Retirement Plans

Retirement is one of life’s biggest worries and retirement plans play a crucial role in providing a source of income in a person’s retired years. Retirement can span up to a third of a lifetime. Retirement plans are much like saving for a 25-year vacation. To afford an expense of that magnitude a person needs to start planning early. Age has a critical impact on one’s ability to save.

The Social Security system, company retirement policies and personal lifetime savings are the three sources from where funds are drawn to pay for expenses after retirement. There are several plans that benefit employers and employees alike. A qualified retirement plan is a plan that meets the requirements of the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act of 1974 (ERISA). The plan attracts many tax benefits.

A plan that does not meet the requirements of the IRC or ERISA is known as a non-qualified retirement plan. These plans are typically used to provide deferred compensation to key employees. The plan allows wider flexibility to an employer and therefore, they do not receive tax deductions until the employee receives proceeds from the plan.

A defined benefit plan is a traditional company pension plan. The retirement benefit is determinable as a dollar amount or as a percentage of wages. These plans are funded entirely by the employer and the responsibility for payment of the accompanying benefits rests with the employer.

A defined contribution plan is a retirement plan in which the contribution is defined, but the ultimate amount of benefit to be paid is not. The actual benefit at the time of retirement depends on the amount contributed over the years and on the investment performance of the account through the years. In this retirement plan, the investment risk may rest solely with the employee. These plans are known by various names such as money purchase, profit sharing, 401(k), or 403(b) plans.

An Individual Retirement Arrangement (IRA) is a personal retirement savings plan available to any individual, regardless of age, who receives taxable compensation during the year. Wages, salaries, fees, tips, bonuses, commissions and taxable alimony are all included.

Retirement plans are a long-term goal that requires steady, long-term saving. To ensure a comfortable retired life, studying and participating in at least some of the various retirement investment plans is critical.

5 Things to Ask When Starting a Retirement Plan

Many Americans are worried about how much money they’ll have left when they reach retirement. While you may have a good income now, your current savings probably won’t last long once you’re retire if you don’t have a savings plan in place. The following questions are things you should ask yourself when starting a retirement plan, or when determining if your current plan will be enough.

How much longer do I have until retirement and how long does my savings need to last beyond that point? The first thing you have to determine is when you would like to retire. Subtract your current age from your desired retirement age to find out how many years you have to save up. Now you have to figure out how long you’ll need to use that retirement savings. Since no one knows exactly how long they’ll live, plan to live to 100; you’ll probably have plenty of savings during your retirement. All of this is important information to know when you begin planning for your retirement. Some plans offer an income life, while others only last until the money you put in and the interest you earned has run out.

How much money can I afford to set aside per month for retirement? This is where it comes in handy to have a budget. If you don’t already have one, you should start one. No matter how old you are, the time to save is now. The longer you wait to start your savings, the less money you’ll have for retirement. Figure out how much you think you can afford to save per month, and figure out how much you’ll have by the time you reach retirement. If you have 20 years left until retirement and you put away $50 a month for that whole period, you’d have $12,000 saved when you reach retirement. That amount isn’t going to be enough to last you through retirement, so you should plan to put away more per month in the future as your income increases.

How much risk am I willing to take? This is a very important question when you’re choosing a retirement plan. Some 401(k)s, IRAs and other retirement plans are invested in the market, so you run the risk of losing money if the market goes down. Other plans like fixed annuities and index universal life insurance have no market risk, so you can earn interest without risking your money in the market. You may need to speak with a financial professional to determine how much risk you’re comfortable with.

What if I need access to the money early? When choosing a retirement plan, it’s always good to think about emergencies that may come up. If you become ill or injured, you may have medical bills come up, or maybe you’d like to help your child pay for college. Many retirement plans have restrictions and penalties for accessing your money early, so you’ll need to make sure you understand the restrictions and fees that your retirement plan offers. Index universal life insurance policies allow you to take out loans, while IRAs, 401(k)s, annuities and other plans may not be as flexible.

Do I want to leave an inheritance for my family when I’m gone? Many people would love to leave money for their families, but never really make a plan to do so. Some retirement plans can be passed on to your loved ones tax-free when you pass away, while others cannot. If you choose a retirement plan that does not allow you to pass on your money, you may want to consider purchasing a life insurance policy so that your loved ones can pay for your final expenses and have an inheritance.

Planning for retirement is one of the most important financial decisions you’ll ever make, yet many people don’t take the time to consider all of their options to determine the best plan for them.

Retirement Planning – Plan Your Retirement For Income Through Mutual Fund Investment

Most of the people I have met have not planned for their retirement as they say ‘future is unpredictable and we need to live in present’ but my dear friend’s future is the outcome of present, our present will decide our future. When we think of retirement we generally think of old age, a period when you have to give up the job and sit at home doing nothing. Contrary to the fact, most of the retiree lives a very active life. We need to seriously consider out planning towards retirement because once we retiree our income stops coming but our expenses remain as it is and in some cases it rises with the rising inflation.

In this regard mutual fund has turned out to be the right answer for making retirement planning easier and safer. Mutual fund being managed by professionals is a key to effective retirement planning.

Some people like it. Some people don’t but the fact is that retirement is a reality for every working person. Most young people today think cannot think of retirement as reality as they believe in ‘living at present’. However, it is important to plan for your post-retirement life if you wish to retain your financial independence and maintain a comfortable standard of living even when you are no longer earning. This is extremely important, because, unlike developed nations, India does not have a social security net. In India people still depend upon bank savings and fixed deposits for retirement purpose, which is unfortunately inadequate.

Retirement Planning acquires added importance because of the fact that though longevity has increased the number of working years haven’t, so you end up spending the last phase of your life without earning.

In simple words, retirement planning means making sure you will have enough money to live on after retiring from work. Retirement should be the best period of your life, when you can literally sit back and relax or enjoy your life by reaping benefits of what you earn in so many years of hard work. But it is easier said than done. To achieve a hassle-free retired life, you need to make prudent investment decisions during your working life, thus putting your hard-earned money to work for you in future.

With the special features of mutual funds like Systematic Investment Plan, Systematic withdrawal plan, systematic transfer plan in addition to other unique features of different funds, the investor can easily plan for its post retirement requirements and ways to achieve it.

Unlike many other countries of west, in India we do not have state-sponsored social security for the retired people. While you may be entitled to a pension or income during retirement, but will it be sufficient post retirement.

Although the compulsory savings in provident fund through both employee and employer contributions should offer some cushion, it may not be enough to support you throughout your retirement. That is why retirement planning is extremely important for every one. More over with mutual funds the investors can actually plan for themselves and also achieve their planned objectives. As compared to direct equities this option of mutual fund is much safer for planning your retirement corpus.

There are many reasons for the working individuals to secure their future emergence of separate families and its attendant insecurity, increasing uncertainties in personal and professional life, the growing trends of seeking early retirement and rising health risks are among few important risks. Besides falling interest rates, also the sustained increase in the cost of living make it a compelling case for individuals to plan their finances to fund their retired life.

Planning for retirement is as important as planning your career and marriage. We need to take conscious and careful decisions to prepare for our retirement. Life takes its own course and from the poorest to the wealthiest, every one gets older with time. We get older every day, without realizing. With our coming old age we tend to become more understanding to the facts of life and realize the importance and impact of retirement. The future depends to a great extent on the choices you make today. Right decisions with the help of proper planning, taken at the right time will assure smile and success at the time of retirement.

In my words, retirement planning means making sure you will have enough money to live on after leaving your work. Retirement should be that period of your life, when you can sit back and relax. Retirement should bring more of enjoyment in your life by reaping benefits of what you earn in so many years of hard work. But it is easier said than done. Most of the people live their worst life during retirement. To achieve a hassle-free retired life, you need to make right investment decisions during your working life, thus putting your hard-earned money to work for you in future. If you are not very aware of the investment that you need to undertake then you can easily take help of online advisers to help you with your retirement plan through mutual funds. The earlier you start the better it is for you.

Now retirement planning can be done with a single click and with the advice of a registered mutual fund advisor by Association of mutual funds in India (AMFI). Fill this retirement questionnaire to know your current financial situation and your investor profile which will help you plan for a worry-free retirement.

Start Your Financial Retirement Planning Now!

With the economy on the decline, retirement may seem impossible. However, if you are concerned about the financial security of your retirement years, you have to be serious about financial retirement planning. Financial retirement planning is the first step to ensure that the lifestyle you’re dreaming of at retirement will have a better chance of becoming a reality.

No matter how old or young you are, it’s never the wrong time to think about financial retirement planning and start a retirement savings plan. However, the earlier you begin the better off you will be. Chances are you will have a larger nest egg at retirement if you begin saving at 30 years of age instead of 60. With more years to invest your investment will have a better chance of recovering from any drops or bump along the way. The longer your money is invested the better your chance of securing your future. By planning for your retirement needs, you’ll identify what you need to do in order to secure your future and be in a better position to deal with most issues that may otherwise confuse you and do damage to you financially.

The first consideration for your retirement savings plan will be where your investment money will go and for how long. As a basic strategy, you should invest some of your money in short term investments, medium-term investments and long term investments. The type of investment usually is determined by your time horizon. Generally, the more time you have before having to sell off the investment for cash, the riskier the investment.

If your time horizon is five or more years, which would be considered long term investments, you can choose investments that appreciate over time. Growth stocks and real estate are good long term investments if you have many years left before retirement. Volatile stocks or CDs are considered short term investments, investments that are held for a year or less, and should be reevaluated several times a year.

Times are different – you can no longer take the retirement planning advice of an investment adviser as gospel when it comes to financial retirement planning. You need to educate yourself and take charge of your money.

If you find planning for your retirement needs a daunting task, there are many retirement planning tools you can turn to for help. These tools include well-written books that can explain the difference between things like bonds and stock, etc. There are also individual classes and seminars that you can take to help you craft your retirement investment plan to reach the goals you set for your retirement.

You don’t want to find out too late that you don’t have enough money to cover your retirement needs. You must educate yourself to gain an understanding of what is possible with the money you invest. Generally, a balanced retirement savings plan should include investments in treasury bills, money market and savings account to provide accessible cash; stocks in small, medium and large companies for growth and appreciation; and other investments such as real estate for long term appreciation.

Your financial retirement planning should take into account the number of years you have left until you plan to retire. The more years you have to invest your money, the more risk you should take with your investment money. If you have only a few years before retiring, you should have more of your investment funds in readily available cash. You don’t want to be at retirement’s door with most of your money tied up in the stock market only to see a big portion of the money disappear in a market downturn, which can happen at any time.

If you do have many years before retirement, aggressive stocks and real estate can be a sound investment. Your nest-egg may growth faster with this investment strategy because the funds are shielded from certain taxes, and because real estate is a good hedge against inflation.

Financial retirement planning is not rocket science. It’s mostly common sense. Besides there are many retirement planning tools that you can use to help you create the best retirement savings plan for you. However, even the best laid out plan needs to be reviewed and adjusted with the circumstances. Review your retirement investment portfolio at lease once a year and make adjustments as warranted. Don’t let short term ups and downs in the market throw you off your path that leads to your goals. Ups and downs in the investment market are part of the normal cycle of investing. Stick to your informed long term plans and the bumps along the way should all even out over the years to provide for your retirement needs.