Tuesday, December 10, 2013

Registered Pension Plan

Registered Pension Plan - A form of a trust that provides pension benefits for an employee of a company upon retirement. RPPs are registered with the government. The employee and employer, or just the employer make contributions to this retirement plan until the employee leaves the company or retires. Contributions to an RPP are tax deductible for both the employee and the employer. Contributions to the plan and gains on underlying assets are tax deferred, so the funds are taxed when they are withdrawn from the plan. In this article, we will discuss types of registered pension plan.
1.  Registered Pension Plan - Types of Registered Pension Plan

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Tuesday, August 21, 2012

Retirement Planning for Couples


Cooperation is the key to successful retirement planning for couples. Many couples get themselves into trouble because one spouse or partner handles all of the investments and retirement planning. This is a terrible mistake because at some point that individual may not be available to take care of those chores.
Both Spouses Need to be Involved
The life expectancy for the average American man is around 76 years while the life expectancy for average American woman is around 81 years. That means the average woman can expect to be on her own for four to five years in retirement. Medical experts estimate that 50% of Americans over age 85 suffer from conditions like Alzheimer's disease that leave them unable to manage financial matters.
This is why both spouses need to be active in the retirement planning process.
There is a strong possibility that one of you will not be able to manage the retirement investments at some point. There is also a possibility that both of you might not be able to handle the finances at some point.
Retirement Planning is a Family Affair
Even if one spouse normally takes care of the retirement investments both need to be in a position to take charge of them. This means both spouses need basic information that can let them take over the investments and funds at a moments' notice. This information includes:
  • The names and contact information for all of the professionals used including retirement planners, financial advisors, insurance agents, brokers, accountants, tax preparers and attorneys.

  • The basic information for all your bank, brokerage, retirement and other financial and investment accounts. This includes the name of the institution, the institution's contact information, the account numbers, passwords and user names for online account access and the addresses of any websites used to access or monitor the accounts.

  • The location of all paperwork related to retirement planning including wills, legal documents, insurance policies, annuity policies, prospectuses, checkbooks, etc.

  • How to access all of the investment and bank accounts. If you have an IRA, 401k, money market account, brokerage account or CD both spouses should know how to access it and withdraw money. If you have a life insurance policy with cash value both spouses should know how to access it and borrow money.

  • The basic information about all the insurance policies and annuities you have. Both spouses should know the names of the insurance companies they hold policies with and know how to contact them. You should have a list of all the policies and numbers written down.
If you use any sort of financial advisor or retirement planner spouses should meet with that individual. Both of you should know how to get in touch with that person and know what financial decisions he or she is making.
Legal Considerations
It is not just enough to know where all of the money and paperwork is. Both of you should have the legal right to access the accounts. Read all of the documentation and make sure this is the case. If not get it changed so it will not be a hassle later on.
If you are not married you should check with an attorney to see what your rights are in your state. The law can vary widely from state to state and some states may not recognize some living arrangements. Something to be aware of is that relatives could try to claim they have legal powers over your partner or his money if there is no formal legal marriage. It may pay to get married or set up a legal arrangement such as a domestic partnership to protect your rights.
Steven Hart is a freelance writer and a Financial Advisor from Cary, IL. He writes about Annuity topics like Annuities Explained, Fixed Income Annuity, Annuity Leads and more.
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Monday, August 20, 2012

A Retirement Planning Checklist


With so many Americans approaching their retirement years, retirement planning has become a big business. It's no wonder. We see various studies showing that an overwhelming majority of workers may not have enough money saved to actually retire when they hoped. Even if you may have been late to the party, for many people, there's still time to make some positive changes that can improve your retirement outlook. If you're within five or ten years of retirement, the following tips are for you:
- Start boosting your savings. On the day you retire, what you have saved is all that you'll have for the rest of your life. This is your last chance to add to your savings or investments while you still have earned income. The IRS recognizes this and has given Americans over 50 years old a "catch up" provision in most retirement plans. You can add an additional $5,500 to your 401(k) plan this year and an additional $1,000 to IRAs. Look for ways to increase your savings rate in the years leading up to retirement, whether it is in a retirement plan, an emergency fund or other type of investment.
- Check your Social Security estimates. While social security retirement benefits were never intended to provide for your entire retirement income, they can offer a significant and reliable source of income once you stop working. To find out what you can expect to receive, go to the Social Security website and get a customized estimate based on your age and earnings history. You will see estimates based on taking benefits at age 62, your "normal" retirement age (generally 65 or 66) and age 70.
- Calculate your projected retirement income and expenses. Start with your social security and other guaranteed sources of income such as pensions and fixed annuities. Then total your non-guaranteed investments including 401(k)'s and taxable accounts. A traditional rule of thumb is to use a 4% annual withdrawal rate from your non-guaranteed investments. While this is usually considered a safe way to ensure that you never run out of money, it is not fool-proof. If you retire in the midst of an extended bear market, there is a higher likelihood that you could run out of money someday, and you may need to adjust your withdrawals for a few years until markets improve. Ideally, you would like your guaranteed income to cover all your necessity expenses during retirement- things like housing, healthcare, food, etc. Plan on using your non-guaranteed income sources for items like travel and golf.
When projecting your retirement expenses, remember that you'll have more free time on your hands. This could mean eating out more and additional travel and recreation opportunities. Don't forget to consider healthcare expenses as well. As we get older, we tend to need more medical attention and these out-of-pocket costs can add up. If you find that you have a potential shortfall in income, determine what you can do now to increase your future retirement income.
- Pay down debt if possible. While you're working, you may find it easy to make your regular debt payments on the mortgage, car loans and credit cards. If you can reduce or pay off debt while you're still earning money, you should do it. If you have the ability to pay off your mortgage and wonder if you should, talk to your accountant or financial professional. Retiring without a mortgage can add to your peace of mind, but, for some people, keeping the mortgage- and the interest deduction- could make sense too.
- Conduct an insurance audit. Start with a basic coverage review of your home, auto and liability policies. Next, take a look at your life insurance. You may consider adding coverage to protect a surviving spouse or you may find that you have insurance that you no longer need. I would strongly recommend taking a look at long term insurance if you haven't already. Many clients complain that the premiums are expensive; however the cost of paying for extended healthcare out-of-pocket can devastate your financial situation. If you have a sizeable estate, ask an attorney how a combination of long term care insurance and proper estate planning can protect you.
- Keep an eye on the asset allocation of your investments. People typically make their portfolios more conservative as they approach retirement to avoid big losses if the market goes down. If your accounts decrease in value by 40-50% while you're still young and working, they may still have time to recover. That may not be the case if you're only a year or two from your retirement date. You need to expect the unexpected and prepare for it. You never know when the next big crisis or meltdown will occur.
- Consider the tax implications of your investments. Remember that all the money in your IRAs and 401(k) will be taxed as ordinary income as you withdraw it. So if you're planning on withdrawing $20,000 a year from an IRA, keep in mind that what you actually get to spend may be significantly less. And don't forget about capital gains taxes. In your taxable accounts, selling stocks or funds that you've held for a long time could also trigger more taxes. Don't just sell indiscriminately; sell strategically- trying to offset gains with any losses you may have.
- Check and update your legal documents. When was the last time you updated your will? A lot has changed over the years and it's essential to have certain legal documents executed and in place as you get older. Start with your will and at least have a health care proxy and durable power of attorney. Again, if you have a sizeable estate, you should contact a qualified estate planning attorney to discuss the possible use of trusts.
If you haven't taken the above steps yet, I hope you'll do them now. I've never met anyone who retired with too much money.
David Chwalek is a partner with Senes & Chwalek Financial Advisors and a Registered Representative of Investors Capital Corporation, Member FINRA, SIPC, 57 Main Street, Concord, MA 01742. His website is http://www.senesandchwalek.com and he can be reached at (978) 369-2255. Views and opinions expressed are those of David Chwalek and are subject to change based on market and other conditions. The information provided is general in nature and should not be construed as tax or investment advice. Consult your investment professional regarding your unique situation.
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Sunday, August 19, 2012

Retirement Planning - The Three Biggest Mistakes


Retirement planning, the three biggest mistakes...
I have been retired since 1994; I missed being a baby boomer by two months being born October 1945.
I have seen the same three retirement mistakes made repeatedly... You do not have to make the same mistakes..
  • Retirement mistake number one...Not having a non-financial retirement plan
Most folks do not spend enough time thinking about what they are going to do after they retire.
They spend plenty of time going over their investment portfolio neglecting areas such as...
What hobbies they are going to take up or pursue, what is important to each spouse, how far or close they want to be from family and friends, etc.
Most folks plan all their life why not spend a little time retirement planning?
Retiring just to stop working, is no retirement plan at all... It is a great way to obtain an early obituary.
  • Retirement mistake number two... Not considering low-cost retirement lifestyles
Many potential retirees are giving up or postponing their retirement plans. They believe they do not have enough money.
Having been retired for 18 years, we have enjoyed the following fun, safe and frugal ways to retire, they include:
  1. Living on a sailboat in the Caribbean
  2. Full-time RVing in the US
  3. Living in foreign countries
  4. Downsizing
  5. Living off the grid
We were pleasantly surprised to find that each one of the above lifestyles did not require anywhere near the money that we thought we would have to have for retirement.
Friends, family, coworkers and especially my financial planner told us... we did not have enough money to retire.
They were wrong then, they are wrong now, and most are still working.
Do not give up on retirement until you have examined lower cost lifestyles.
  • Retirement mistake number three... Assuming you will spend 80 to 100% of what you spend while you're working
This is a self-inflicted wound... When you sit down to meet with your retirement planner, they will not be encouraging if you tell them you are going to spend a lot less money in retirement.
You will probably meet your financial planner in his or her fancy office, both of you dressed in business attire.
Have you ever seen anyone wearing a suit to the beach or to the golf course?
If you are planning to employ anyone of the five frugal retirement lifestyles listed in mistake number two, your life will become a lot simpler and cheaper to maintain.
No costs associated with maintaining your present home, keeping up with the neighbors and coworkers are some of the things that do not seem to be discussed, when planning your retirement.
These are only the big three retirement mistakes... There are a few more and you could obtain that information below.
You do not have to make these same retirement mistakes.
Get informed!
Biggest Retirement Mistakes, get a free book and more practical, commonsense, non investment advice.
Gary Pierce is the webmaster of http://www.frugal-retirement-living.com he retired early at 49, he is still retired at 66. He has experienced some of the retirement realities that baby boomers are facing.He can show you how to make lemonade from the lemons the baby boomer generation has been dealt.
It is 2012 and many are wondering if they can ever retire...you can still retire. Don't give up until you check out this website.
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Saturday, August 18, 2012

Retirement Planning Doesn't End at Retirement


As millions of Americans transition from full-time work to retirement, they move from the life stage of asset accumulation to a new stage - distribution planning. Instead of trying to acquire and build up savings for retirement, they are now repositioning their assets to provide an income they can rely on for the rest of their lives.
The impact of this shift, which is beginning right now for the initial waves of millions of baby boomers, cannot be overestimated. Born between 1946 and 1964, these boomers will need to plan for a retirement that could last for more than 30 years. So, it's not only those close to retirement, but an entire generation that may need professional help to ensure that their portfolios will provide an income throughout their lifetimes.
There are several key risks that can undermine the success of a retirement plan - longevity, inflation, asset allocation, fund withdrawal rate and last, but certainly not least, health care expenses.
Underestimating the Risk
Many people underestimate what their life expectancy is and therefore risk outliving their assets. The facts indicate that at least half of the population may outlive the average life expectancy. A successful lifetime income plan can help retirees prepare for living well into their 90s as there is a very real possibility that people will live 20, 30 or even 40 years in retirement.
The anticipated longer retirements and the impact of inflation make it more important than ever that portfolios include investments with the potential to outpace inflation. It's also of paramount concern to provide income protection for the surviving spouse in the event of long-term care needs for an unhealthy partner.
Many retirees think they need a conservative portfolio. But, given the anticipated length of their retirement, this could create a heightened risk of outliving their assets. A key to long-term success may lie in balancing portfolio income with portfolio growth.
Obviously, a conservative withdrawal rate would dramatically increase the likelihood of retirees not outliving their assets. A good financial advisor can help people understand how much they need to save to meet their lifestyle goals, and what is a realistic withdrawal rate.
Rising health care costs coupled with inadequate medical insurance coverage can have a devastating impact on a lifetime income plan. Addressing this risk may mean targeting savings specifically for health care and purchasing long-term care insurance.
Sporty Forties
Looking at the differing needs for various segments within the baby boomer generation may make more sense if we divide them into age groups. Let's consider the first group as those who are currently ages 40-49. These are the youngest baby boomers. They are too busy to think too much about retirement planning right now. They have multiple financial goals, including college savings, retirement, children's needs and housing costs.
The important risks for this group to consider are longevity and asset allocation. These people really need to understand the value of extra years of compounding on their savings. They also should look into a growth-oriented portfolio so they can take advantage of long-term equity performance. Some questions to consider:
• What events could capsize your current retirement savings plan?
• Has market volatility impacted your savings?
• Will you be paying college tuition for your children?
• How would you prioritize all of your different financial goals?
Possible solutions to these issues are: risk tolerance and subsequent proper asset allocation, college savings planning, health insurance, life insurance, disability insurance and deferred variable annuities.
Nifty Fifties
The next segment includes those who are currently ages 50-59. They are now beginning to think about retirement and are uncertain whether they have saved enough. They probably don't know how to put together a retirement income estimate themselves, and they are concerned about life's changes: kids leaving home, aging, new goals and directions.
These individuals should be thinking about longevity, an appropriate strategy to provide for growth until retirement age and how they will meet their needs during a long retirement. They should be looking at transitioning their asset allocation plan to take advantage of the next 5-15 years before retirement.
Now is the time to discuss life and health coverage in retirement, including obtaining long-term care insurance, discontinuing disability insurance and looking at the options for supplemental health insurance coverage at retirement. Questions to consider:
• Your retirement could last 25-30 years or more. Are you prepared financially?
• Do you know how much you will be spending in retirement?
• How is your long-term portfolio holding up?
• Do you feel comfortable about your retirement savings plan?
Possible solutions for people in this age group include reviewing their asset allocation plan, taking advantage of catch-up provisions in their IRAs and employer-sponsored plans, consolidation of assets for more efficient management, and fixed or variable annuity products. Now might be a good time to also consider living benefit riders on variable annuities.
Super Sixties
Finally, those individuals who are 60-69 years of age. Their key concerns might be wondering whether they have saved enough for retirement, wondering about their health prospects and concern about taking care of children and grandchildren financially.
Issues to consider include planning for the possibility that they will live longer than they think, asset allocation review, health coverage and the risk of inflation eroding their spending power. Questions to consider:
• How much can you expect to receive from Social Security or your pension?
• Would you like to help fund your grandchildren's education?
• Have you thought about protecting your spouse or partner if something should happen to you?
• Can we discuss the retirement income potential of your portfolio?
Possible solutions to these issues: asset allocation and diversification, catch-up provisions for IRAs and employer-sponsored plans, consolidation of assets for more efficient management, assessing your life insurance coverage, long-term care insurance needs or annuity laddering. Conversion to a Roth IRA might be considered. Additional considerations:
• Checking your beneficiary designations for all accounts
• Discussing required minimum distribution options
• A health care power of attorney, or living will
• Systematic withdrawal plans
• Estate planning considerations
The transition from full-time work and asset accumulation to retirement and asset draw-down brings a new set of financial decisions. The main challenge - achieving potential lifetime income solutions - is a serious one.
Education is of paramount importance. No matter which age group you currently are in, understanding how to, and adequately planning for, your retirement takes effort. It's important that you understand the issues you currently are facing and the issues you will face as you get closer to retirement.
It's education that will last a lifetime.
Grant M. Barra, LUTCF, CLF®
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Friday, August 17, 2012

Retirement Planning - Securing Your Future


Taking care of your wealth management planning can encompass many different things; life insurance, medical cover and inheritance tax planning are but a few. However, one of the most important aspects of your financial plans should include retirement planning - after all, you'll rely on this in your later years.
How you manage your retirement planning will depend on various different factors. Firstly, it's safe to say that if you want to have enough disposable income to enjoy your retirement then it's vital that you don't rely on the state pension. Unfortunately, despite this provision that we're given in the UK, it really is only just enough to take care of your main expenditures, such as your food and utility bills - it won't cover much in the way of treats.
Work and pensions
If you're employed by a medium or large sized organisation, you will probably have the option to have a proportion of your salary taken every month and used as contributions for a work-based pension scheme. Usually your employer will also make a contribution on your behalf, and as with other types of pensions, you will usually get tax relief on these contributions. Even if you have a work based pension scheme, it's still worth considering setting up an additional pension plan if you want to enjoy life to the full once you've retired though. This is particularly relevant if you want to take an early retirement, rather than working all the way up to the government stated retirement age.
Wealth management planning means considering all angles
It's crucial that you bear in mind that as people live longer and longer, you're likely to need a pension that will support you for perhaps 20 or 30 years. Obviously, if you plan on taking an early retirement, then the amount of time you'll need funds for will increase accordingly. Of course the main thing to think about is the kind of income that you're going to want access to when you're older. Annuity rates are currently at an all time low, with rates falling due to the economic climate. There is no way that you can pre-empt what will happen when it comes to your time to give up work - so it's best to err on the side of caution and make plans for the worst case scenario.
As you can see, there's a lot to think about when it comes to retirement planning. There are different types of pensions, and a whole host of things you may want to do with your life after work. The best advice would be to make an appointment with a wealth management planning professional who can talk you through your options and help you do the maths, so that you can save for the old age of your dreams!
If you would like to know more about wealth management planning and retirement planning, please visit us.
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Thursday, August 16, 2012

Long - Term Investments For Retirement Planning


To build and maintain a successful retirement portfolio, you need to find mutual funds that will best help you achieve your objectives. In the early 90's, I searched for investments that had to meet my criteria of 1) average or low risk, 2) above average performance, and 3) distribution of dividends (income and capital gains). After several years of burning the midnight oil and analyzing thousands of mutual funds, I established and built an investment portfolio for our (spouse) Individual Retirement Accounts. The core of our investments is diversification and growth. Over the past decade our IRA accounts have reflected positive growth year after year after year.
Risk: This indicates the volatility in terms of its investment objectives. The risk is assigned to a mutual fund in its attempt to achieve the fund category objective can be Low, Below Average, Average, Above Average, or High in overall risks.
Performance: The percentage is a gain or loss when the fund's net asset value is more of less than the value of the share price. The net asset value is the current market value of the mutual fund's holdings (stocks/bonds) per share. The market value of a fund is also referred to as share price. When a mutual fund declares a distribution for shareholders, its nav/share price is reduced by the amount given its investors.The return of a mutual fund includes the distribution and the performance. A net asset value computation is undertaken once at the end of each trading day based on the closing market prices of the portfolio's securities.
Distribution: The dividends and interest earned by a fund on its investment is the fund's income. Most equity funds distribute income quarterly. When a fund sells an investment security for a higher price than originally paid, the fund has a gain. When a fund sells an investment security for a lower price than originally paid, the fund has a loss. If the investment security is held by the fund for more than one year, the gain or loss will be a long-term capital gain or loss. If the investment security is held by the fund for less than one year, the gain or loss will be a short-term capital gain. The gains and losses are netted together and when the fund has a net gain, that gain is usually distributed to the shareholder once a year.
Consider the over-whelming benefits of having an IRA portfolio that have successful funds and you reinvest the distribution every year instead of receiving the amount in cash:
  • Your total mutual fund shares increase in proportion to the dollar amount of distribution received.

  • You are dollar-cost-averaging your purchase of shares because the net asset value is reduced by the share distribution amount and additional mutual fund shares are purchased at that the lower price. Example: At the close of the market, a mutual fund distributed $1.25 per share. The net asset value of the share will be reduced by $1.25. In Addition, any performance gain or loss will be included in the share price.

  • You do not incur any tax liability until reaching the age of 70 l/2 than you must withdraw a yearly Required Minimum Distribution (RMD) based on the value of your IRA.
  • Over the long-term, your performance/return can grow substantially.
Rollover: If an IRA investment is under performing and you are not satisfied with the investment, you can rollover the account into another mutual fund, CD, etc. without penalty or tax consequence. as long as you do not receive any distribution from the fund. It is always is beneficial to check with your tax accountant on your action before taking it.
Best news of all is that possessing an a IRA account enables you to control, manage and direct your future investments (savings). I know from having over 20 years first hand experience. My IRA portfolio includes a blend of certificate of deposits, annuities, stock mutual funds and bond mutual funds. The choice is yours, and you can be your own financial planner of the success of your IRA portfolio.
Remember there is no guarantee of future performance and mutual funds are not guaranteed by the government. Always read the prospectus before making an investment. Good luck in your retirement plans and may your portfolio continue to grow and grow!
I am the owner of Mutual Interest Data Service, Ltd. my website http://www.largedividends.com provides visitors, like yourself, with unique, current and factual reports on mutual funds. These reports are a five-year analysis of mutual fund performances and distribution of income and capital gains. In 2000 I was granted permission (reference file No. 137-1) by the staff of the Securities and Exchange Commission's Division of Investment Management to operate an Internet Website (http://www.largedividends.com).
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