Drawing on the expertise of the authors-who conduct retirement seminars and have traveled extensively investigating places to retire and talking to prospective retirees and those who have taken the plunge-as well as the insights of contributing experts in various fields, Retire Right is designed to be a comprehensive, all-inclusive resource.

• Provides detailed information about particular locales, financial planning and tax considerations, lifelong learning opportunities, leisure and volunteer activities, and working after retirement
• Includes interactive surveys, questionnaires, and worksheets to involve readers in the rewarding process of planning their ideal retirement
• Delves into the psychological issues surrounding retirement

Filled with practical information and advice, anecdotes, resources, and a healthy dose of humor, Retire Right is the one and only guide retirees will ever need.

Customer Reviews:

“I just finished reading my neighbor’s copy of The New Retirement: The Ultimate Guide to the Rest of Your Life, by Jan Cullinanae and Cathy Fitzgerald, and I had to share my enthusiasm about this book. I am also going to get my own copy! It is a great summary of all of the things we Baby Boomers should be thinking about as we approach retirement. The New Retirement helps the reader decide when and where to retire, whether continued employment may be necessary or desirable for financial or psychological reasons, and how to make the transition into a retirement lifestyle that is right for you. I’ll recoup the cost of the book many times over by taking advantage of the ideas in the financial planning and tax chapters.

The book is unique in that it really does address ‘the rest of your life,’ from retirement planning, to maximizing the retirement years, to preparing for the eventual sunset. The New Retirement opened my mind to the many paths I can take to spend the rest of my life in a fulfilling manner.

The authors’ conversational style and sense of humor make this an ENJOYABLE read. The wealth of fascinating facts, web site references, analyses of places to live, and practical advice make this a MUST read. ”

– Joyce Logan, Deer Park, Illinois

“I have two financial concerns: The first is paying for the college education of my two sons. Fortunately they are 10 years apart in age so I won’t have them attending college at the same time. The second is saving for retirement. I’m still 25 years or so away from retirement but I see how my own parents have struggled as they got into their mid-70’s. My dad did not have a retirement account and my mom only got into one maybe 10 years before retiring. A sobering prospect.

This book is a real eye-opener. We don’t plan on re-locating and we are only looking to maintain our current lifestyle while trying to account for medical expenses. While much of the book does focus on the best places to retire with appropriate ratings, I found most helpful the various surveys and worksheets designed to come up with the retirement plan that best fits your desires. You’ll uses these work sheets to figure out just how much money you’ll need to have when you retire based upon your lifestyle.

Most interesting was information on a “working” retirement, where you enjoy the benefits of retirment while perhaps owning a small business. There are lots of opportunities that you may not have considered for a working retirement. There are also the very important sections dealing with healthcare, living wills, and dealing with aging parents. This is great information for us as we are now dealing with two aging and ill parents ourselves.

Whether your planning that retirement to Arizona or Florida, or planning on staying where ever you are at, the information in this book is invaluable. Best of all it’s great no matter what age you are whether a younger person in their late 20’s or in their 40’s like me. It’s never too late to get planning.”

Tim Janson (Michigan)

More review click here!

While the financial world crashed and burned in 2008, there is a moment to pause and ask: “Ok, but how can we do?”

Now, you as consumers take a break, pop the cork and opening in 2009, is a good opportunity to reflect on how these costs are learned.

1. Exhale
2. Keep saving
3. Realize the upside
4. Retirement savings or rainy-day fund?
5. Rebalance your portfolio
6. Take control of your retirement money
7. Revisit your idea of risk tolerance
8. Be discerning
9. Avoid get-rich-quick schemes
10. Convert your conversion
11. If you’re in or near retirement, plan ahead
12. Compare retirement income and outflow
13. Invest in yourself and rethink your idea of retirement

By Dana Dratch • Bankrate.com

That’s right. The recession is making clear what we’ve suspected for a long time. The concept of not working and embracing leisure for the last third of one’s life isn’t practical for most people.

Put it this way: Survey after survey has shown that a majority of aging baby boomers plan on working in retirement. Well, that plan is coming true.

Financial safety net
Economic downturns often accelerate change. For instance, in the latter part of the 19th century, the country moved from a rural, farm economy to an urban, industrial one. The wealthy associated old age with leisure, but for everyone else it usually meant involuntary unemployment and a humiliating dependence upon family, charity or community organizations for shelter and food. Policy reformers agitated for some kind of a financial safety net for the nation’s impoverished and isolated elderly.

Not much happened until the Great Depression. It was an economic disaster for families, especially the elderly “as they watched their hard-won assets vanish, and with them their hopes for an independent and secure old age,” write historians Carole Haber and Brian Gratton in “Old Age and the Search for Security.” (Sound familiar?) Traditional middle-class objections to a national safety net crumbled with the Depression. Social Security became law in 1935.

“The real or incipient collapse of individual households helps to explain the widespread popularity of Social Security,” say Haber and Gratton.

Our image of retirement is still shaped by the early decades after World War II. The elderly poverty rate plunged thanks to Social Security. Older Americans gained universal health care coverage with Medicare in 1965. And Corporate America offered workers defined-benefit pension plans based on a salary and years-of-service formula.

It was in these years that retirees developed a distinct lifestyle captured by the mass migration to Sunbelt communities, traveling in RVs and bus tours, spending long mornings on the golf course and other recreational pursuits. The development of modern retirement is a great social achievement of the 20th century.

But in the 21st century, the underlying economics of retirement are changing.

Living longer, working longer
On the positive side, we’re living longer. Average life expectancy is now about 78 years, up from 61 years when Social Security became law. We’re healthier, too. Disabilities among the elderly are declining, thanks to a combination of healthier lifestyles and medical advances.

A seismic shift in the economy and workplace is making it easier for an aging population to labor longer. An information- and services-dominated economy will ease the transition to longer working lives. Simply put, toiling away on a computer in medical diagnostics or government bureaucracy is far less demanding than manning an auto assembly line or mining for gold. The rise of an economy based on intangibles and longer life expectancy is behind more than a decade’s worth of scholarly research, aging conferences and popular press articles trying to redefine retirement.

Retirement savings wiped out by crisis
The day of retirement reckoning is here for less happy reasons, too. For the second time in eight years, savers have watched in horror as their 401(k)s, 403(b)s and other retirement savings were hit with sharp declines. This time around, the household wealth destruction is even greater because of the nationwide fall in home prices. For instance, from the last quarter of 2006 through the third quarter of 2008, the real value of homes and household holdings of stocks plummeted by $5.6 trillion, according to a recent report by Hoisington Investment Management Co. in Austin, Texas. It predicts that the wealth loss may exceed $10 trillion when the fourth-quarter figures are calculated.

Indeed, the current pension system is making everyday retirement insecurity worse. Employers have embraced defined-contribution savings plans like 401(k)s. But 401(k)s don’t deliver a steady stream of income during one’s golden years. There’s also plenty of evidence that workers with access to defined-contribution savings plans aren’t taking full advantage of them, either.

But wait, there’s more: The health insurance system is widely acknowledged to be broken and is a strain on family finances. Even with Medicare coverage after age 65, the elderly are finding it necessary to pay for a greater percentage of their overall medical bill.

The comedian George Burns used to get a laugh saying, “Don’t stay in bed, unless you can make money in bed.” It’s no longer a joke. Many aging workers simply can’t save enough to create a solid foundation of savings that will maintain their standard of living in retirement.

Postponing retirement
The solution: work longer. After all, earning a paycheck in your latter years can make a huge difference in retirement living standards. Pocketing even a slim income often allows retirement portfolios to compound over a longer period of time.

Take this calculation by economist Robert Shackleton of the Congressional Budget Office, which posits a married couple is in their early 60s earning $100,000 pretax a year. They’ll need nearly $66,000 a year after taxes to replace 80 percetn of their preretirement income. (The 80 percent is a standard rule of thumb when it comes to making this kind of retirement calculation.) If both retire at age 62, they’ll receive more than $25,000 in total Social Security benefits and require a portfolio of at least $891,000 to generate the income they need to live the good life through their normal life expectancy. (The calculation comes from a paper written several years ago, so the Social Security numbers will have changed a bit over the years. Yet the basic calculation remains true.)

But if our couple waits until age 66 to retire, their Social Security benefits go up and the time they need to bank money shrinks, so $552,000 in savings will suffice. Retire at age 70? All they require is a portfolio worth some $263,000. And so on.

More than making ends meet, work is physically and mentally energizing. It keeps the mind active and dementia at bay. For many people, the workplace is a social environment, with birthday celebrations and coffee klatches. To be sure, you may want to say goodbye to your current office mates for the last time. But that doesn’t mean you won’t want to work.

Of course, not all senior citizens will be physically and financially healthy in retirement. Especially vulnerable are less educated workers. So are single-parent households. Both groups are far less likely to have a pension plan and own their home. And then there’s the lingering problem of ageism: Some employers are still hostile to aging workers with sagging middles and graying hair.

Nevertheless, the recession has made it clear that retirement and work will be woven into a new cloth for many Americans. The challenge for all of us — employees and employers — will be making the best of the situation.

Copyright © 2009 The McGraw-Hill Companies Inc. All rights reserved.

Though it’s never too late to start, the sooner you begin saving, the more time your money has to grow. Gains each year build on the prior year’s – that’s the power of compounding, and the best way to accumulate wealth.

2. Set realistic goals.

Project your retirement expenses based on your needs, not rules of thumb. Be honest about how you want to live in retirement and how much it will cost. Then calculate how much you must save to supplement Social Security and other sources of retirement income.

3. A 401(k) is one of the easiest and best ways to save for retirement.

Contributing money to a 401(k) gives you an immediate tax deduction, tax-deferred growth on your savings, and – usually – a matching contribution from your company.

4. An IRA also can give your savings a tax-advantaged boost.

Like a 401(k), IRAs offer huge tax breaks. There are two types: a traditional IRA offers tax-deferred growth, meaning you pay taxes on your investment gains only when you make withdrawals, and, if you qualify, your contributions may be deductible; a Roth IRA, by contrast, doesn’t allow for deductible contributions but offers tax-free growth, meaning you owe no tax when you make withdrawals.

5. Focus on your asset allocation more than on individual picks.

How you divide your portfolio between stocks and bonds will have a big impact on your long-term returns.

6. Stocks are best for long-term growth.

Stocks have the best chance of achieving high returns over long periods. A healthy dose will help ensure that your savings grows faster than inflation, increasing the purchasing power of your nest egg.

7. Don’t move too heavily into bonds, even in retirement.

Many retirees stash most of their portfolio in bonds for the income. Unfortunately, over 10 to 15 years, inflation easily can erode the purchasing power of bonds’ interest payments.

8. Making tax-efficient withdrawals can stretch the life of your nest egg.

Once you’re retired, your assets can last several more years if you draw on money from taxable accounts first and let tax-advantaged accounts compound for as long as possible.

9. Working part-time in retirement can help in more ways than one.

Working keeps you socially engaged and reduces the amount of your nest egg you must withdraw annually once you retire.

10. There are other creative ways to get more mileage out of retirement assets.

For instance, you might consider relocating to an area with lower living expenses, or transforming the equity in your home into income by taking out a reverse mortgage.

A growing number of financial planners are rethinking the conventional wisdom. (Remember the old adage that you should subtract your age from 100, and devote that percentage of your portfolio to stocks?) Here are five new rules to consider:

Separate your investments into different pots. Often, investors in retirement lump all of their money together, with which they pursue one strategy, says Eric Bailey, managing principal of Captrust Advisers in Tampa. His firm, which works with pensions, endowments, and high net-worth individuals, takes an approach ripped straight from the institutional investors’ playbook. Clients’ money is separated into three categories: Short-term funds reside in very low-risk investments, such as high-quality bonds; intermediate-term money goes in a balanced mix of stocks and bonds–such as a 50-50 or 60-40 split; and long-term investments starting with five-year time horizons are heavier on stocks. “This way, you can take advantage of a market sell-off with your long-term investments and you’ll avoid needing to liquidate investments when stocks are down,” Bailey says.

Don’t reach too far for yield. Cash may be king in this market, but decent yields are hard to find. Treasuries present the ultimate in safety, but the pay is meager: The one-year bill currently yields just 1.1 percent and the five-year 2.2 percent. Unfortunately, if you’re looking for a bigger payout, you’ll have to take on some risk. Says Oliver Tutt, managing director of Newport, R.I.-based Randall Financial Group: “You’ll have to make a trade-off somewhere, particularly if you’re dealing with large amounts of money.” Stick with quality: If you’re considering a bond fund, for example, be sure to look under the hood at its various holdings and review the fund’s prospectus to see what types of bonds–and credit ratings–it targets. “Quality is always important, but more than ever it is now,” says Bill Walsh, chief executive officer of Hennion & Walsh, an asset management firm based in Parsippany, N.J. “Know what you’re buying.”

Make it a muni. Government bonds are airtight when it comes to safety, but their yields are near all-time lows. As an alternative for retired investors in the upper tax brackets, municipal bonds are worth considering. With munis, investors get the benefit of tax-free income, less volatility than corporate bonds, and, theoretically, more safety. “Right now, there’s more value in munis than almost every other area. But be sure you know the issuer,” says Walsh. Among munis, he recommends high-grade, general-obligation bonds and essential-purpose bonds such as the sewer authority. “Stay away from things like nursing home bonds, which could go out of business,” he says. Walsh prefers single-issue bonds over bond funds, which “will work, but you have to be careful,” because there is no set maturity date, no set yield, and managers can sometimes buy outside of that asset class.

Go for dividends. It’s a no-brainer that quality matters in a market like this. But how do you know if a stock is “quality”? Dividends are one indicator. That’s because dividend income–which is essentially a portion of company profits paid out to shareholders–helps offset fluctuations in a stock’s share price, creating a cushion during turbulent markets. “During trying times, dividend-paying stocks tend to do well,” says Paul Alan Davis, portfolio manager of the Schwab Dividend Equity Fund. Davis also looks for companies on solid footing, which have plenty of cash and aren’t in “financial straits.” During the first 11 months of year, Davis says, the S&P’s dividend-paying stocks fell by roughly 36 percent; meanwhile, nondividend payers were down about 45 percent. You’ll find those dividend payers in more developed industries such as consumer staples, utilities, and healthcare. Examples include Philip Morris, Coca-Cola, General Mills, Bristol-Myers Squibb, and Pfizer.

Consider “alternatives”: This asset class, which is used most often by pensions and other institutional investors, runs the spectrum from commodities and annuities to real estate. But individual investors can also use them to dramatically reduce volatility in their portfolios, says Gary Hager, founder and chief executive of Integrated Wealth Management in Edison, N.J. He likes real estate investment trusts, or REITs, which have historically provided a smooth ride for investors. A sample portfolio from 1978 through 2007 shows that putting 10 percent of equity holdings in U.S. REITs improved returns by 0.3 percent and cut volatility by 0.9 percent, compared with investing in stocks alone, according to The Only Guide to Alternative Investments You’ll Ever Need: The Good, the Flawed, the Bad, and the Ugly. Other alternative investments to consider include commodities and inflation-protected securities, both of which are offered in ETF form.

Save the market’s decline, 2008 might seem like any other year for individual retirement accounts. But that’s not so.

There were many new laws, court decisions, IRS notices and other rule changes affecting the retirement plan of choice for millions of Americans, according to Ed Slott, the nation’s preeminent IRA expert.

Here’s a snapshot of the top IRA changes in 2008.

New Laws on Distributions

By far, the biggest changes came as part of the Worker, Retiree, and Employer Recovery Act of 2008, or WRERA (which might be an acronym for “we’re in big trouble”).

Under that law, required minimum distributions for IRA owners, plan participants and beneficiaries are waived for 2009. Of note, you are still required to take your RMD if you turned 701/2 in 2008 but decided to wait until this year to take that distribution.

Another provision of WRERA: Starting in 2010, non-spouse beneficiaries aren’t allowed to leave retirement plans with the former IRA owner’s employer. They will have to transfer those plans to an IRA at a bank, brokerage or mutual-fund firm.

Under the Emergency Economic Stabilization Act of 2008, sometimes called the bailout bill, IRA owners who are 701/2 can transfer up to $100,000 to a charity in 2009 without having the amount included in their gross income.

Court Decisions

If an IRA owner dies and has designated a revocable trust as the beneficiary, the expectation is that the money in the IRA would be exempt from claims by creditors of the decedent, as they say in estate planning circles.

Not so, according to Seymour Goldberg, author of J.K. Lasser’s “Inherited IRAs” and contributor to Slott’s newsletter.

In a recent Kansas court case, creditors were able to get at the money in an IRA that named a revocable trust as the beneficiary. According to Goldberg, the lesson learned is this: Don’t designate a revocable trust as the IRA beneficiary. Instead, name an irrevocable discretionary trust with spendthrift language as the beneficiary, he said.

IRS Takes Note of Roth Conversions

Uncle Sam cleared up a big issue with IRS Notice 2008-30: A non-spouse beneficiary of a qualified retirement plan can transfer the account to an inherited Roth IRA so long as the transfer is allowed by the plan and the beneficiary meets the Roth conversion eligibility requirements, according to Slott’s newsletter. Starting in 2010, plans must allow such transfers.

IRS Private Letter Rulings

In its private letter rulings (PLRs), the IRS responds to a specific taxpayer’s request for relief. But sometimes these rulings can help other IRA owners who might need guidance with similar problems. Take, for instance, PLRs 200840054 and 200835033, both of which deal with substantially equal periodic payments or 72(t) payment plans.

Some IRA owners who are under age 591/2 can avoid having to pay the 10% penalty on IRA distributions by taking money out in substantially equal periodic payments or SEPP.

In those two rulings, the IRA owner failed — because of a mistake by the account custodian — to take a distribution and then did a make-up distribution. Typically, the IRA owner has to pay the 10% penalty on all early distributions if he fails to take the SEPP. But the IRS ruled in these cases that the custodian was at fault and the IRA owner didn’t have to pay the penalty.

Given all the mergers of financial firms lately, it’s likely mistakes of this sort will increase, Slott said. If you’re using a SEPP plan to withdraw money from your IRA and the custodian fails to make a payment, consider asking the IRS for relief.

Saving the ‘Stretch’ IRA

People who inherit IRAs use their life expectancy to calculate the amount of the distribution, in effect “stretching” the IRA over their lifetimes. But in PLR 200811028, the beneficiary failed to take the required distribution for a couple of years. After realizing the mistake, the beneficiary took three years of distributions and even paid the 50% penalty due on the late RMD.

In years past, the IRS would have forced the beneficiary to withdraw the rest of the IRA money over five years. But in this PLR, the IRS gave the beneficiary permission to continue taking required distributions over her life expectancy. “This PLR now indicates that IRS now treats a stretch IRA as the default mode,” according to Slott’s newsletter.

Identifying the Beneficiary

No matter what else you do this year, be sure to designate a beneficiary on your IRA. In PLR 200846028, the IRA owner wrote that the beneficiary is “as stated in the will.” Well, the IRS says the beneficiary must be “identifiable” and forced the IRA beneficiaries “as stated in the will” to take the IRA money out in five years instead over their life expectancies – the more tax-friendly way. The takeaway? Make sure your beneficiary or beneficiaries are “readily identifiable.”

Rules on Disclaimers

Often IRA beneficiaries will disclaim an inherited IRA to reduce any potential tax bills. But there are right and wrong ways to do a disclaimer, according to Slott.

PLR 200837046 points to the right way. In that case, two children, one of whom was the named beneficiary and the other who was born after the IRA owner had named the older child as beneficiary. When the owner died, the oldest child disclaimed half of the IRA, in effect giving half of the IRA to the younger sibling. The older brother got to use his life expectancy for the distributions and the younger brother had to take his share of the IRA over five years.

PLR 200846003, meanwhile, was the wrong way to disclaim. In effect, an IRA owner signed a prenuptial agreement saying a trust for her new husband would be the beneficiary. Well, the wife died before she actually changed the beneficiary and all heck broke loose. Her children, who were the named beneficiaries, disclaimed the IRA. Now estate taxes might be due because the children failed to disclaim the IRA and trust assets the right way. Suffice to say: If you plan to disclaim IRAs, make sure you talk to a qualified professional.

IRA Trust Rulings

Many problems that arise with IRAs are the result of owners not naming beneficiaries correctly.

In PLR 200826028, the IRA owner said in his estate plan that after specific gifts were made, all remaining assets, including an IRA, would go to charity. Well, the IRS said the estate failed to pay any income tax when it transferred the IRA to the charity. This tax could have been avoided, according to Slott’s newsletter, if the IRA owner had simply named the charity as the beneficiary.

In PLR 2008260008, an IRA owner named his two children as beneficiaries, one of whom was a minor. The minor’s guardian asked the court for permission to create a trust for the minor’s share of the IRA. Not surprisingly, the IRS ruled that the transfer of the IRA to a trust would trigger taxable income, though that tax wouldn’t be due until distributions came out of the IRA.

The lesson? If you have a beneficiary who’s a minor, it’s best to designate “a custodian or a trust to hold an inherited IRA for the minor” rather than have to ask for a ruling later.

What the Future Holds

What will be the top IRA rulings in 2009? That’s impossible to say just yet. The only certainty is that that there will be a list next year, too.

Robert Powell has been a journalist covering personal finance issues for more than 20 years, writing and editing for publications such as The Wall Street Journal, the Financial Times, and Mutual Fund Market News.

• When can I retire?
• How much savings do I need for retirement?
• How much can I spend in retirement?

The most important of the three questions, from a retirement planning perspective, is the last one – How much can I spend in retirement?

How much can I spend in retirement?

How much you can spend in retirement, is based on how much you have saved for retirement, divided by an annual safe withdrawal rate of between 3% to 4.75% depending on your age at retirement.

A better, and the more important, question to ask is “How much do I need to spend in retirement?” To answer this question you will have to create a retirement budget.

Creating a retirement budget, insures that you will not run out of money during retirement, and it allows you to answer the other two retirement planning questions.

How much savings do I need for retirement?

How much savings you need for retirement, depends on how much you spend in retirement (your annual retirement budget), divided by an annual safe withdrawal rate of between 3% to 4.75% depending on your age at retirement.

The amount you need to save for retirement, is the amount of money you will need, to cover the cost of your retirement. The cost of your retirement is your retirement budget, which we calculated, when we answered the previous question – «how much can I spend in retirement?»

When can I retire?

When you can retire, is determined by when your savings can pay for your spending in retirement, based on your retirement budget. So, if your retirement budget is $3,000 per month, you currently have $600k, you need $900k to pay for your retirement, you save 25k per year, and your investments earn 10% compounded annually – you can retire in 3.5 years.

Did you notice, that the common thread in answering all three questions, was your retirement budget? That is because creating a retirement budget, your spending plan for retirement, is the key to calculating how much you will need for retirement, and to figure out when you can retire.

About the Author:

Author Ramsay Mameesh is the founder of iPlan Retirement – an eco-concious retirement planning company located in San Francisco, CA. Mr. Mameesh is a graduate of California State University with degrees in Bus. Admin, Economics and Marketing. He has over ten years experience working for large finanancial institutions. More of his articles can be found on the iPlan Retirement Blog.

A retirement calculator shows you how much to need to save to get the income you need when you retire. Or it may be how much you want! That depends how much you are making, and how young you are. Either way do use a retirement calculator.

You can find a retirement calculator on many web sites, so you do not need to get the services or a retirement planner or investment advisor to find the answers. In this way, you use the retirement calculator, calculate the amounts you need, and then visit an investment advisor or retirement planner.

To decide how much you need to save, you need:

1. The income you need to live on at today’s prices

2. The rate of inflation per annum between now and the retirement date.

3. The rate at which your fund will grow.

Let’s go through these and how they relate to a retirement calculator. First, how much do you need to live on? Remember, that retired people do not normally spend as much as people who work. When you retire, you won’t need:

special clothes for work the sort of car that keeps you up with the Joneses

you will be able to take holidays at off-peak times

and you will have time to do things – instead of paying to get them done.

So your costs will be lower. So let’s say you are earning $60,000 a year now, you might think that $50,000 would be enough. Next you need to remember that if you are healthy, you expect to live for 15-20 years, and so need to allow for inflation in that period – so actually you need more! This is where a good retirement calculator comes in.

2. The next thing the retirement calculator needs is the rate of inflation, or what you expect it to average until you retire. With the price of oil going up, we know that inflation over the next decade will be higher than it is now. Official figures put inflation at around 2-3%, but the true figure is more like 5%.

This means that you need to allow for at least 5%, and probably 7% and feed that into the retirement calculator.

4. At what rate will your retirement plan grow? A difficult one this. Five years ago, people were talking in terms of 10%, but not now experts suggest a lower figure. The problem is that a retirement fund or retirement plan has to be prudent – you don’t want to wake up one morning, a year or before you retire, to find that a crash on Wall Street has cut the value of your fund by 30%. You just won’t have the time to get that money back.

So you will be doing well to get 10% return, but could almost guarantee 5-6%. Maybe 7-8% would be a realistic figure to put into the retirement calculator.

The retirement calculator is just some software set up to make a calculation after you enter some figures. As I said earlier, the retirement calculator needs:

Required income

Inflation

Expected return

And of course, how long till you retire.

Here are some results from a retirement calculator:

Required income: $30,000 per annum

Years till retirement: 15 years

Annual inflation: 2.5% (unrealistic)

Annual yield: 5%

Income needed in 15 years: $43,448

Required value of retirement plan in 15 years: $825,000

Quite a lot of money for a modest retirement income. Here’s another one:

Required income: $30,000 per annum

Years till retirement: 20 years

Annual inflation: 5%

Annual yield: 8%

Required value of retirement plan in 20 years: $987,573

If you want an income of $45,000 when you retire – equivalent to less than $30,000 today – you will need: $148,000.

When you use a retirement calculator, make sure you use one that does calculate the income you will get at retirement adjusted for inflation – over 20 years, you will need 50% more than think you need today. If you do this, then you will benefit form using a retirement calculator.

About the Author:
Rex Truman is not retired but should be – instead he gives information at RetireWhenULike.com to help people save enough so they can enjoy retirement, ideally with an interesting job where they are in control.

Since few people are motivated in investing for retirement early enough, it has become a serious issue for governments in many developed countries. In some of these countries their welfare systems are straining from the demands put on them by the growing numbers of elderly living beyond the estimates of previous human longevity models. In these countries governments have warned their citizens that their social security systems may not have enough funds to go around.

In order to face our retirements more confidently, it has become necessary for us to not rely on state-sponsored programs; but increasingly on self-managed initiatives.

Key Issues Regarding Investing For Retirement

Investing for retirement requires us to prepare a retirement plan early – the earlier the better. Unfortunately, when you are young it is very difficult to imagine life as a retiree. What can we do? Perhaps we should initially discuss it with our parents. Many of them would have experienced the positive and negative elements of investing for retirement. Next you may wish to a financial planner. Do not commit to any investments until you feel that you have done enough research, clarified your doubts, identified your key goals and estimated what portion of your salary you are prepared to save for the long-term.

During your discussions with your financial planner regarding investing for retirement, you are likely to be surprised how much you will need to set aside for the golden years when you would have stopped working. Many people tend to extrapolate their planned savings linearly and find that achieving their investment goals are near impossible. Your financial planner should be able to enlighten you regarding some essential concepts of investing like the time value of money, the effect of compounding interest, the benefits of a diversified portfolio with a spread among asset classes with varying risk and return profiles and pre-tax investment programs made possible by your employer or government.

When you have done sufficient research, understood key investment concepts and got sound advice from your financial planner, you will realize that if you start early enough and do the right things, you should be able to retire rather comfortably with sufficient funds to last your lifetime. Investing for retirement is not difficult if you start sufficiently early and act on sound financial planning advice.

The Advantages Of 401k Retirement Plans

A 401k retirement plan allows a worker to save for retirement while deferring income taxes on the saved money and earnings until withdrawal. Many people today are relying on 401k retirement plans to support their needs during their retirement. The funds from this retirement plan can be used to pay regular bills and in some cases if the funds are substantial, help us retire in style and luxury. In these uncertain times fraught with economic and political uncertainty and health scares, it pays to plan ahead for our future when we may not be economically very productive by saving with a 401k retirement plan. The 401k retirement plan is a flexible program that has substantial benefits for retirees.

Of all the advantages of a 401k retirement plan, they key advantage are the tax benefits. Companies you work for are responsible for creating and designing the plan. Some companies may restrict the amount set aside to match what the employer sets aside.

The tax benefit arises from the fact that you will only be taxed on the remaining amount of your salary after the savings into the 401k retirement plan. The return on investment from a 401k retirement plan may be higher than many other competing retirement investment plans. The flexibility advantage is that you may transfer the funds from the retirement fund initially setup with your former employer into the new employer’s 401k retirement plan. You may also choose to transfer the funds to a personal 401k retirement fund account.

Use Your 401k Funds To Build A Diversified Financial Portfolio

The 401k retirement fund plan is to a large extent a self-directed investment program. You can choose to assign the funds into a wide variety of financial assets like stocks, bonds, money market investments, mutual funds or some of them. You can choose to re-allocate the funds among these investment choices at any time. It is critical to get some information and advise regarding these financial instruments if you choose to invest and re-allocate the funds yourself.

Saving and investing with a 401k retirement plan is a great way to ensure that you have sufficient funds to live on long after your retirement from full-time employment. The funds can be withdrawn if they are needed in the event of an emergency. If necessary, you may also take out a loan against your 401k retirement funds. This should only be done after much careful thought and consideration. The funds in your 401k retirement plan are for your retirement. If you squander the money, you will just be postponing your agony into the future.

About the Author:

Cindy Heller is a professional writer. Visit Retirement Sentiments to learn more about saving for retirement and investing for retirement.

There are two basic types of employer-based retirement plans – Defined benefit (DB) plans and Defined Contribution (DC) plans.

Defined Benefit (DB) plan

A Defined Benefit pension plan comes with an employer guarantee that you will receive a specific amount of money at retirement. The pension amount is related to the number of years you have worked at the organization and your highest earnings on the job. This amount is handed over at retirement in the form of a lump sum or monthly checks as long as you live. The Federal Government protects your DB pension benefits. Even if your employer goes bankrupt, you receive your benefits.

A DB plan begins paying your benefits when you reach retirement age and stop working. You can decide whether the plan covers you alone, or you and your spouse. If it’s the latter, your spouse receives the checks after your death.

The problem with a DB plan is that the employer alone contributes to the pension. Several companies struggle and end up with underfunded DB pension plans. When they go bankrupt, the Pension Benefit Guarantee Corporation (PBGC) takes over and pays out substantially reduced amounts to the pensioners.

Defined Contribution (DC) plan

To lessen their burden, a number of employers have shifted to the Defined Contribution plan in recent years. Here the employees take a more active role in managing their retirement income. They are responsible for investing the money during their working years.

A Defined Contribution plan comes with some risks that one needs to be aware of. It does not promise any returns, unlike a Defined Benefit plan. While the Federal Government does not guarantee the amount accumulated in your account, it protects the account assets from misuse. The total sum in your account depends on the amount invested over the years, the investment vehicles chosen and performance of those investments. Since the responsibility of retirement planning is shifted onto your shoulders, it is critical that you contribute regularly once eligible and that you choose your investments wisely.

The 401(k) plan is one of the popular types of DC plan. It is a payroll deduction plan that lets you save part of your salary for retirement. In some cases, the employer contributes to the 401(k) plan, with contributions ranging from 25% to 100% of your savings. There is usually an upper limit to the employer’s contribution into their employees’ 401(k). Occasionally employers put in company stock in lieu of cash. A plan with overloaded stock should be avoided. In the case of Enron, the company matched employees’ savings with company stock. When the company went under, the value of the employees’ retirement accounts plummeted because the Enron stock price nosedived.

Types of Defined Contribution Plans

• 401(k) plan – This is one of the most popular DC plans. It is usually offered by large organizations. The employer often matches the employee contribution.

• 403(b) Tax Sheltered Annuity plan – It is like a 401(k) but is eligible for employees of schools, churches, hospitals and certain non-profit organizations.

• Savings Incentive Match Plans for Employees of Small Employers (SIMPLE) – Businesses with 100 or fewer employees can establish SIMPLE plans, where employees allocate part of their salary into an Individual Retirement Account (IRA) and the employer matches the contribution. The employees decide on the investment options.

• Simplified Employee Pension (SEP) plan – This is designed for small businesses, that do not have other pension plans, and the self-employed. SEPs are tax-deferred retirement accounts.

• Profit sharing plan – Company profits are shared with the employees, based on their salaries.

• Employee Stock Ownership plan (ESOP) – It is similar to the profit-sharing plan except that it invests primarily in company stock. Employees share in the company ownership.

Tax Incentives

Although you, as an employee, are responsible for funding a DC plan, there are some tax breaks that make it very attractive. The money that you invest in the plan and the earnings from the DC plan are both eligible for tax deferment. This means that you do not pay income tax on the amount till you withdraw at, and hopefully not before, retirement. How does a tax deferment help? Postponing taxes means that the amount you invested in the plan and the earnings from it makes the nest egg grow faster. Add the power of compounding and the amount is substantially high. The larger the base amount available, a compound rate of interest balloons the total amount to significant proportions. A tax deduction upfront would have reduced the size of the base amount itself and consequently the final amount in the DC plan. Even though the withdrawals are taxed, the larger size of the nest egg, because of tax deferment, more than makes up for the taxes paid.

Let us say you wish to contribute $100 to your DC plan, and you fall in the 15% tax bracket. If you do not contribute to the DC plan, you pay a tax of $15 on the $100 that is part of your income. You get a net of $85 as take-home pay. On the other hand, if you do contribute $100, the entire amount goes into your DC plan and you postpone the taxes. In effect, your $100 contribution reduces your take-home pay by just $85 and not the entire $100. Meanwhile your nest egg, enhanced by your $100 contribution, grows faster and is only taxed when you withdraw.

Vesting

When an employer contributes to your DC plan, you do not have the right to withdraw the amount anytime it suits you. Until you spend a certain number of years at the company, you cannot access the money. Once you cross that period, the money becomes “vested”. You can withdraw it whenever you wish. This is called “cliff vesting”, which means that you are not entitled to the money until you complete a specified number of years at employment, but can withdraw after you do. A 401(k) plan vests after a 5-year period. No employer can force you to work longer than 7 years before you become vested in the pension benefits.

Some employers have a graduated vesting schedule. Here a certain percentage of your money gets vested each year you remain employed, until the amount is 100% vested. Some DC plans like the SIMPLE and SEP vest immediately. You can access the employer’s contribution the very day it is deposited.

Borrowings and early withdrawals

DC plans permit you to borrow money from the account, with a loan limited to half the vested amount in your account. In most cases, the loan needs to be repaid within 5 years. Borrowing can drastically reduce your nest egg, so try to avoid it.

If you wish to withdraw early from the account before retirement, you get levied a 10% penalty on the amount plus taxes. There are a few factors that allow you to avoid the penalty. Again an early withdrawal is highly avoidable.

In the event of a financial emergency, most DC plans allow you to withdraw money without incurring penalties. Unlike a loan, you do not have to repay the withdrawal. However there are a few stringent conditions to be fulfilled in order to qualify for an emergency.

Make the most of the DC plan by contributing the maximum amount possible, or as much as you can stretch yourself. Since an employer matches 25% to 100% of your contribution, the more you contribute, the faster your retirement fund grows. If you are over 50, you can put extra money in your retirement account in addition to regular contributions. Make informed investment decisions and you are well on your way to meeting your goals.

Original: http://www.advisorworld.com/2009/01/09/employer-based-retirement-plans/