s retirement to protect against the potentially devastating impact of unexpected life events like death and chronic illness. She likens this protection to that of safety net for a tightrope walker.

“While you may retire, the fact is your money never should,” says Koplin. “Having a financial strategy that is flexible enough to adapt to a person’s changing needs and circumstances is a must. Retirement can truly be great, but that means carefully managing your money throughout your golden years.”

Best Ways to Protect and Invest Your Money

Filed under Planning & Money

Retirement can be comforting yet a challenging event in many peoples lives. You want to be able to live comfortably during this time with out worrying about how to make ends meet. To do this requires that you have a solid strategy in place that can generate consistent income, protect you against inflation and be able to live the comfortable lifestyle that you have become accustomed to. In this article we will examine what you can do to have an enjoyable retirement without the stress and challenges that so many retirees face today.

Ways that Erode Retirement Assets

There are many ways that can reduce your retirement assets. Any one of them can create a situation where you might not have enough money to live on once you retire. In this case knowledge is power in that if you know how and in what ways they can reduce your income or assets you can take steps to ensure that this doesn’t happen to you.

Inflation: It doesn’t take a rocket scientist to understand how inflation can effect your everyday life. However, it can also have an effect on your retirement in that it increases your cost of living every single year. Over the past 50 years inflation has averaged four percent a year. This means that something that cost you $100 dollars today will cost you $180 dollars 15 years from now. This can be huge when you are living off a fixed, consistent amount yearly. To be able to continue to live a comfortable lifestyle in retirement you must be able to consistently keep up and stay ahead of inflation.

Living Longer: People are living longer now more than at any other time. The average man who retires at 65 can expect to live until 82. While the average woman who retires at the same age can expect to live until 85. This can pose an enormous potential challenge for you in that the longer you live the more the odds increase that you will not have enough money to live on when you are retired. To be able to live a comfortable retirement we must be able to structure our income and investments so that they can continue to provide for us long after we have passed the average age of life expectancy.

Lack of Diversification: Many people don’t balance out their portfolios to protect themselves against a bad investment. They usually end up placing a substantial amount of their investments in one particular area or asset class and that’s it. Far to often they think that XYZ is a good area or company and that as long as they stick with their current strategy they will retire with more than enough income and assets. Such was the case with many individuals who invested in Enron stock that were near retirement or at retirement. When the energy trading company collapsed many employees had invested the majority of their assets in the company’s stock were virtually wiped out. Along with that went their retirement savings that they had accumulated for years. The basic idea here is don’t put all of your eggs in one basket.

Medical Expenses: Another area that can effect on your retirement income and assets are medical expenses. As you become older the needs for medication and health care will only increase. Combine this with the fact that health care costs have been rising consistently over the past several years. According to Fidelity Investments the cost for health care has risen a total of 34% since 2002. It estimated that with in the next 10 to 15 years many retirees will spend half of their income from Social Security on health care costs. To be able to have a worry free retirement you must use tactics that can be able to keep up with these costs so they don’t reduce our income or assets.

Ways to Protect Assets and Create Income

There are many ways you can protect your assets against some of the above risks and be able to create additional income. Diversification is the key to allowing you to maintain stability, growth and income. Below are several tips and tactics that you can use to protect yourself against the potential challenges that you will face in retirement.

Equities / Dividend Stocks: To be able to combat the forces of inflation requires that your assets and income grow at rate faster than inflation. One way to do this is through the use of equities (stocks) or dividend paying stocks. Over the past 50 years stocks have averaged 6.6% compared with the average inflation rate of 4.0%. While the average dividend rate of the S&P 500 is 5.3%. What this shows is that investing in stocks and dividend paying stocks can keep your assets and income growing at faster rate than inflation by giving you long term growth and strong consistent dividends. When you put the two elements together the overall return is much greater than inflation. The important key is to use a conservative approach that can provide you with consistent long term growth and dependable, rising dividends.

Bonds: Another way that can provide income and stability during retirement is through the use of bonds. Over the past 50 years bonds have averaged 5.5%. Generally bonds are considered to be a conservative investment. When you purchase a bond you become a creditor to the company or government that issued the bond. During the life of the bond ( 5 years, 10 years, 30 years) you will make a consistent interest rate that is stated at the time of purchase. These interest payments will continue until the bond matures on the date in the future. U.S. Government Bonds are the safest followed by municipal bonds and corporate bonds. These types of assets will provide you with a consistent income on a regular basis. In retirement they can compliment your overall strategy by bringing a conservative income, orientated side to your portfolio that will provide you with stability.

Mutual Funds / Bond Funds: If you are uncomfortable investing in stocks or bonds another way to go is through the use of mutual funds and bond funds. A mutual fund is a company that raises money from investors (shareholders) and invests that money in a portfolio of stocks, bonds or both. The idea is that they will provide you with diversification and balance so that you don’t have to worry about what stocks to buy or sell. A bond fund invests in bonds with the purpose of providing income and stability. The way that these two areas can benefit you is by providing your portfolio with balance and income without having to become involved in what stocks or bonds are the best areas for you.

Fixed Annuities: An alternative way to protect your assets and create income is through the use of fixed annuities. A fixed annuity is a written contract between you and the insurance company that is designed to provide you with regular payments at specific times (usually monthly, quarterly or annually) and can be for a certain number of years or your lifetime. These types of annuities are not tied to the stock and will pay you a stated guaranteed amount at a worst case scenario. These can be used to supplement your retirement income and can provide you with diversification as well.


By utilizing a diversified strategy that can provide you with stability, income and growth retirement doesn’t to have the stress and challenges that so many face today. This diversification can be achieved using a variety of tools such as stocks, strong dividend paying stocks, bonds, mutual funds, bond funds and fixed annuities. However, like all strategies it is important to first evaluate your own situation to determine what amount of income and diversification will be needed to ensure that your assets are protected so that your income will be at a satisfactory level for your lifestyle. This will help you to have the worry free retirement that you always envisioned.

Article by Chris Seabury 

Little Known Veterans Pension Benefit

Filed under Planning & Money

If you haven’t heard of it, you are not alone. Currently there is a ground swell effort to inform veterans about this benefit. The Governor of Illinois felt it was such a serious situation that he created a non-profit corporation to work with other corporations, service groups and individuals like us, to get the word out and to educate Veterans and the families on this benefit. There are about 22 million veterans in the United States and about two billion dollars of benefits that go untouched every year. And a lot of it has to do with the fact that people just don’t know that the benefits are available. They don’t know that they qualify and they don’t know how to apply.

You’ll notice that it says “Aid & Attendance and Housebound”. The power of this benefit is that it provides extra income when you need it most, when you health changes and you need care. How many of you have helped care for a loved one? How many of you know someone who has lost just about everything because of the cost of care?

You know when this benefit was introduced in 1952; long-term care wasn’t such a big issue. Families stayed close. Not so many children went away to college, and then farther away for their careers. Things were pretty simple.

Now families are busy, busy. Children are scheduled in soccer, gymnastics, ballet, t-ball, so many events that they eat supper on the road, order meals by numbers “I’ll have a #2 meal super-sized” and it’s a different world.

So now, long-term care cost is a fact of life. We can’t rely on family. And most of us, being really honest would rather NOT have a family member help us with those really personal care needs. So would extra money help your family when you need care? Sure! Most of us are not going to turn it down, especially when you’ve already earned it. That’s why the Improved Pension Benefit is so important.

Qualifications for Veterans & Widows

So people ask, “What are the qualifications for this benefit?” The first qualification is a discharge from military service that is anything BUT dishonorable.

The veteran must have served at least 90 days of active duty with at least ONE day served during a declared state of war. Now you did not actually have to be in combat. As an example, you could have been a clerk in San Diego harbor, and never left US shores. As long as you had 90 days active service, you did not have a dishonorable discharge and one day was during wartime, you qualify onthose points.

Finally, you have to be totally disabled, OR age 65 and older. This benefit has been on the books since 1952 and one of the reasons Veterans didn’t take advantage of it was that they thought you had to be disabled. Let’s take a look at this benefit. It is a pension. At what age do we generally qualify for a pension? The age we start receiving a pension is when we hit retirement and that is usually at age ….??? Right, 65! So it makes sense that if you are 65 or older, then you qualify for the pension, because of your age. It doesn’t matter that you are not disabled.

 Declared States of War

The next thing people want to know is, “What are the Declared States of War?” How many of you were in the Korean War? You will remember that during the Korean War, it was called a Police Action, an advisory thing, right? Vietnam was that way, too. However, for benefits related to Periods of War, these are the dates and events recognized by the Department of Veterans Affairs. These are the wars that count for this benefit.

Mexican Border Period 1916-1917
WWI 1917 – 1921
WWII 1941 – 1946
Korean War 1950 – 1955
Vietnam War 1962 – 1975
Gulf War 1990 – . . .

DVA Improved Pension 2008

So people want to know, “How much money are we talking?” Here are the pension amounts for this year. Now there are different amounts if you are Housebound, and there are amounts if you are simply low income. For now, let’s look at the numbers for Aid & Attendance. When you need Aid & Attendance, you are typically in a facility. Your costs of care are the greatest. Your need for extra money is the greatest. AND the pension benefit is the greatest.

If you are a couple, Veteran and Spouse, and one of you is receiving care in a facility, you could receive up to $22,113 per year, TAX FREE. So how would an extra $1842/month help with you care costs? Would you want the money that your service earned? Sure you would.

For a single veteran, it could be up to $18,654/year, or over $1554/month, TAX FREE.

For the surviving spouse of a veteran, it’s up to $11,985/year, or /$998/month, TAX FREE.

This benefit is available every year you continue to receive Aid & Attendance in a facility. There is a Cost of Living adjustment every year that reflects the increase in Social Security. It’s normally, about 3%, this year it was 2.3%.

It is a Means Testing program, which means they look at both your Income and your Assets. Now at this point, people will look at each other and say, “Oh we have too much income and assets to qualify.” But there are two important things to know, that can make all the difference.

First, your out-of-pocket medical expenses are deducted from your income. When your health and lifestyle change and you need care and assistance, there can be substantial expenses, and these are deducted from you income.

Second, the VA counts your assets as of the date of the application. So, you can create an estate plan and reposition your assets before the application.

Income Testing

Let me share with you my favorite couple Roy and Dale. You remember them. They had a dog named, Bullet, a horse named Trigger, a friend named Pat who had a Jeep named….Does any know the name of Pat’s Jeep? It was Nelly belle. How about Dale’s horse, do you know her horse’s name? It was Buttermilk. They were my favorite couple when I was growing up. I used to watch their program all the time and knew that Roy, in his white hat, would always get the bad guys in their black hats.

Now Roy and Dale are very comfortable, 2500 dollars in income each month. Everything’s paid for. Life was good. But then Roy falls off Trigger and breaks his hip. He goes to Happy Trails Care Facility. His expenses for facility care, medications, health insurance premiums total $3200/mo. Now life is not so good. They are spending $700 more each month than they have coming in. Where do you suppose that extra money is coming from? Right, their savings! Their income is upside down and they are burning through their assets quickly.

So here is an example of a couple going from having plenty of income, to losing money because of a simple fall, change in health and need for Aid & Attendance. Roy was a veteran and his service has earned him the Improved Pension Benefit, they would qualify for $1801.25 per month. Would that make a difference in their lives? Could it save the drain on their estate? Absolutely!

Asset Testing

Now, it is also means tested for Assets. Whatever you have titled in your name will be counted with the exception of your house and car as long as one of you is residing in the house. This is the opportunity to put in place the estate planning that you’ve been putting off. You can put things in place so your assets are controlled by family; and you know that things will still go the way you want, without losing them. With the VA, there is no look back period. It is very important to have everything properly titled and positioned before you make application for the benefits, so be sure to consult with a professional.

Documents Needed

Sometimes people have misplaced their discharge papers. Some people call it their military jacket, others refer to it as the DD214, and still others call them separation papers. It may be that you don’t know where these papers are. Don’t worry, you can apply for duplicates and it takes about 4 weeks for them to arrive. Other forms needed are the Marriage Certificate and a Death Certificate if the veteran is deceased. These just take some time to get from the county or state departments. They do need to be certified copies and that can be done at the courthouse in most places.

If you need to do some estate planning for you assets, that takes a little time. So by the time the documents arrive, you’ll have things in place and be ready for the application process. When you send in the completed application, the first thing the DVA does is time stamp it, enter it into their system and assign a case number. That’s important, because the time stamp is the date counted for your first benefit payment. It may take up to six months for the application to be processed. But when it’s processed and approved, the DVA will go back to the time stamp on the application, and send a check retroactive back to the date the application was entered into the system.

Lance D. Fisher

What is a Pension Annuity?

Filed under Planning & Money

When the investment in your personal pension plan reaches maturity when you retire, you will need to transfer its accumulated value into a regular income for the remainder of your retirement. This is achieved through the purchase of a pension annuity – a seemingly simple and straight forward transaction that exchanges the final value of the pension fund into which you have been paying into a regular income.

Whilst the principle of a pension annuity is seemingly very straight forward, however, things are rarely quite as simple as they seem.

The first and probably most critical aspect of buying a pension annuity is that it is a long-term, one-off commitment. You have just one shot at it, since there is no going back and asking for a refund of all of the capital simply because, after the event, you have found a better deal elsewhere. In other words, it is very important that you make the right choice.

Making the right choice is made no easier by the fact that a host of different annuities all offer a host of different annuity rates – i.e. will offer a different level of income for the same amount of pension investment.

The difficulty is further compounded by the sheer number of different types of annuity available these days.

Standard annuity – the most conventional form of annuity is one that pays you a fixed income throughout the remainder of your life. The income is known in advance, so you have the security and peace of mind in knowing just how much that will be;

With profits annuity – as the name suggests, this relates the income you receive to an element of your initially invested sum that is in turn invested again in equities, bonds and gilts. In this way, your annuity reflects some of the risks inherent in such investments;

Unit-linked annuity – this is probably the choice for those prepared to take the greatest risk on an annuity that is entirely subject to the fluctuations of the investments made;

Immediate (“temporary” or “purchased life”) annuity – this form of annuity needs to be purchased either from the cash element of your matured pension fund or some other cash resource. The advantage of this kind of annuity is that part of the annuity is treated as a return of your initial capital and, therefore, is not taxed, whereas the whole of your pension annuity would be subject to income tax;

Impaired life annuity – this is a type of annuity designed for those whose actuarial life expectancy is lower than someone of the same age in the general population. Different annuities will operate different definitions of what amounts to “impairment” of life, but it is generally a question of an existing serious illness or lifestyle factors such as smoking, obesity or past occupation.


The seemingly simple and straight forward question of converting the final value of a pension fund into a regular, income-paying annuity actually requires the kind of advice you can best receive from an independent financial adviser, since:

• Your pension annuity decision is of a one-off type that you need to get right the first time;
• There is considerable variation in the level of income paid by any one annuity – naturally, you would want the highest paying;
• There is a wide range of different types of annuity – some higher, some lower, risk – an independent financial adviser will be able to help you choose the one you want.

Article by Steve Wright 

Bond Investing – Allocation Guidelines

Filed under Planning & Money

For most investors, bonds are just one thing – ballast. Bonds can work well for income seekers, and, in the hands of an adept speculator, they can beat the stock market for long stretches. But this is not how most investors use them. Most buy and hold, rather than speculating.

There is a better way to get extra value from your bond investment. Bonds help in keeping a stock-focused portfolio sturdy — steadily, predictably heading in the right direction for long-term returns.

It’s All About The Ratio

The first fixed-income question for most investors is, what’s the right ratio of bonds to stocks?
Michael Holland, manager of the Holland Balanced Fund, strongly advocates a 60/40 ratio of stocks to bond for most investors. With this ratio, investors can generally gain 80% of the stock market’s long-run return but with only a moderate level of volatility along the way
Interested in even more security than that? The minimum-risk allocation is probably 80% fixed-income, 20% stock, according to Alan Gayle, senior investment strategist for Trusco Capital Management. In his view, a 100% bond allocation is never a good idea, even for the most risk-averse investor, because bonds can suffer lengthy bear markets in their own right.

Whatever your asset-allocation goal, you should always be splitting up the bond portion of your portfolio between the different classes of bonds.

• Start with at least 25% invested in bonds with as little default risk as possible – this means Treasuries, inflation-indexed Treasuries or municipal bonds.

• Add an allocation of up to 65% for bond funds with “economic exposure,” such as those focused on highly rated corporate bonds. These usually outperform Treasuries when the economy heats up. A fund is a better choice than direct investment for most investors because it offers a level of diversification few investors achieve with individual corporate bonds.

• Don’t neglect junk bonds. They deserve at least 10% of your bond investment. High yield bonds correlate more closely with equities than with fixed income investments, and their higher yields can compensate when Treasury yields are low. Don’t buy direct – funds are the only safe way to play the high-yield market.
Lowest Risk Bond Type – Treasury Bonds

The safest choice of bond investment for your portfolio is Treasuries (and inflation-protected Treasuries). Only rarely do Treasuries offer the fixed-income world excitingly large returns. But their issuer — the US government — won’t be going bankrupt any time soon. In troubled times, that is an important consideration.

Bond Investing – Why Buy Into A Fund?

The primary advantage of these funds is that they simplify your investment. Writing a check to a fund company takes less effort than buying individual bonds and can, for some investors, be worth a small annual fee.

Many financial planners criticise government-bond funds, though, because few bond funds feature a single maturity date. Most managers buy and sell to take profits or pounce on perceived bargains. This means that there is no way to guarantee the return of your capital in full on any precise date – one of the key reasons for buying bonds in the first place.

The only way to totally guarantee stability of principal is to buy individual bonds at issue and hold them to maturity.

Article by Mark Bennett

Life Insurance and Retirement

Filed under Planning & Money

It may not be something you want to think about, and rightly so, but investing in a life insurance plan is a good idea for a multitude of reasons. There are many variables involved with different life insurance plans, and each plan has different methods of determining its fees.

If you are considering a life insurance policy, you’ll want to do as much research as possible into different agencies to figure out which plan best suits your needs.

First, let’s talk a little about why you should consider investing in a life insurance policy.

The purpose of having a life insurance plan is to protect your family from financial disaster if you die. If you suddenly die with no insurance, the burden of paying off a mortgage, the taxes owed to the government from your inheritance, or a grandchild’s college tuition could placed be on your family’s shoulders.

There may be no need for insurance if you have no dependents and are single. If you are married with no dependents, you will still want to consider a life insurance policy so the burden is not left on your spouse if you die.

Here are some common questions about life insurance:

How expensive is life insurance?

If you are young (baby boomer retirees still count) and are in good health (don’t smoke, no health conditions, etc.), life insurance may be more affordable than you think. But if you are a little older and have bad habits or medical conditions, you may find that a life insurance policy will be very expensive.

What kind of plan will I need?

This will depend mostly on your age, your lifestyle, and how much taxable money you will leave to those in your will. Think about the life expectancy of yourself and your spouse, along with the general state of your health. Also take into consideration whether or not your spouse will be able to provide for him or herself after you’re gone.

Do my spouse and I need separate plans?

Yes. You never know what might happen to whom first. The cost of each plan will depend greatly on the age and health of each individual. Also consider who would be left with what burden if someone dies, and if either of you would still be receiving an income.

You should be very careful about the company and plan you choose. Do your homework, as each company’s policies can be very different. Choosing the right plan for you is one of the most important steps to retirement, as you will make sure your family is safe and secure if anything should happen to you.

Protecting Against Senior Investment Fraud

Filed under Planning & Money

When Ben and Ida received an invitation for a complimentary gourmet meal if they attended an investment seminar, they learned the hard way that there is no such thing as a free lunch. Promised a guaranteed income on an investment, the senior couple opened an account with the sponsoring firm, and got bilked out of thousands of dollars. They are not alone.

A survey by the North American Securities Administrators Association (NASAA) shows senior investment fraud accounts for nearly 50% of all complaints received by state securities regulators. That number is up from the 2005 survey, when 28% percent of fraud reports involved the elderly. The financial industry is littered with slick schemes that result in broken dreams for seniors who take the bait. Stories of seniors losing their life savings are far too abundant. Seniors are being targeted through the internet, mail, phone, in-home visits, and free “financial seminars” specifically tailored to large groups of seniors, says Bob Webster, Director of Communications for NASSA. There are many reasons seniors fall victim to fraud, including:

• Being too trusting, and too good mannered to be rude
• Wanting a better rate of return on their money
• Believing the salesperson is nice, friendly and caring
• Being impressed with fancy credential and titles

These titles can serve as an easy way for an unscrupulous sales agent or adviser to gain a senior’s trust, which is the first step in a successful fraud,” says Webster. “It is exceedingly difficult for prospective investors – particularly senior citizens – to determine whether a particular designation represents a meaningful credential by the agent or simply an empty marketing device.” Financial predators use fear tactics to instill fear in seniors of running out of money and becoming a burden to their families. They inspire distrust in seniors of family members concerning their finances to keep seniors from disclosing the fraud. And they prey upon the loneliness and isolation, and availability of some retired or widowed seniors. How do you know if a potential investment is legit? Webster says to contact your state’s securities regulator to see if the salesperson is licensed in your state to sell the security and if the security is licensed for sale in your state. “Usually investments that guarantee or promise high returns for little or no risk are signs of trouble ahead,” he says. Investment scams can take many shapes. If it didn’t sound good, seniors wouldn’t give it a second thought! Whatever the enticing investment, scammers use specific tactics to get seniors hooked. Be cautious of these phrases:

•”Your profit is guaranteed.”
•”It’s an amazingly high rate of return.”
•”There’s no risk.”
•”You can get in on the ground floor.”
•”You would be a fool to pass this by.”
•”This offer is only available today.”

Webster adds, “Remember, if it sounds too good to be true, it usually is.

Precautions to Take

Most investments are some form of securities that must be registered with the state securities regulator or with the Securities and Exchange Commission (SEC). Check to see if the investment opportunity is registered by contacting your state securities regulator. If the potential investment is not properly registered, do not invest.

Check the person. Is the person properly licensed with the state or with the SEC to sell this product? If not, beware. Is this person a broker, licensed to buy and sell stocks, bonds and other securities, or with an investment adviser, someone who is paid to provide advice about investing in securities but is not licensed to sell them?

Check the history. Does the person or their firms have had any complaints filed against them with regulators? Those who do business with an unlicensed securities broker or a firm that later goes out of business, may have no way to recover money. One way caregivers can help protect their elderly loved ones from investment fraud is to strive for an open, two-way communication when it comes to finances. Make sure the loved one is comfortable talking about money honestly and openly without fear of reprisal. If possible, have them turn to you, or a trusted financial advisor or lawyer before making any investment. If an investor is real, he will have no problem speaking to his client’s family member before taking the senior’s money.

Retirement Planning with Stocks and Mutual Funds

Filed under Planning & Money

Retirement planning doesn’t have to be a daunting task. In addition to a pension, social security and a 401k, the happiest retirees secure investments long before they retire and reap the benefits for that Bahamas cruise later on.

Stocks and mutual funds aren’t just terms for Wall Street brokers anymore. They’re assets to anyone with a desire for more money. Why not benefit as the economy benefits and share in the wealth? That’s what “capitalism” is all about.

A stock is a share in the ownership of a company. For the company, a stock is a fundraising loan that they needn’t repay, but will typically yield greater income for both the company and its shareholders in the end. As an owner, you are entitled to your share of the company’s wealth.

You won’t be able to control how the company is run per say, but the good news is that you will have a claim to assets and limited liability (meaning that you’re not personally responsible if the company can’t repay its debts).

Stocks can be daunting since there’s always the risk that the company won’t be profitable and you’ll lose your investment. When retirement planning, the AARP recommends investing for the long haul in companies that are likely to succeed (instead of trying to “time” the market) and invest small in many different stocks to minimize risk and maximize returns.

A mutual fund is a lower-risk investment. Investors pool their money and allow professionals to select stocks for them. While stocks may generate a larger return, mutual funds are better for retirement planning because of their low risk and maintenance.

Mutual funds spread your investment dollars around and gives you the expertise of a money manager to ensure the success of at least some of your investments.

Mutual funds are constantly being bought and sold, so you can easily sell your shares for money. Many people choose the automatic investment option, which takes a certain amount of money out of each paycheck to invest. When the market’s down, more shares are bought to increase your ownership and when the market’s up, less shares are bought at the higher price
So how will you make money off your stocks and mutual funds? One way is through appreciation, meaning that the fund will be worth more than what you paid for it as the market changes and you’ll be able to resell, making a small profit.

Another way is through dividends, which works like interest that is distributed among shareholders annually or sometimes quarterly. A third way is through capital gain distributions, which is the portion of the shared company profit that you can receive annually or monthly.

Retirement planning investments shouldn’t be touched until retirement however, since this money will be included in your taxable income.

You may be wondering, “Where can I get started on investing in my retirement plan?” For information, check the US Securities and Exchange Commission website to find what questions to ask before you get started with your retirement planning investments.

The local library will also have many resources for eager investors. To jump right in, make an appointment with your local bank.

Article by Mike Selvon

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