Right now, many Americans plan to work well beyond their originally planned retirement age – and even beyond that.
With the current state of the economy, most Americans say they plan to work after they officially retire – as many as 72 percent, according to the 2009 Retirement Confidence Survey. With increasing economic uncertainty, a drop in the value of real estate and retirement accounts, a continuous rise in health care costs and other day-to-day expenses, it’s not surprising that Americans are putting off retirement.
A good number of these Americans, however, have neglected to investigate their options. As bleak as things seem, the good news is that with proper planning, a little discipline and creativity, it is possible to retire comfortably today, despite this recession. Here are some tips to get you started.
#1 – Do the right math and get a good estimation.
Many have postponed retirement, some without really understanding what they need financially to fund their golden years. Often, pre-retirees pick a magic number for retirement, when in reality they have not done the math to figure out if the amount is enough, or even more than necessary.
By formulating a solid mathematical estimation of your financial needs, you will be able to make adjustments as needed to meet your goal. You may be able to retire when you originally had planned. Some tips for determining this need-to-know number:
- Use your current income as a starting point. With the mortgage paid off, with kids out of the home and most fixed expenses paid, experts estimate that you will need approximately 70 percent of your annual income to fund each year of your retirement.
- Know what age you are planning to retire and identify all sources of retirement income.
- Determine your life expectancy. People are living longer; their money needs to last longer too.
- Project your retirement expenses, but take into consideration the average annual percent of inflation. Over the past 20 years it has been approximately 3 percent.
- If you calculate your expenses and it seems that you are going to come up short, don’t panic. Seek advice from a trusted financial professional and consider some of the money saving suggestions below.
#2 – Cut back on expenses to create more flexibility with your retirement budget
In the midst of today’s recession, it is important to get a better handle on your budget and identify areas where you can save some money. Here are a few money saving tips:
- Save on your housing expenses by refinancing your mortgage. The one bright spot to the current economic crisis we are facing is that interest rates are at historic lows. If you can save at least one percent or more on your current interest rate and plan on staying in the same home for at least three to four years then refinancing your home mortgage is certainly worth consideration.
- Save even more on your housing expenses by considering a reverse mortgage. In the right circumstance and with all options for retirement fully explored, a reverse mortgage could not only free a retiree of mortgage debt, but it could also provide a lump sum payment or monthly income to supplement your retirement years.
- Save on your entertainment expenses by using: online movie rental Websites such as Redbox or Netflix; online restaurant discount Websites like www.restaurant.com; discount coupon booklets like those found on www.entertainment.com. For couples that go to the movies, eat out or travel often, these companies can provide hundreds of dollars in savings each year.
#3 – When it comes to your investment portfolio, make sure that at all times you know exactly what you are doing and why.
Investing can be very confusing. Rare indeed is the investor who knows the true purpose of their money, all the hidden costs in their portfolio, their true risk profile and how diversification works in their portfolio. Here are three things you should know as an investor preparing to retire:
- Evaluate your existing retirement savings account or portfolio. Talk to your plan administrator or a financial advisor and determine how much risk you are taking. If controlling risk is important to you, then you should be able to measure it. For example, using the Rule of 100, a 65 year old should have 65 percent of his portfolio in fixed income and 35 percent in equities.
- Make sure the composition of your investment portfolio matches your investment policy statement. Far too often, investors who are really conservative have aggressive holdings in their portfolio. That creates a disconnect between expected and actual results. If the 35 percent allocation to equities should be in blue chip stocks and you see that you actually own small cap and emerging market stocks then you should make the proper adjustments. You are more aggressive than you should be.
- Find out if your portfolio is properly diversified. For example, Bob thought he had a diversified portfolio because he owned 60 stocks spread out over five mutual funds. After meeting with an investor coach who ran an analysis on Bob’s portfolio, it turns out that all 60 stocks were in the same asset class – large cap. This analysis provided insight as to why Bob suffered a 40 percent loss to his portfolio in 2008. The S&P 500, a large cap index, was down about 40 percent. In rebuilding Bob’s portfolio, his investor coach spread his money over 12,000 stocks, in 18 asset classes, in 42 countries to provide him with true diversification. In the future, if the large cap asset class of his portfolio is down, it will be offset by the performance of his other 17 asset classes within his portfolio.
Just because the country is in a recession doesn’t mean that you and your money have to be in one. Effective strategies do exist to help you retire comfortably regardless of the state of the economy. For a more detailed or customized plan, it is always wise to meet with a qualified financial professional.
Ike Ikokwu, “Your Investor Coach,” has spent more than a decade educating and empowering Georgia residents with the knowledge and tools they need to manage their wealth. He brings a unique twist to wealth management by drawing from several of his diverse disciplines, including accounting, financial, tax and investment planning, and safe money alternatives. He is the president of The Blessed Man, Inc., a Cumming-based tax and financial advisory practice and he is the managing member of Abiding In The Vine, LLC, an investment advisory firm. Ikokwu holds the professional designations of Certified Financial Planner (CFP®), and Certified Public Accountant (CPA).
Sanders Family Christmas
In this sixth year anniversary production, they have added a third co-director, Gloria Szokoly, a retired Forsyth County public school teacher. They are so proud to have assistance from Gloria, who is well known for her singing and acting skills in the North Georgia area. In fact, the Metropolitan Theater Association, composed of eight area acting companies, presented the Best Actress award to Gloria recently for her riveting performance in a drama presented at the Holly Theater in Dahlonega.
Georgia is known as the Peach State, but more and more people are beginning to discover the fine wines produced by the vineyards and wineries of north Georgia. These wines are gaining national recognition and fueling the emergence of this area as a prominent wine region. The mountains in north Georgia have a delightful combination of the perfect terrain, soil, drainage, and elevation necessary for vineyards like Wolf Mountain, Frogtown, Three Sisters, Blackstock, Chateau Elan, Tiger Mountain and Persimmon Creek to produce their award-winning wines. The soil composition is very much like that of Italy’s Piedmont region, which produces some of the most prestigious wines in the world. With grape varieties such as Merlot, Viognier, Chardonnay, Cabernet Sauvignon, Malbec, Vidal, and Tannat, the wines produced in our area rival some of the finest wines in the world. Wakoola Water Gardens in Cumming, Georgia has made it their mission to stock our new wine corner with one of the largest collections of wines from north Georgia. We do this not only to support the local economy but to help spread the word about one of the “best kept secrets”.
Wakoola’s new wine corner is currently stocked with wines from two other categories as well: organic and sustainable wines, and “Way Cool” wines (wines we love, not easily found elsewhere). Organic wines are becoming very popular and we are stocking Cono Sur Cabernet Sauvignon from Chile. We also have several selections of their sustainable wines including Chardonnay and Pinot Noir. “Way Cool” wines include restaurant selections, great tasting bargains, and some excellent wines with cool bottles, fun labels or stories.
We’ve also had our Thanksgivings when we traveled to other homes, and even a few restaurant Thanksgivings. One of our fondest memories is the year we were expecting our first child and the doctor had advised no travel. We were hours away from the nearest family, and the idea of lifting a turkey in and out of an oven with baby weight in the way was, well, unappealing.