Needing Retirement Income?

Many pre-retirees are concerned and wondering if they will have enough retirement income when they retire.  So how can they begin to improve their situation?

A simple and excellent strategy is to have all debt paid off by the time of retirement.  For many people this can be at least $1,000 to $1,500 per month of cash flow improvement.   And one of the best ways to possibly accomplish this is to begin years before retirement paying more each month towards your debt.  This can allow you to eliminate your debt much faster with the goal of paying it all off before your reach your retirement date.  In addition, you may also receive an intangible benefit… the great feeling that you owe no one, and the freedom that comes with this.

A common, costly Retiree mistake

A common mistake by retirees is to underestimate their costs of Medicare, Medicare supplements, and out-of-pocket medical expenses.  For instance, it’s not uncommon for a retiree couple to pay $9,000 per year on Medicare premiums and also thousands of dollars out-of-pocket on medical bills.  And don’t forget about annual inflation.  Underestimating these expense items can ruin a good day and maybe someone’s retirement years.

Understanding Dividends

On the heels of Apple announcing they plan to start paying dividends, I hope you find this information helpful and enlightening to your situation.

Most people understand “interest” from savings accounts and CD’s. But few truly understand dividends, how they work, and the benefits long-term. So let’s try to explain.

Simply speaking dividends are payments from corporations to their shareholders (investors of the company). Prior to each dividend, the board of directors declares the amount to be paid to shareholders. Dividends are usually paid quarterly and can be distributed in cash or reinvested to accumulate additional shares. Today you may find companies or stock mutual funds that pay reasonable dividends in the range of 2% to 4% each year.

Many investors prefer stocks or mutual funds that pay reasonable and predictable dividends. These dividends can supply a stream of income compensating the investor with some form of return, while they wait for a potential longer-term overall return.

Stocks that pay dividends can generally be less volatile than companies that pay no dividends. One reason for this is that the investor is compensated for their investment risks each quarter, through the dividend, rather than waiting long-term to receive any potential benefits of growth. Keep in mind this is a general principle and is not always the case for all stocks and mutual funds. Also, savings accounts and CD’s are typically guaranteed (FDIC insured) and stocks are not. This means that the investor can see fluctuations in the value of their stocks or mutual funds. Remember, past performance doesn’t guarantee future investment returns. That said, also remember that dividends can provide some benefit in the meantime while investors wait for longer-term potential growth.

Re-Building Retirement Wealth, Part 1

Almost everyone I talk with, from young to old, seems to be worried about their future. Whether their fears have been heightened due to the economy, the stock market, or the political climate, their concerns usually center on “will I have enough” to retire. In other words, “What if I can’t work as long as I need to?” or “If I want to stop at some reasonable age, will I be able to?” So let’s review over the next several weeks what may help. With each entry we’ll try to address a strategy or “hot topic” that may be helpful.

Live Reasonably. Good marketers have done an excellent job motivating us to want more and more. But the truth is we can’t afford many things we spend our money on. So look at what you are spending (make a detailed list) and then ask yourself what kind of lifestyle you can afford, not just today but later. Next, start finding ways to spend less and save more. Remember, bad habits are hard to break. Reducing spending is almost like pulling apart human flesh. So don’t wait too long to start re-establishing good spending and savings habits. To develop & monitor your spending plan, consider using Quicken or the Mvelope System. And if it helps any, remember that most of the “rich” can’t afford the “yester-years” any more than the rest!