Retirement Planning for Self Employed

If you are a small business owner, than one important thing for you is a retirement planning for self employed. But you can still retire comfortably with a small investment and savings if you choose a convenient retirement plan options. Take income from pensions and Social Security into consideration, as well as expenses for things such as increased travel and medical care. Treat contributions to retirement savings as you would any other weekly or monthly expense. Set up and contribute to a tax-deferred savings plan. You’re probably familiar with IRAs, but Simplified Employee Pension plans (SEPs), Keogh Plans and Savings Incentive Match Plans for Employees (SIMPLEs) are specifically designed for the self-employed. You can try to invest in stocks or bonds, particularly if you start planning for retirement early. Decide which combination of potentially volatile, higher growth stocks and more stable, lower growth bonds is best for you. In the simplest terms, an annuity is an investment contract that guarantees you a set income in return for your investment. Also, you can try to start a small business or consult on a part-time basis to keep your mind active and to reduce the amount of money you need to withdraw from your savings. One of the smartest money moves is to invest, also known as invest in a Roth IRA. Any money you put into one of these savings accounts grows absolutely tax free; you won’t owe a dime as you let your savings accumulate, or when you cash out in retirement. Plus, an IRAs is more flexible than a 401k plan and other retirement plans because you can invest it in almost whatever you want, from stocks and mutual funds to bonds or real estate. If you are employed, than 401k plan is a good, contribution are automatically deducted from employee’s paycheck each pay period. This money is taken out before the employees paycheck is taxed. The contributions are invested at the employees direction into one or more funds provided in the retirement plan. Employers often match employee contributions, but are not required to do so. While the investments grow in the employees 401k account, they do not pay any taxes on it.

Annual Study Of U.S. Retirement Income System

According to the financial studies, Mercer and ACFS measured the overall pension benefits that are being provided to the citizens of 16 countries, the likelihood that those systems will be able to provide benefits in the future, and the integrity of private retirement plans. A year ago, the U.S. had the 10th best retirement-income system in the world. A year later, that hasn’t changed, according to the third annual study of the pension systems of 16 countries by Mercer and the Australian Centre for Financial Studies. The same as last year, the U.S. didn’t get such high marks. In fact, the U.S. earned a “C” grade for its pension-plan system according to the 2011 Melbourne Mercer Global Pension Index, the same grade awarded to Poland and Brazil. Read the Global Pension report here. The Netherlands and Australia earned the highest grades, a B+, for their respective retirement-income systems. By its own admission, Mercer and ACFS said comparing diverse retirement-income systems around the world is not easy. Retirement-income systems are diverse and often a number of different programs, according to a report published by the Organization for Economic Cooperation and Development in March 2011. Classifying pension systems and different retirement-income schemes is consequentially difficult. At the moment, no country has a gold-standard pension system according to the Melbourne Mercer index. To receive a best-in-class grade, the researchers said a system would have to provide adequate retirement benefits, be sustainable over the longer term and be trusted due to its strong and robust governing structures.

Employers Are Making Decisions For Retirement Savings

Retirement fund trustees and employers are making decisions for retirement savings, switching from employer-sponsored funds to umbrella funds and between umbrella funds.This is one of the conclusions that can be drawn from a paper due to be delivered at the annual convention of the Actuarial Society of South Africa next week. The paper, entitled, a critique of the umbrella retirement fund charging model, is based on the research. One of the aims of the research is to develop, an industry-agreed method of comparing charges across all defined contribution retirement funds (employer-sponsored stand-alone funds and financial services industry umbrella retirement funds). The model developed by the research offers employers and retirement fund trustees, for the first time, a tool with which to assess properly the cost-effectiveness of whether your retirement savings in an employer-sponsored fund should be moved to an umbrella retirement fund, or switched from one umbrella fund to another. However, the researchers say the model needs further refinement to make it an easy “plug-in” tool. They warn that costs of local retirement-savings products should not be the only reason for switching funds. Other factors that should be taken into account include administrative ability, corporate governance and the cost of risk cover.

New 401(k) Retirement Plan Regulation For Small Businesses

A new regulation issued by the Department of Labor this week will allow small businesses to more expert advice for 401(k) retirement plans. This regulation will improve access for retirement plan companies to offer workers individual account advice and other retirement services. Currently businesses, employers can offer expert advice, but it has to be contracted with an independent investment adviser, rather than the retirement planning company, like Fidelity or Vanguard, to avoid any potential conflicts of interest. This change simplifies an already complex process for small business owners sponsoring retirement plans. As sponsors of a retirement plan, small business owners automatically become plan fiduciaries, meaning they can only act in the best interest of their employees, or participants. The Associated Press reported that 401(k) plans covering 17 million participants will start to offer investment advice under this regulation change. The Labor Department also estimates 3.5 million of these participants will seek business advice from these investment advisers. In addition, the department estimates 17 million IRA beneficiaries will also seek advice. The regulation will go into effect Dec. 27, according to the DOL.

Saving For Retirement In Mutual Funds

For a long time, retirement saving and planning meant investing in small saving schemes. However, the problem was that these savings seldom beat inflation. Then came mutual funds, but these were seldom used for retirement planning. Things picked up slightly later with the advent of private sector mutual funds. Before investing in mutual funds, there are some questions you need to ask yourself. How many years are left for your retirement? How much money will you need at retirement? What is your risk-taking ability? What is the monthly income you will need to sustain your current lifestyle? Once you have answered these, planning becomes simple. No matter what your investment horizon is, no matter what your risk-taking ability is, no matter how much your investment is, there are mutual fund products for every need. You can invest in equity funds for capital appreciation, debt funds for regular income or gold funds for securing your future. In terms of risk, not only can you choose funds which are safe, you can also invest in funds that are highly risky or hybrid funds, which invest in both equity and debt and are moderately risky. Mutual funds are the lowest cost options for wealth creation when compared to unit-linked insurance plans and structured products. Building a corpus for retirement is most likely your last goal after others such as child’s education or buying a home. This means you have more time to plan and invest for retirement. Equity schemes are the best vehicles to build a retirement corpus. Large-cap and blend-cap funds can be used. Also, equity as an asset class tends to be adequately hedged against inflation, the biggest risk in the long run. The choice of fund depends on your objective and risk-taking ability. Each asset offers funds that enable you to meet specific goals. While planning, take help from a financial advisor to decide the asset allocation. Pick funds that have a good record, performance and lineage. Stick to funds that are simple to understand. Equity funds are ideal during accumulation/earning years as equities tend to outperform most assets over long periods. A simple way to start is to invest in a systematic investment plan (SIP) of an equity mutual fund. SIPs smoothen unpredictable market movements by accumulating more units when the markets fall. You should start moving towards debt when your retirement is 5 years away by investing 20% corpus each year in debt instruments. You can use a Systematic Transfer Plan for this. The idea is to reduce risk and build the debt portfolio, which will give consistent income after retirement with little or no loss of capital. The retirement corpus should not be rebalanced unless there is any significant change in the expected performance of a fund due to the fund manager leaving, change in the fund mandate, acquisition of the asset management company, etc. Mutual fund portfolios can be rebalanced without costs. Such a review is advisable as it helps reassess performance and realign strategy if there is an important market development or a change in asset allocation. Mutual funds have been highly successful in creating long-term wealth. In fact, countries like the U.S. have defined contribution retirement plans such as the 401K which hold a large party of assets in mutual funds, especially equity funds. One can also look at Fixed Maturity Plans among the best options, and Quarterly Interval Plans with dividend payouts for steady income. These schemes do not provide monthly income but regular dividend payouts. It’s the closest one can get to high returns and regular income.

People Cannot Afford To Retire With Their Debt

Most Americans used to pay off their debts before retiring. However, people with so much debt cannot afford to retire. Wages have barely kept up with rising prices over the past 35 years Americans have pushed debt higher, living beyond their means. Now, people are postponing retirement, cutting living standards or both. All kinds of debt held by this age group have risen, but the big problem is mortgages. Thirty-nine percent of households with heads aged 60 through 64 had primary mortgages in 2010 and 20% had secondary mortgages, including home-equity lines, according to research group Strategic Business Insights’ Macro Monitor. That was up from just 22% and 12%, respectively, in 1994. The housing crash has made things worse. A few years ago, homeowners in their 60s with big mortgages could sell their homes for a profit and buy smaller places or rent. But the drop in housing values means that many homeowners have little equity, and some now owe more than their houses are worth. People have tried to reduce debt since the financial crisis, with limited success. Americans of all ages owed $11.4 trillion at the end of the second quarter, based on data from the Federal Reserve Bank of New York. That’s down about 15% from 2007 but nearly double what they owed in 1999, adjusted for inflation and population. Older Americans also have struggled to dig out in the past four years. “Relative to the value of their homes, the amount of indebtedness if anything has gone up because house prices have fallen faster than mortgages have been reduced,” says Christopher Herbert, director of research at Harvard’s Joint Center for Housing Studies. Many have little choice but to keep working. Debt isn’t the only issue clouding retirement prospects. People aren’t saving enough either. As calculated in a Wall Street Journal article earlier this year, the typical American household nearing retirement with a 401(k) retirement account has less than one-quarter of what it needs in that account to maintain its standard of living in retirement.

Some Tips Of Retirement Activities

Here are some tips of quality retirement activities to help planning your retirement to make your life better: Find something you are passionate about. If I am going to do something for the next years, I better enjoy what I am doing. I don’t want to do something merely for the sake of doing it. Since retirement is my time to do what I want to do, it is the perfect time to focus on what I am passionate about. Passions differ and can change over time, but you know when you are passionate about something. You want to tell the world all about it, you can’t wait to get back to it, and while you are doing it you could not be happier. Whatever that it is for each of us, we need to find it and pursue it. Find something that challenges you. If an activity is too easy, it will get done too quickly. Rising to meet a challenge engages our capabilities and focuses our attention. Successfully dealing with a challenge gives us a feeling of accomplishment and worth. Retirement can be a time of discovery if we engage in activities that push us a bit. Find something that helps others. There is a satisfaction that we can realize by stepping outside of our comfort zone to help someone in need. Heartfelt gratitude expressed for even little things will warm the coldest heart. Some of us are courageous trail blazers who travel to foreign countries to help those in need. Other people just take the time to talk with a homeless person waiting on the curb and listen attentively to their story, empathizing with their situation, and showing that someone cares. Whether it is a little or a lot that you can give, try it. You might like it. Find something that is long term. If we are fortunate, retirement will be an extended proposition lasting many years. It is advantageous if retirement activities are not quickly completed and require time and diligence. Life-long learning and progression are ingredients that keep us sharp and engaged. Learning a new language is a never ending journey and taking up a musical instrument will give you something to practice indefinitely if you are patient and persistent.