Planning for stress-free finances in retirement is a large aspect of modern life. Technology has made it easier than ever before for investors building and managing retirement funds to stay up-to-date on their investments. Here are effective ways to stay current on your retirement fund.

Visit financial news websites.

Sites focused on the latest money matters tell you what is going on around the world. There are many good websites with reliable news.

• CNBC
• Bloomberg news portal
• Reuters money section
• com
• Investopedia news section
• MarketWatch

Respected publications such as The Wall Street Journal have online versions that offer you the latest money news. These sites also help you stay abreast of current developments in the overall economy. With a retirement fund, it is good to know and understand the rate of inflation, for example, and how it interplays with your personal assets.

Read market updates.

To understand how current market conditions affect your retirement fund, you need to be aware of what is happening with stocks and other types of investments. News, insights, and analysis from reliable sources are good ways to stay informed about events as well as to better understand trends and their expected long-term results. One such way to keep current is to get market updates from Fisher Investments, an independent money manager.

Sign up for email alerts.

If you are interested in news and information on specific subjects that may affect your investment holdings, you can go to Google.com and sign up for email alerts on many different subjects. You can specify specific keywords and phrases, and whenever they are found online, you will be alerted with an email. You can even select how you receive the updates—when Google finds news items relating to your specifications or in a digest form.

Know the current market conditions.

With a retirement fund, you are investing for the long term, so perhaps checking the market daily may not be the best idea. If you tend to get nervous when the stock market wobbles or you are apt to enthusiastically buy questionable stocks that suddenly become popular, checking stock prices constantly is probably not helpful. However, to understand the effect current conditions have on your retirement fund, keep current with market conditions at least weekly. Visit the websites of Nasdaq and the New York Stock Exchange for up-to-the-minute prices.

Read state and company retirement news.

If all or part of your retirement money comes from pensions issued by companies or government entities such as states, be sure to stay current with these groups. Sign up for newsletters and emails and visit their websites regularly so you will know what is happening with this part of your retirement income.

Stay in touch with your financial advisor, and be proactive.

If you work with a professional asset manager such as Fisher Investments on a long-term basis, keep in contact so you will know how your money is working for you. In this situation, being proactive rather than reactive is more helpful for your financial future. Even if you have a financial specialist, being more hands-on with your money ultimately gives you more control. Knowledge is power and knowing the current state of your retirement fund not only reduces anxiety but can also help you make necessary decisions without shock or panic. Increased knowledge also can help you avoid common retirement fund mistakes.

The condition of your retirement fund is vital to your quality of life, so it is important for you to keep current with your finances and understand how market and economy conditions shape your money situation. There are simple ways to stay up to date now, thanks to the internet. When you know the state of the economy down to your particular investments, you can more easily make choices that have a positive impact on your finances, both now and in the future.

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In the USA the figures don’t make good reading. Many citizens are carrying credit card debt that incurs a high rate of interest. Too few have sufficient in their retirement fund and seem to think that Social Security will make a significant contribution to comfortable retirement. The latter is simply untrue; it was never designed for that and the System is increasingly under pressure as the fund is dwindling. Don’t expect the Republican Party to increase taxes any time soon to boost it. You need to be saving and one thing that you can do immediately to help if you have credit card debt is to borrow ironically. A personal loan can pay off that balance and the interest you will be paying is significantly lower.

You deserve a comfortable retirement after a long working life but you have to earn that as well. The sooner you start to save, the more chance you have of success. If your dreams of traveling, fishing and spending time with the grandchildren, you will need money and after the regular monthly paycheck stops, you must know where the finance is coming from. Today’s population that is approaching retirement has begun to understand the problem. According to a recent survey by Transamerica Center for Retirement Studies almost half fears that its investment is insufficient.

Things for Serious Consideration

Here are a few things to consider when you are thinking about retirement:

• -You can draw Social Security as early as 62 but you will receive significantly less per month than if you wait until full retirement age, 66 and rising to 67. If you can wait until you are 70 there is more again.
• -You should not be carrying any significant debt if you are considering retirement. Some as normal as a credit card balance will be a problem because of the interest you will be charged.
• -Hopefully all your children will now be financially independent. That means they are working and in control of their own finances, including the repaying of their student loans direct lenders where applicable.
• -If you are helping to support elderly parents then it may be you need to delay the decision to retire.
• -You certainly must sit down and work out a realistic budget. If you have lived by one throughout your life there is nothing that should cause you too much concern. However, if you have found that over the years you have been spending virtually all your monthly paycheck to cover your bills, you should reflect that on retirement, your paycheck stops.
• -Those of you that have had an investment portfolio and can afford to maintain one after retirement should look at whether you have too much risk in that portfolio. The recession hit many portfolios but although the recession has gone, there are some economic indicators that suggest there is no boom on the horizon even if Donald Trump suggests he can get the country moving ahead. If you have any concerns, you should talk to a financial advisor and address those concerns.
• -Home loans come in several forms. Mortgages are the traditional types of home loans, but reverse mortgages are also available to you if you are of retirement age. As a retiree you can obtain money based on your home equity from your chosen mortgage lender. Your lender will distribute that money to you a little bit each month, or you can opt to receive the funds as a line of credit or lump sum. Regardless of how you are paid, you will not have to make monthly repayments as you would with a traditional mortgage. Since you will have repayment flexibility, you can use the funds obtained from your reverse home loan to help you meet financial obligations during your retirement without the stress of an extra bill each month.
• -Retirement affects more than just yourself. There may be wife, children and even elderly parents. You should certainly discuss everything with your wife to reach the best possible answer to your circumstances. If you are both working then you may decide that one of you retires immediately and the other continues for a while. It is a matter of doing the calculations.

So What Do You Think?

After looking at each of these aspects, you may be closer to reaching a decision on retirement. You need to consider how you will spend your time, bearing in mind you will need to be able to finance those activities. If you have many friends who have retired that is a different position than if your friends are mostly working. One thing is certain; there are too many Americans today who have not got the luxury to retire early with plenty of money to enjoy the dreams they had when they were younger. If this is you and retirement is still some years away, act now, reduce any debts you have and start to save.

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I’m leaving the world of making money online today as I wanted to share some thoughts about retirement planning and savings. Since 2008, it seems that the whole investment world has changed and companies are using this excuse to make the final move towards less generous retirement benefits for their employees. It is no secret that defined pension plans will soon be extinguished and that Government sponsored pensions will be modified. Regardless if we are looking at a small pension payment or a higher number of years of work before retiring, the whole retirement concept has changed. Freedom 55 doesn’t exist anymore; we can now consider Freedom 75 or something like that.

Can we stop this phenomenon?

Can we make sure that we all have a nice retirement… and that we don’t have to wait until the age of 75 to stop working?

I think there is a solution to this problem: We must force people to save

Pay yourself first

I think everybody that reads a little bit about personal finance knows about this ultimate savings rule: pay yourself first. What does this mean? It means to consider your savings as important as your mortgage or your car loan payments. In fact, your savings should be your first creditor, the most important one. Before paying your bills, eating or paying your rent/mortgage, you should start saving. Nice theory and those who apply it generally make a very nice living and have plenty of money to enjoy their retirement. This is why I think the Government should apply a “pay yourself first” tax on each pay check.

The 10% rule applied

How about we try to use another well-known personal finance principle: save 10% of your income. Let’s play with number for fun:

Assume you make 50K per year

Saving 10% of your gross income per year would equal to $5,000/year

At a 5% investment return, you will generate the following nest egg in:

20 years: $165,329

25 years: $238,635

30 years: $332,194

35 years: $451,601

40 years: $603,998

As you can see, I’m not talking about astronomical numbers (both in terms of savings and nest egg). Some people will argue that 603K won’t be much in 40 years considering the inflation. Keep in mind that I didn’t increase the salary during 40 years either. Therefore, we can assume that numbers would likely be the same if I increase both the salary of 50K and the savings according to the rate of inflation.

Let’s continue this example and suppose than an individual starts saving at the age of 30 and makes 50K/year. At the age of 65, he will have $451K in his retirement account. If he were to live until the age of 95 (so 30 years), he will be able to withdraw $26,116 per year with an investment return of 4% with a safer portfolio. This is without inflation. If we factor a 2.25% inflation rate, we get $19,477 per year. I don’t know about Government pensions in the States but if you have been working all your life in Canada, you should be able to get a pension of roughly 11K/year today. If you add both numbers, you have $30,477/year in today’s dollar to retire.

If you have managed your budget throughout all these years, you should not have any debt and 30K per year should be more than enough to support your lifestyle.

The thing is that people don’t do this

While my example is quite simple and the math behind my rationale as well, most people don’t save money. They would rather go on vacation, buy a new TV, go out to restaurants… they basically do everything besides saving money for their retirement. And this is why I think we must force them to save.

How I would do it

Instead of leaving people the choice of doing whatever they want with their paycheck; I would setup an automatic withdrawal directly on their pay stub of 10% of their gross income. This amount would not be taxed (in other words, it would be treated as an RRSP contribution for Canadians). This money would be directly sent into an investing account (according to the individual wish). He would be able to manage it as he wishes but would not be able to withdraw from this account until the age of 60.

This would basically force each individual to take care of their own retirement plan. They would build their pension plan over the years. Imagine if your employer would match only 50% of your contribution (as some of them do at the moment). Here are the numbers would you get with the same example:

20 years: $247,994

25 years: $357,953

30 years: $498,291

35 years: $677,402

40 years: $905,998

This would be an easy way to reach $1M in investments before retiring!

How would you react if the Government did this?

Personally, I would be pleased! I would rather be forced to save than be forced to work longer, pay more taxes and support half of the population who didn’t want to save when they were younger!

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As a financial planner, I meet with several clients at different stage of life and with different investor profile. Some of them come to see me to borrow money and invest massively in index funds. Some others are panicking and think that the world will collapse. A lot of clients are asking me the following question:

“I’m about to retire, should I withdraw my money from the markets now?”

If you have asked your financial planner, he already told you that you should definitely not withdraw your money from the market right now. However, you probably have a small doubt that he is thinking about his commission being affected by withdrawals than your own good. Well if it’s the case, you should be better of getting rid of your financial planner now and start looking for another one.

However, I can tell you that he is right (why leaving your financial planner then? Because you don’t trust him!). The very first reason why you should deal with a financial advisor is trust. Then, you look which kind of answers (and explanations) he gives you to your financial questions.

Even if you are about to retire, you won’t be withdrawing all your money the first year.

People have the false belief that they should revise their investment strategy upon retirement. That they should get most of their money into fixed income and other secure investment product. The truth is that if you do that at the age of 55, 60 or even 65, chances are that you will survive your capital (unless you are awfully rich or awfully cheap!). Don’t you want to live the life you always dreamt about? This is why you need a good portion of your money invested in the stock market.

When we are looking at current CD (certificate of deposit) rate, we are barely making 3 or 4%. After the evil inflation got its dirty hands over your yield, you are left with almost nothing. The stock market always gave about 9% over long term (10 year +). Therefore, even if you live through fluctuations, you are still better off with stocks or aggressive mutual funds than with CD’s and bonds.

Let say that you have 1M$ at retirement. If you plan on withdrawing $35,000 every year and your investment drop by 10% the same year, you will still get 868K at the end of the year ((1M$ – 35K) times 90%). Then, if your investment portfolio increases the next year by 10%, you will end the year with 916K. However, if you withdraw your money from the stock market after the first year and you go into a 3.5% CD, your investment will worth 862K after the second year. That’s 50K, or 18 months of retirement gone because you leave the stock market at a wrong time!

The key here is not to try to time the market, but to not cash in your money from the market when you are in a down slump. Wait until it goes back up and then, you will be in a better position to get more secured.

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Have you notice something about my layout? The whole blog is in different tint of blue and white. Everything but one thing… This big orange button. You know what? There is a reason for that… It is because I want to make my RSS FEED button visible! Please register for this blog RSS Feed by clicking on that orange button Then, you’ll get my daily post in your email everyday!

In the first post of this series about My Big Plan for Retirement, I established my financial situation. As it is the case for the rest of the plan as well, this situation might change any time. In order to get my plan started and improve my financial situation, I already took some actions.

 

The first thing I did was to buy a property where I can live with my family. My house will be very comfortable for my two kids, my wife and myself. Why is that so important? Because moving incurs several costs and if I can avoid them for 5 to 10 years, I will be able to concentrate on other things. We bought a property in a very nice area in a growing city. Therefore, our house has better chance of increasing in value. I plan on using the equity on my house to the maximum. Instead of selling and making a profit, I rather re-mortgage my house once in a while to create assets instead.

 

Speaking of which, many of you probably know by now that I am doing a Smith Manoeuvre. I setup an HELOC when I first bought my house last November and I started the manoeuvre in February. Therefore, my mortgage is slowly becoming tax deductible and the investment should grow enough to cover for the amount of my mortgage much faster. I will write more about my whole Smith Manoeuvre plan in another post. For now, let just say that I started investing now so I can have a good 600K from the Smith Manoeuvre strategy (or even more!) at the age of 55.

 

I am also doing minor changes to my property in order to increase its value. I planted some trees and a cedar edge to make my backyard more intimate. We also add a lot of flowers to add up in colors. I am looking at renovating my basement. I would like to get rid of the carpet and put wooden floor. I also have the possibility to make a third bathroom. However, these projects are not scheduled this year as my wife will be on maternity leaves and we will see our cash flow decreasing for a while.

 

My employer is helping me with my retirement plan by offering a generous pension plan. If I manage to work 30 years for them, I will get a really nice pension for the rest of my life. Also, I have the opportunity to buy the company stocks from my pay cheque. The employer is adding 25% of my contribution in my account. I contribute to this plan to the maximum of my capacity. Chances of having bank stock crashes by 25% are minimal these days. This is why I do not mind concentrating my investment in the financial industry for the time being.

 

As my pension plan is grabbing all my RRSP (IRA) contribution, I don’t have much left to invest in my RRSP account. However, I use my year end bonus to contribute to my RRSP’s. This year, I am planning to put only 1K in my RRSP and keep the rest to cover our new baby’s expenses. That amount will cover the minimum payment from my HBP (Home Buying Plan).For the years after, I should be able to put around 3K. I do not think I will be allowed to invest more money into my RRSP as the equivalence factor from my pension plan will reduce my contribution limit. Still, 2-3K a year can get me close to another 300K in RRSP at the age of 55. Not so bad considering that I’ll have a pension plan on top of that!

 

So this part resumes where I am and what I am doing to become a wealthy retired guy on the beach. Next time, I’ll write about my other projects I have in mind. I strongly believe in getting multiple sources of income to achieve my goal. What about you? Do you have any plan, do you have anything put in place? I am curious to get your ideas and strategies about this topic.

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