Posts Tagged ‘retirement’

Pension experts have revealed that the scheme set up to protect final salary pensions could be in trouble.

As pension shortfalls have recently hit a record high, the Pension Protection Fund (PPF) is in danger of being submerged from a high level of claims being made from companies that have gone bankrupt.

It has been revealed that up to 91% of final salary schemes cannot afford to pay out benefits, with the under-funded schemes carrying deficits of over £228 billion.

The PPF takes around £700 million from companies every year, but this has proved too little and doesn’t cover its liabilities. The PPF has a deficit of around £550 million.

The PPF has already carried the weight of 62 schemes that failed, which include Woolworths, and Lehman Brothers.

There are now growing concerns that further failed schemes will result in the PPF to collapse, leaving future companies at risk of bankruptcy vulnerable to loss of employee pensions.

The government has been called on by The National Association of Pension Funds to back the scheme and act as a safety net, but the government has yet to comment.

NAPF Chief Executive, Joanne Segars, said: “In these exceptional times, maintaining confidence and security in pensions is vital so it would be a sensible measure for the Government to be the ultimate guarantor of the Pension Protection Fund.”

Vince Cable, Treasury spokesman for the Party, said: “I get a very strong sense that this is the Titanic hitting the iceberg. As the recession deepens, it has become very vulnerable. Companies won’t be able to sustain the fund in its present form. The Government has to be explicit that it is standing behind it.”

The potential issues were raised after a new survey from Punter Southall revealed that 60% of pension schemes are unaware of how the recession is affecting their funding position.

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Pension experts have revealed that the scheme set up to protect final salary pensions could be in trouble.

As pension shortfalls have recently hit a record high, the Pension Protection Fund (PPF) is in danger of being submerged from a high level of claims being made from companies that have gone bankrupt.

It has been revealed that up to 91% of final salary schemes cannot afford to pay out benefits, with the under-funded schemes carrying deficits of over £228 billion.

The PPF takes around £700 million from companies every year, but this has proved too little and doesn’t cover its liabilities. The PPF has a deficit of around £550 million.

The PPF has already carried the weight of 62 schemes that failed, which include Woolworths, and Lehman Brothers.

There are now growing concerns that further failed schemes will result in the PPF to collapse, leaving future companies at risk of bankruptcy vulnerable to loss of employee pensions.

The government has been called on by The National Association of Pension Funds to back the scheme and act as a safety net, but the government has yet to comment.

NAPF Chief Executive, Joanne Segars, said: “In these exceptional times, maintaining confidence and security in pensions is vital so it would be a sensible measure for the Government to be the ultimate guarantor of the Pension Protection Fund.”

Treasury spokesman for the Party Vince Cable, said: “I get a very strong sense that this is the Titanic hitting the iceberg. It is potentially very vulnerable in a serious recession, which is what we are now getting into. Companies won’t be able to sustain the fund in its present form. The Government has to be explicit that it is standing behind it.”

According to the survey, which was carried out by Punter Southall – an administration service provider specialising in pensions, 60% of pension schemes are currently unaware how their funding is, and is due to be affected by the on-going recession.

UK Price Comparison website Which4U – Compare Credit Cards, Savings Accounts, Fixed Rate Bonds, Bank Accounts, ISAs, Loans, Mortgages, Insurance, TV & Broadband and Gas/Electric bills to find the best UK deals

“Inflation is taxation without legislation” – Milton Friedman

Most people underestimate how much inflation will affect their retirement plans. Just like compound interest, the effects of a relentless year on year accumulation are significant. For instance, if you retire at 65, and think you may live until 90, which is not unusual nowadays, you will need about twice as much income in your twilight years as you do when you have just left your job.

The problem with inflation is that there is no person or body to whom you can appeal if you think you have been hard done by. Inflation happens, get over it! You should check that your investments are well-placed to nullify the worst of runaway inflation, and make sure your investment strategies include either a good initial margin or an excellent annual return in order to deal with it.

I can’t emphasize strongly enough the need for a good investment advisor, such as Ken Himmler (www.kenhimmler.com), or a company such as Integrated Asset Management, (www.iamllc.biz) who can look after your interests. Inflation has averaged nearly 3 1/2% since the beginning of the 20th century, and that rate of inflation requires more than double the income over 25 years — more recently the rate has been lower, which still requires nearly twice as much income over the same period to buy the same goods.

What are we to make of the current administration’s plans? The $250 bonus is very welcome. However, we have not yet seen the impact of all the proposed spending, and experts generally agree that creating spending will result in inflation. There is a purpose to the funds that are being provided to stimulate the economy, and they may well be needed at this time, but that does not change the fact that they will lead to greater inflation.

Retirement living is often on a relatively fixed income, and those who are already retired will find it hardest to adapt to the increased inflation which is likely to occur. Nonetheless, the best investments will allow you to come out ahead, and enjoy a long and relaxed retirement.

Authored by Kenneth Himmler, Sr.

A recent report has revealed that retirees in Australia are the fourth poorest in the developed world, with our unemployed ranked as the poorest.

The Organisation of Economic Co-operation and Development has found that 50 percent of our single retirees live in poverty, which is defined as less than 50 percent of average earnings. This figure has risen by 4.8 percent over the last 10 years. Other figures show that a worrying 27 percent of all aussie retirees live in poverty.

One way to avoid becoming a victim of poverty is to open a high interest savings account and deposit whatever money you can afford. This will provide people in need with an additional source of finance, keeping them above the poverty line.

Jenny Macklin - Families and Community Services Minister, said the figures from the report are "shameful" and underlines the 12 years of neglect from the former Howard government.

“This is a searing indictment of the Opposition’s record in government on older Australian,” she said.

National Seniors chief Michael O'Neill has said that the new findings have identified a problem that Australian pensioners were already having to deal with.

“The single pension is inadequate and needs to be increased to two thirds the rate of the couple pension,” he said.

However, the report has also revealed further figures indicating that those without a job in Australia are suffering even more than the retired, with unemployed ranked as the poorest of all developed nations.

Sydney's Welfare Rights Centre policy officer Gerard Thomas said that this was a very serious message, and that unemployment is expected to continue rising due to the global economic slowdown.

“The Government has recognised that pensioners are doing it tough but they appear to have blinkers on when it comes to understanding the real situation that unemployed people find themselves in,” he said.

The Rudd Government has introduced a $500 allowance this year in an attempt to boost pension incomes, and will be raising the telephone allowance to $132 a year.

In October 2008, the Government unveiled plans of a one-off lump sum Christmas bonus of $1,400 for single pensioners and $2,100 for couples, in an effort to increase consumer spending.

An inquiry is also under-way to increase the single pension, which currently stands at $281 a week.

The unemployed are provided with $50 a week less and they were not included in the Government’s recent economic rescue package.

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Thanks to major advances in the health sciences, life expectancy has never been greater than ever.  With the average baby boomer expected to live to 77 and beyond, there’s never been a more well-positioned generation to enjoy a long and comfortable retirement – but are your retirement savings up to standard?  With the oldest baby boomers just reaching sixty this year, it’s more important than ever to make sure that your savings and investments are healthy enough to last you well beyond fifteen to twenty years. 

So what can you do to make your retirement savings last?

First, you’ll want to make sure that your investments are ready for retirement in five to ten years.  Head to your investment firm to get the kind of financial check-up you need; this includes reaffirming your retirement plans with your investment advisor, underlining when exactly you’d like to retire and what you need to do to turn your savings and investments into actual cash in your bank account. 

Of course, even the most well-meaning retiree runs the risk of blowing his or her retirement savings if there’s no strict budget to follow.  It’s hard to predict what you’re going to be spending your money on in the future or what emergency expenses are going to pop up (hospital bills, anyone?), but if you want to make your retirement living a happy and comfortable one, you’re going to need to set a withdrawal budget.  Financial experts recommend withdrawing only 4 to 5 percent of your total savings for the first year; while this may appear to be conservative – especially if your nest egg isn’t up to scratch – this will help you to better outlast shaky market conditions and inevitable inflation that will occur in the future.  This conservative withdrawal habit will balance out with the further growth of your savings and investments, which should continue to increase as the years pass.

Don’t forget about your Social Security checks, which far too many baby boomers are depending on in order to pay for basic necessities.  If you’ve been smart about your retirement plans, then your monthly check will probably provide additional lining for your cash cushion – but have you considered when you should start collecting?  You can start receiving Social Security payments at the age of 62, but this will greatly reduce the monthly payout amount by up to 25%.  If you can, start collecting between 65 and 67; this way, your retirement savings will receive a nice financial boost courtesy of the government.

For more information on smart retirement planning, visit www.kenhimmler.com, the IRA and 401(k) experts!

Authored by Kenneth Himmler, Sr.

Are your ready for retirement? Have you been investing your monies over the years, saving 401ks, and actively planning for retirement? If so, you’re in the distinct minority. Well over 90% of retirees are totally unprepared when the time comes. As a result, they end up living their retirement years in far different circumstances and environments than they had envisioned.

No one is going to take responsibility for your retirement except you. The people that end up satisfied in retirement are the ones that figured that out early on If you don’t plan for it, you could easily find yourself destitute when you reach your sixties.

One method of starting to plan for retirement involves taking advantage of retirement calculator software. This kind of software can make planning your retirement a breeze. What criteria should you look for in a retirement planning software tool? First, it should be user friendly. If it’s difficult to understand and use, it won’t get used. Second, look for evidence that the software is well supported. The last thing you want is a situation where you’ve spent a lot of time entering all of your financial data into the program simply to find that the company has gone out of business and the software is no longer supported. It can be worth paying a few more dollars for the peace of mind knowing that the software has plenty of customer support behind it.

Thirdly, an essential feature in a retirement planning software tool is for it to be able to track stocks, bonds, 401ks, IRAs, and other common financial investment instruments and including them in the retirement calculations. It should be able to extrapolate how much a regular series of payments over a specified time frame at a specified interest rate will result in at the time that the person retires. And it should be able to work backwards as well. For example, assuming that you are 35 years old. The tool should be able to take your desired income requirements at 65 years, and determine how much you will have to save each year in order to reach that goal.

You don’t have to use software to plan out your future. Plenty of people, especially if they have the money, are more than comfortable with leaving their retirement planning services in the hands of a professional. But, even in these cases, it doesn’t hurt to use retirement planning software to get an idea of the possibilities available to you. You can then take these broad suggestions to your financial planner for implementation of the finer details or simply for a more informed feedback of the desirability of your plans. But also, keep in mind that financial planners aren’t gods. And they are dealing with multiple clients. It’s very possible that your tool may discover something that they missed in putting together you financial portfolio.

For a lot of of the baby boomers who are already at retirement age, it’s too late to implement a long term retirement plan. But even they, can make use of software to ensure that the funds that they have accumulated provide for them as long as possible. As, for those in their thirties, forties, and even fifties, the best time to start thinking about a retirement plan is now. The younger you start, the less painful are the financial sacrifices that you have to make.

Your retirement years are the time when you want to relax, travel and enjoy the fruits of your labor.  However, in retirement planning, too many people forget about healthcare. 

While you worked as an employee in the corporate sector for 30 to 50 years, you most likely had the benefit and convenience of medical healthcare, either paid in full or in part by your employer in a group health plan.  All you had to worry about was how much money was withheld from your paycheck each month for your share of the premium and perhaps which HMO or health care plan to choose.   

Jump to age 65 when you retire and are no longer an employee or a member of the group health plan.  You are now responsible for obtaining and paying for your health care premiums.  And you are responsible for paying any amounts over what your health care does not provide.  Will you be able to afford health care after retirement?

How Much Will You Need?

A report from the Fidelity Consulting Services in March of 2009 showed that a typical 65-year old retired couple will need $240,000 for health care costs during their retirement years.  That figure is up 6.7 percent from 2008, and anyone at or near retirement should be aware of the escalating health care costs.  The Fidelity figure is calculated even after a couple is covered by Medicare and does not include costs for prescription medication, long-term care, or dental costs.

Why does health care cost so much after retirement?  Some of the reasons for the jump in health care cost estimates is the increasing number of physician visits, more expensive diagnostic testing, and general inflation. 

How to Plan For Retirement Health Care

It is important for any individual or couple planning a retirement savings to take into account the rising costs of health care.  There are many things one can do before retirement to help save for medical costs.

• Set up a specific Retirement Medical Savings Account – Many people can start putting money each month into a specific account earmarked for medical costs.  A specific savings vehicle, such as a Health Savings Account, may be a great way to save for retirement health care costs with tax advantages.

• Open a separate IRA – You could also open an IRA account separate from your regular retirement IRA.  This gives you similar tax advantages and helps earn more on the money you contribute.

• Retire in stages – Retirement doesn’t necessarily mean you have to stop working cold turkey.  At retirement age, you could drop your normal full-time hours to half-time or other part-time scheduling.  This may allow you to continue earning money and continue on the company group health care plan.

• Preventative care – Before and during retirement, you should be proactive in your preventative care.  Always attend your regular checkups and physicals.  These screenings can help detect early health care concerns before they escalate.

Planning your health care during retirement alone can be a daunting task.  It is always recommended that you also work with a qualified retirement wealth manager like www.kenhimmler.com or retirement asset management company such as www.iamllc.biz to help you plan for your retirement health costs. 

Authored by Kenneth Himmler, Sr.

The recession hasn’t exactly been a keen investor’s best friend. 

With the Fed introducing legislation based on quantitative easing (which means that interest rates will plummet to historic lows) and the markets performing shaky at best, many of the savviest investors are opting to pull out their money before incurring any more losses.  However, it’s important to note that even in the current economic climate, smart investments can still be made with less risk involved.  The key to protecting your hard-earned money while earning a tidy profit is not how much you invest; rather, it’s where you put your money in the first place.  Consider these alternative investment options to keep your money right where it belongs – in your pocket!

Indexed CDs have become increasingly attractive to savvy investors over the years, and it’s not because it offers protection against principal loss; indexed CDs are one of the most effective investment options in the face of inflation, which the Fed predicts will drastically increase over the next decade.  Lock in your interest rate now and ensure that your CD lasts for no longer than five years, as the recovering economy will do a long-term locked-in CD more harm than good.  Financial experts typically recommend locking your money in an indexed CD for no longer than eighteen months.  Before investing, be sure to research which CDs offer the best rates over an eighteen-month period; a great resource can be found at www.bargaineering.com. 

If an indexed CD isn’t your cup of tea, then try the indexed annuity out for size.  Once the bane of investment advisors everywhere, indexed annuities are quickly becoming one of the preferred investment options for baby boomers reaching retirement.  An indexed annuity is simply a contract with an insurance company that guarantees a minimum interest payment; an additional benefit is that your indexed annuity (which is linked to the stock market) can generate even more cash flow if your stocks do well.  Indexed annuities offer a great investment opportunity for those looking to protect their money while dabbling in the unstable world of Wall Street.

Like with many investment schemes, however, make sure you understand the minute details before leaping into indexed annuities.  Don’t lock your money in one for more than ten years, as you run the risk of making little more than the interest rate, even with inflation.  Be sure that your insurer will honor the promoted interest rate for the entire length of the annuity, as many insurance companies fail to advertise which interest rates are permanent and which are merely promotional.  Be sure to involve your investment advisor in any considerations regarding indexed annuities, as he or she can point out esoteric details that may have first escaped your notice.

Not all investments retain an all-or-nothing mentality; in fact, you’ll find that many investments are tried-and-true methods for generating a tidy sum of money that can go towards retirement.  These alternative investments will go a long way towards protecting your money while still generating a surprising amount of cash flow straight into your savings.

Authored by Kenneth Himmler, Sr.

Let’s face it – unless you’re a savvy saver, you’ve probably lost sleep over your impending retirement at some point or another.  Maybe you’re worried that inflation will eat away at your 401(k) retirement fund, or you won’t be able to afford rising medical costs in another decade or two.  Whatever the case may be, it’s time to acknowledge some ingenious solutions that will improve the health of your retirement savings – not to mention help you to sleep better at night!

When it comes to a smart and comfortable retirement, you’ll want to pay off any toxic debt before you hit your retirement age; this means that any credit card debts you have will need to be tackled before you can give that retirement speech.  If you’re approaching your estimated retirement age, devote a larger portion of your income to paying off those credit cards; you don’t want your hard-earned savings and investments going towards toxic debts instead of the possibility of a Florida retirement, do you?

It’s easy to give in to worry if you don’t have a firm idea of what your retirement assets include; if this sounds familiar, then schedule a meeting with your investment advisor and get a hold on where you are at this current point in time.  Additionally, if you’re worried about Medicare, make sure that you have a health insurance policy that will cover long-term hospital stays, which Medicare doesn’t cover.  If you’re still worried about healthcare costs in your retirement, take a proactive stance by taking care of both body and mind.  Eat a healthy diet and get plenty of exercise, and you’ll hardly have a need for those health insurance worries!

Additionally, make sure you plan ahead for that transition from employee to retiree.  In many cases, it can take some time before your savings and investments become cash in your bank account, so don’t let this transition knock you out of your stride.  Your registered investment advisor should be able to help you with this all-important transition.

For more information on smart retirement planning, visit www.kenhimmler.com, the IRA and 401(k) experts

Authored by Kenneth Himmler, Sr.

This week I think about long-term care insurance and whether that you should consider taking out a policy. It does not rank as one of the best investments for everybody, but you should consider carefully whether it may provide you with the assurance of continuing care that you need. As with all insurance, there is a chance that you will not see a return on investment, but you may want to pay for peace of mind.

Long-term care covers many services beyond the routine medical requirements, including help with eating, bathing, dressing, and getting around. In fact, ordinary health insurance does not provide any benefits towards long-term care, but the need for long-term care is very real as there is about a 50% chance if you’re 65 that you will spend some time in a long-term care facility.

People generally fall into one of three camps when considering this type of insurance. They may have enough money in their investments that they feel confident they can cope with the costs should they arise. The actual cost of long-term care services is on average about $30,000 per year, although it can be much higher, so these people may decide that they will face these costs if they need to.

On the other hand, they may have so little spare income that they cannot afford the premiums, which may be $2000 per year, and decide that they hope they qualify for Medicaid if the need arises. In fact, long-term care insurance for these people would only save the state money, not them.

Long-term care insurance is sold to the third group of people who have sufficient funds to afford the premiums and want to feel secure. Your investment advisor should be able to help you determine if it is right for you. Contact Ken Himmler (www.kenhimmler.com), or Integrated Asset Management (www.iamllc.biz) for advice.

If you decide to afford long-term care insurance, it is something you need to think about sooner rather than later, and you should not wait until retirement age. If you apply in your 50s, there is a one in 10 chance that you’ll be rejected; in your 60s, the charts increases to two out of 10; by the time you’re 70, the chance of rejection is four in 10. The younger you apply, the cheaper the premiums will be, so you cannot afford to wait until retirement. Be sure to read the fine print to check that you are getting the coverage that you want.

Authored by Kenneth Himmler, Sr.