Wednesday, September 29, 2010

Can you Afford to Retire?

WOW!!! This video and interview is very revealing! This interview is with an expert a consultant in the Retirement planning industry. This gentleman has set up 401k type plans for major corporations in the US. He states that there is a GAP between the have and have nots regarding the 401k type plans. He also discusses who REALLY saves money when a company implements a 401k plan with its employees.
Check this interview out with Brooks Hamilton. He is the founder of Brooks Hamilton and Partners. In this interview he reveals some MAJOR CONCERNS with the 401k type here One of the major points is that these experts state that you need to contribute at LEAST 18% of their annual salary for 30 plus years to have enough to retire. Most people invest into their retirement plan 1/3 of that amount. The other point is after the passing of ERISA in 1974, the shift in responsibility from the Employer to the Employee. This turned into major cost savings for the employer, but the financially uneducated employee is now making MAJOR financial decisions.

Brooks is also featured in this video clip which discusses "Can you Afford to Retire?" This video explores more in greater detail the major problems facing people who use the 401k plans.

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Making these 5 mistakes is costly..

Are you frustrated with your 401k type plan? Even if you are doing well inside of it, you may not know how long it will work for you at retirement. Just because it doing well now, does not mean it that translates into success after 59 1/2.
This article "The top 5 Financial Mistakes Business Owners make and How to Avoid them"I would submit to you that making these 5 mistakes can be costly. What are these 5 mistakes? Well, most people are making these mistakes currently in regards to retirement planning. I will not steal any thunder from Ms. Pamela Yellen, but this is very valuable information! If you are a business owner or not one, this article is an excellent read!
These mistakes can be very costly and you may find yourself being short with many different needs at retirement.

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Monday, September 27, 2010

Those "Evil" Bush Tax Cuts, are they for the Rich??

People are having this debate about the "Bush" Tax cuts being reversed. The claims that the "rich" were getting a larger tax break is part of the argument for the reversal of these cuts. The other side believes that it will encourage economic growth if the cuts are held in place. Whatever side you are on, this will impact your retirement savings.
If you are 59 1/2 or younger(or currently retired), you better be seriously concerned. Your 401k withdrawals after 59 1/2 are taxed at earned income tax levels. In other words, IF you have the need to withdraw $1,000,000 or more out of your 401k plan, you may find yourself "rich". Being "rich" has its advantages, but for the IRS provides us the greatest advantage by collecting 35% of our hard earned money!! Ouch!! If your objective is to accumulate $1,000,000 for retirement, you will provide approximately $350,000 to the IRS. This is assumed that this is a lump sum withdrawal.
The experts say you will be in a lower tax bracket at retirement. Really? If that is the case, why is there a debate about raising the Earned Income tax rate schedule? I never understand why people listen to the "experts" on the TV or radio, they dont know your personal situation and retirement planning is not a cookie cutter process. Its also not known what the tax rates are going to be in the future, but its safe to assume they will not be lower based on the current deficit and debt load by the US govt. See the link at the top of this blog??
Each Qualified retirement plan(401k, 403b, Traditional IRA) has 2 tax benefits. With 401k type plans, you get the tax deduction upon contribution, tax free growth(no capital gains!!!), then you pay the taxes at the current income tax rates upon withdrawal. So here is the Congress seeking to take a Tax increase on your retirement money! You saved taxes on a lower tax bracket, and you will withdraw and pay full taxes on a higher tax bracket. Here is the other kicker: Capital Gains tax rates are LOWER than the Earned Income Tax rates. You may have been better doing a "buy and hold" strategy outside of the 401k and saved more money! "Doh"~Homer Simpson..
How do you have a Tax Free retirement? You must first work with someone who understand which lines in the Tax Code that max out all the benefits for retirement accumulation....That search can end right HERE with us!!

Here are the current Tax Brackets as of 2010:

Tax Bracket Single Married Filing Jointly
10% Bracket $0 – $8,375 $0 – $16,750
15% Bracket $8,375 – $34,000 $16,750 – $68,000
25% Bracket $34,000 – $82,400 $68,000 – $137,300
28% Bracket $82,400 – $171,850 $137,300 – $209,250
33% Bracket $171,850 – $373,650 $209,250 – $373,650
35% Bracket $373,650+ $373,650+

Keep in mind these are the current rates, set to expire after 2010. Here is an article discussing the implications of the Bush Tax cuts in case they expire: "What to Expect if the Bush Tax Cuts Expire" Its an excellent read! If you have concerns about your current 401k plan, and you wish for FREE information on how to have a Tax Free Retirement, please contact me for the FREE Info!!

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Sunday, September 26, 2010

Are you ALL your Important Assets covered?

People purchase protection for their Cars, Home, Jewelery, Boats, or Motorcycles. etc. When the unexpected happens, this protection can come in and make things "whole" again. In my experience working in Financial Services/Insurance, I have seen so many cases where people had more than enough protection that carried them through the "storm". Not once during the claims process did they complain about "paying to much" for their protection. Most people are not worried about that if their house has burned down. Your house is important "asset"(I use that word asset loosely)would you ever think about not insuring it? Of course not!!
So why do many people have zero protection for their retirement savings? What form of protection do most have against downside losses? Many experts and advisors believe in Dollar cost averaging or a Buy and hold strategy. These are fine, but you must plan for the worst! For example, if I employed a buy and hold(dollar cost)strategy for Pan Am stock from the 1970s, how much stock would I have today, and how much would it be worth today? I would have plenty of shares of stock that are worth nothing!
In my opinion, you must have liquidity when those market corrections take place. This just means you must have fast access to cash. The problem with most people is that their 401k is liquid, but the value of the liquidity or shares is subject to the volatile mood swings of the market. This means your money is not protected, and may not be there when you really need it.
The other main concern is after 59 1/2, how far will this retirement money last? With the tax changes on the horizon, this will have a huge impact on how long these monies will last. Changes in the health care legislation, looming inflation, Government spending all play a factor in how long your money will last.
In short, you must think about making sure your retirement savings are protected against loss. Having your car and home insured make sense, so why not your hard earned cash??

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