Retirement In the New Age

Are You Prepared For A Life of Leisure?

Consider These Numbers…

"At the end of WWII, there were 42 workers paying into Social Security
for each person receiving benefits. Today, barely three people contribute
for each recipient. Projections are that by 2030, when most baby boomers
will have retired, just two working people will contribute for each person
receiving benefits. (Social Security Administration, Trust Funds
Report, 1992)."
(Saperston Asset Management Inc.)

"Social Security benefits will replace only 16% of the income of married
couples earning $50,000 to $100,000 and only 9.5% of the income of married
couples earning $100,000 and only 9.5% of the income of married couples
earning $100,000-plus. (Office of Research and Economic Analysis, Pension
and Welfare Administration)."
(Saperston Asset Management Inc.)

"Working people tend to think their retirement lifestyle will be better than
their current lifestyle, but retirees report their standard of living has
declined. Example: Twenty-six percent of workers say they are "just
making ends meet," but only 16% think they will live this way in
retirement. Of retirees, 20% are "just making ends meet," while 16%
describe their pre-retirement lifestyle this way (Employee Benefit
Research Institute)."
(Saperston Asset Management Inc.)

Is this the reward for a life of ardent labor and selfless devotion?
I would like to think not. I did not write this article with the intent
to trouble you, instead I have written it in hopes of awakening you to
the issue before it's too late.

Now that we have discussed the problem, let's discuss some solutions.

If you're still in your youth, roughly between the ages of 20 and 35 you
still have time to start a traditional savings plan that will over time
build you a comfortable nest egg for retirement. But my main focus
in this article is to help those with much less time before retirement.

What do you do when you only have a few years left before retirement
and you realize that you don't have enough set aside to live the life of
luxury and leisure that we all hope for. Should you put your dreams
aside and continue to work through your golden years? No one
should ever have to do this. No, instead I propose you take fate into
your own hands, flip it upside down, and shake it until his pockets are
empty. Than pick up the cash dust yourself off, and enjoy your life.

Ways to "Flip Fate" - Retirement Plans & Solutions

Money is a game of self education. Those who have it prosper, those
who don't fail. It's that simple. So pick an option and get educated,
your retirement depends on it.

401(k)'s & IRA's
Time to put these bad boys into overdrive. Start plunging huge chunks
of your monthly income into either your 401(k) or your IRA. If your
company provides a lucrative compensation matching plan, than hit
that 401(k) hot and heavy as it has the potential to provide a return of
up to 25% 50% and sometimes even 100%!

Stocks & Mutual Funds
If you know what your doing, or have an Einstein of a broker, you may
want to take a look into this option, as the stock market is a proven
money maker for those who know the game. For those who don't stick
with mutual funds and a good broker.

Second Job
This is not a pretty one, but drastic situations call for drastic measures.

---------------------
These last two are quoted directly from MSN's "Money Central" and
are probably the two which are the most immediately lucrative choices
you have.

"Plan to sell your house and buy a smaller one or get out of the real
estate market altogether.
This is especially true if you're planning to move to a retirement
community with lifetime services. If you need your home equity for living
expenses, you can always take a reverse mortgage."

"Start a business on the side.
There are many benefits to this, especially if you're close to retirement.
First, you can usually contribute up to 25% of your self-employment
income to a tax deductible Keogh plan even if you're already putting
money in another plan.

The second benefit is that your new knowledge and experience makes you
more valuable to your current employer. Third, if you're laid off or
experience job discrimination in terms of a pay raise, you have another
income. Also, once you're officially retired from your primary job, you
have a nice business that can continue to generate income. It gives you
some great tax deductions and still allows you to sock away money for
retirement, whenever you finally decide you can afford to slow down."

Your financial future is dictated by the choices you make today. Don't
let retirement sneak up on you as it has so many others. Make a decision
to take action today. Good luck, and enjoy your retirement!

Wishing you success,
Michael Bosse
mike_jb2@hotmail.com

Health, Wellness & Wealth - The Freedom and Time to Enjoy
Life to it's Fullest! Be part of the next Trillion Dollar
Industry...Health! Benefit from the best health products
available, than share them and profit http://www.artofhomebusiness.com/V4L

First Published in the Balanced Report Fall 1991
This is the central question of retirement planning. When people come to see us, that is what they are asking us to answer for them. The question is usually phrased as. "Can I afford to retire? When can I afford to retire? How much income will I have at retirement? Will inflation cause me to have to work longer or reduce my standard of living?" Very simply you want to know, will you have enough. This is no different than planning a trip. You need to try to figure how much money you need. How much cash / travelers cheques, will you need for the journey? When you have figured that out you will probably still take along some credit cards just in case you miscalculated. We feel more comfortable with a safety cushion in case we run out of money. At retirement most people want to know that their pensions and investment portfolio will provide an adequate income. Their capital is their safety cushion and they usually prefer to leave it intact.

The difference between retirement and a vacation is that you don't have to worry about the price of your purchases increasing between the beginning of your vacation and the end of it. But, you sure do in retirement. If you spend too much on your vacation you can always earn more to pay for it. In retirement you are unable to earn more income, in most cases. A person retiring today at 65 years of age can expect to live an average of 22 years, or age 87 based on current mortality tables. This is one third of your life and the figure is improving all the time. With that length of time in retirement, perhaps longer if you retire earlier, inflation becomes a serious matter to consider. At 5% inflation it will take three times as much monthly income in twenty two years to provide the same purchasing power it did the year you retired.

In order to answer the question how long will my money last it now becomes a little more complicated as we need to factor in an assumed rate of inflation. Most Financial Planners that I talk to like to use a figure of 5% in their forecasts. Any assumption under 4% is in my opinion irresponsible. Over a long period of time such as retirement, you can expect that some periods will be higher than others but it will level out over time. It is my experience that many people will experience a fair amount of inflation in their expenditures in the early years of retirement. This is because they are now traveling more or making a major purchase such as recreational vehicle or equipment to enjoy their retirement. But as they get over 80 years of age they start to spend less. So inflation of expenses is greater in the first ten yours of retirement and less after.

You then need to factor in the various pensions that you and your spouse may be eligible to receive. Many people now retire prior to age 65 and elect to receive a reduced Canada Pension in order to start collecting earlier. Old Age Security does not start until age 65 so you will have to factor in that extra cash flow requirement for a few years. If the spouse is a few years younger and you both want to retire at the same time you may have to plan for this additional income by drawing extra from your investments until the spouse's pensions begins. The point being that there will be about five or six different income streams to factor into the calculation because of the different starting times.

After many years of paying taxes some pensioners are now loosing their Old Age Security benefits. If you have net income greater than $50,850.00 you will lose some of your benefits. Sad as this is, it needs to be factored into your retirement plans. There are a few interesting financial planning activities that help to deal with this problem. Sometimes this claw back can be avoided for awhile by letting your RRSP's accumulate a little longer.

Fortunately we have developed a computer program to accurately calculate all of the various income streams, inflation, growth, etc. This programme will tell when you can retire, how much you will have each month in today's dollars and if it will run out. Using this key information has enabled many of our clients to make their retirement decisions easier. It has also helped some of our older clients who came through the depression and are afraid to spend. Knowing that your money will last gives you the freedom to enjoy yourself in retirement. But, you need to plan, calculate and save if you want to get there in comfort.

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