The Looming Retirement Crises - The Perfect Storm - Special Report For Advisory Clients

Posted by Vipul Mistry Thursday, June 12, 2008 0 comments

America, the land of opportunity. The most powerful and prosperous nation in world history….is in one of the most perilous places in its history. As millions of baby boomers ready themselves for retirement, most are doing not nearly enough! To make matters worse, rising healthcare costs, overextended long-term-care capacity, under-funded retirements and the looming Social Security crises could all converge at the most inopportune time and create a Perfect Storm. Whether you are already retired or planning to, be sure to head this wake up call before it’s too late.

Every year, more and more Americans move toward retirement with insufficient savings, and with this the country is moving into dangerous territory. The American Institute of Financial Gerontology notes that although the average American life span is 77.2 years, a person who reaches the age of 65 can expect to live to age 83, while 26% of all 65-year-olds today will live past the age of 90. By the year 2030, the percentage of persons in the U.S. age 65 or older will reach 20%. Considering that people over age 65 spend four times as much on healthcare as their younger peers, according to AARP research, and that end-of-life care, can eat up 50% or more of an individual's lifetime healthcare funds, every American had better recalculates their retirement planning strategy, regardless of whether you are already retired or planning too.

Will you have enough to retire?

The problem is that people fail to make a provision even remotely adequate for maintaining their pre-retirement lifestyle. Studies found that U.S. savings rates (estimated to be around 1.1% of net income) are somewhere between 25% and 38% of the amount required to meet overall retirement needs; that Social Security will make up 80% of retirement income for the least wealthy 20% of retirees; that approximately 48% of all households are on track to accumulate adequate retirement wealth (meaning, of course, that the rest are not); and that at current mortality rates, the average under-funded household faces 19 years of unfunded living expenses. The answer is clear; it’s time to build up that nest egg that we always thought would just appear on its own. Studies suggest that people age 50 and over immediately begin to set aside 13% to 23% of their current gross income.

In the past, there were three sources of income for a retiree: (1) a defined benefit pension plan; (2) Social Security; and (3) personal savings. In retirement, two of these--the largest two--took the form of monthly checks. Workers defined their retirement assets in terms of the monthly income they expected to receive from Social Security and a company pension, whose total could be quickly and easily translated into a fairly clear picture of their expected lifestyle.

Over the past 20 years, defined contribution arrangements have increasingly replaced the defined benefit leg of the stool. Instead of counting on professionals to manage their asset pool (as was the case with a defined benefit plan), workers are expected to make their own long-term investment decisions. More important, workers are expected to do on their own what pension actuaries once did with sophisticated computer models: Figure out how the lump sum of their savings nest egg can be translated into an income stream at retirement, and manage it in the proper investment vehicles so that the income stream doesn't dry up over unpredictable cycles of market returns.

Managing your own money is a daunting task. The overwhelming number of choices, accompanied with the fear of making a mistake is paralyzing, and often leads to the wrong portfolio, many times holding assets that were bought for the last bull market and not the next one. This is particularly true with retirees, as many investors still have a portfolio of “yesterdays” investments and not one for tomorrow. Obtaining the highest returns with the least risk possible is critical.

Be the expert…or hire one!

Personal finance and making a retirement plan is serious business. You need to get the fundamentals down pat, spend a lifetime updating yourself on the rules and laws, and learn the ins and outs of calculations for retirement in particular. For instance, did you know that Each year a person postpones retirement reduces his or her need for retirement savings by about 5%, while increasing Social Security benefits by 7%. Unfortunately, hardly any pre-retiree takes the trouble to figure out that he or she will almost certainly need to plan to live a good 20 to 30 years after retirement. In that time, the price level will almost certainly rise dramatically, even at present low levels of inflation. How do you deal with that when most of us can barely afford to have enough to retire on for the first few years after the gold watch?

In addition, there is the investment management to consider. You can't just read "The Wall Street Journal" for a few months and expect to get it. This is serious business, and small mistakes today, whether with too aggressive or too conservative a portfolio, can create enormous problems tomorrow.

For some reason people always think they can take short cuts with their retirement planning. The majority of people actually spend more time researching to buy a refrigerator than they do planning for their retirement! The biggest mistake one can make is to fail to educate themselves or hire a finance specialist to take care of them. Men and women, but especially men, hate to ask for directions. This is a cliché about driving, and I don't know if it's true or not, but it most assuredly is with personal finance.

It’s the distribution and succession, not just accumulation

For those who do prepare properly, careful consideration must be paid to not only saving and investing the money, but on the proper mechanics on how the assets need to be held in order to maximize your income distribution through your retirement. It does no good to spend your life saving and investing wisely only to give it all back to Uncle Sam! After all, it’s what you and your loved ones keep, that counts.

Developing a Retirement Investing Plan That Fits You

Posted by Vipul Mistry Tuesday, June 10, 2008 1 comments

We are programmed to think ahead and plan for our futures. We were taught in school that we must get good grades and go to college -- get a good job and live the good life. Now that you have done all those things it time to start thinking about retirement investing. There are a few basic rules you should apply when thinking about your retirement investing plan. This article will help you create a retirement investing schedule that fits your needs.

Where do you want to be in 5 years?

Before you can plan ahead you need to know where it is you really want to go. If you plan on traveling when you retire you may not want to have the burden of a home and all the up-keep that is involved with that obligation. Retirement investing is not always about making the right investments. It is also about smart handling of your assets and time management. If you own a home you will need to have it cared for while you are away on your trips. If you sell the home you may be losing the investment value, but you will be adding life value by relieving yourself from the obligation and expense of maintaining the home.

Do You Need the Motor Home?

When considering your retirement investing plan you should think about the types of vehicles you will own. The stereotypical retiree buys a motor home and off they go. Then they are hit with huge gas bills, maintenance charges, and insurance and the list goes on. If you considered a smaller vehicle you may save a considerable amount. This may not sound like retirement investing, but if you are saving money you are earning money.

Learn All You Can About Retirement Investing

The internet is a wonderful place to discover a good retirement investing plan. See what others are doing and develop a system that works best for you. It is not always about stocks and bonds. Think ahead and manage what you have. That is a great investment.

Staying Healthy Is A Great Retirement Investing Plan

Continuing on with the thought of Retirement Investing other than stocks and bonds -- you should be developing a healthy diet and workout regiment. Consult with your doctor to develop a health plan that works best for you. If you are not healthy no amount of money will really matter. Enjoy life to the fullest by thinking out side the box.

Heavy rains lash Mumbai for second day

Posted by Vipul Mistry Sunday, June 8, 2008 0 comments
Heavy rains continued to lash the city on Sunday for the second consecutive day causing waterlogging in many areas.

Most city dwellers chose not to step out with heavy rains being witnessed across the city.

There was waterlogging in many parts of the city, however road traffic remained largely unaffected due to a low number of vehicles on roads.

Services on the suburban rail lines were also affected with trains running late. However, there has been no stoppage due to the rain yet, said the railway police.

Investing For Your Retirement

Posted by Vipul Mistry Sunday, June 1, 2008 0 comments

Pension scheme contributions

With current tax relief, for those on a marginal tax rate of 22%, a contribution of £100 only costs £78 (and for those on 40% only £60) and then earns income and capital gains free of tax (except that tax deducted from dividends can no longer be recovered). So pensions are a very tax efficient investment.

When a pension is drawn, it is taxed as income but in most cases some 25% of the pension fund can be withdrawn as a tax free lump sum.

Contributions to the state pension schemes and occupational schemes are made from income. Personal and stakeholder pension contributions are also usually in the form of regular monthly payments but need not be.

For self employed people with irregular income, contributions in the form of a lump sum once a year, when you know how much is available, might be more appropriate. Furthermore, charges tend to be lower when contributions are made that way.

Individual pension accounts

With all forms of pension scheme apart from occupational final salary schemes, including stakeholder pensions for which they are specially designed, contributions can be paid into an individual pension account (IPA), which is a wrapper like an ISA.

The money can be invested in gilts, unit trust and shares in pooled investment funds and the advantage is that you have control over how the money is invested and can value Your scheme at any time by looking up the value of the investments.

If IPA holders change jobs and wish to join their new employer's scheme, they can either transfer the IPA into the new scheme or leave it where it is, stopping contributions to it as appropriate.


These additional voluntary contributions on top of an occupational scheme can also be made in the form of a lump sum and at present it is possible to go back to earlier years if there is space within the Inland Revenue limits on contributions.

There is some debate about whether AVCs are better value than ISAs. With AVCs the contribution is tax free but the benefit is taxable, whereas ISAs are the other way around.

In both cases money in the scheme is free of tax on income and capital gains but ISAs have the advantage that tax deducted from dividends can be recovered until 2004. Charges might be higher for pension schemes than for 1SAs.

Most experts favour AVCs because the tax gain comes at the beginning and so funds accumulate tax free at a higher level. The main advantage of ISAs is complete freedom of action you can get your hands on the money at any time. However, some people prefer the discipline of not being able to access the funds before retirement.

Cash lump sum on retirement

Most pension schemes include an option to take a cash lump sum on retirement. It is a pleasant decision to make, but it may not be easy. Remember you can choose to take as much as you like up to the scheme limit, but you lose pension in proportion.

If a pension is fully inflation proofed, then it might be better to keep it intact. If not, then it might be possible to buy an annuity with the cash, which pays more after tax than the pension foregone, depending on annuity rates at the time.

You do not have to buy an annuity; you may choose to invest the money differently. You may in any case want to use some cash to pay off some at least of your mortgage.

But think carefully before using it for a holiday or a new car!

Pension annuities

With money purchase occupational schemes, personal pensions and the new stakeholder pensions, the fund at retirement must be utilised to buy an annuity (this can be deferred in some cases beyond retirement). This is called a compulsory purchase annuity, and all the receipts are taxable.