Forced to Retire Early? Follow These Five Tips

Retire Early

Sometimes, we may be forced into a position where we have to retire early. While this may cause some initial problems, it might benefit you in the long run. However, preparing for an early retirement will involve some difficulties. Due to this, we want to share five steps you should take if you need to retire earlier than you expected.

Think About Pensions and Social Security

As you worked at your job over the years, you most likely put money into social security, and you may have a pension. This means you will need to strategize your pensions and social security to get the most out of your benefits. Each of these will provide you with a certain amount of money. While social security benefits automatically accumulate as you pay taxes, you will need to see if you have a pension. 

Identify A Location

As you plan to retire, you need to find the best location available. You will still need to pay certain bills and taxes, so you need to find a location with a low cost of living. On top of this, you should purchase the home you want to live in to avoid paying rent. Once you identify the location you want to move to, you can create your plans around that idea.

Look at Investments

Many people will have different investments they contributed to as they worked. This can include IRAs, 401k plans, and purchasing stocks that increased in worth. You will need to review your investments to see how much money you earned through all of them. From here, you can add these investments into your funds alongside your pensions and social security. This will help you see how much you will have during retirement.

Create a Budget

Once you know how much money you will have, you can create a budget. Depending on the options you have available, you could easily identify how much money you will have access to each year. From here, you can divide your money to see how much you can spend each month. This will assist you as you plan for your retirement.

Make Necessary Life Changes Immediately

If you plan to move, get a new home, or anything else that will change your life, you should do it immediately. If you hold off on these changes, they will become major expenses later on. Since you will most likely receive your money in portions, you won’t be able to pay them all off at once. Due to this, it’s better to make those changes as soon as you can.

Conclusion

While you will face some problems when you need to retire early, these steps will help you out. Following them will let you see the amount of money you will need to retire alongside any other preparations you should consider. These steps will get you on the right track as you prepare for your early retirement. Make sure you review and apply them to make your retirement process as easy as possible while ensuring you have enough money for your needs.

How to Save For Retirement the Right Way

Saving for retirement should be a priority as soon as you start your career. Putting off your saving to take a grand tour of Europe might be appealing, but you could end up working well past 65 if you make these kinds of financial decisions. If you would rather not rely on the support of your children or social security when you can’t work anymore, here are some of the best ways to save for retirement.

401k

For most people, a 401k is the first place they start investing. A 401k is a retirement savings account that allows you to deposit untaxed income from your paycheck. However, there are limits to the total amount that can be deposited annually. In 2018 the annual limit for contributions rose from $18,000 to $18,500. This includes any salary deferrals, as well as after-tax contributions to designated Roth accounts. If you’re lucky, your company will offer to match your 401k when you retire.

IRA

IRA stands for individual retirement account; unlike a 401k, the contribution to your IRA are taxed before they go into the account. However, when you decide to pull the money out of your account, only the earnings will be taxed, not the principal investment. A smart retirement strategy is to use a combination of a low fee IRA and a 401k savings account. The maximum contribution you can make to an IRA account under the age of 50 is $5,500. As a young person just starting out, maxing out your IRA account and putting the rest of your savings into a 401k is the best way to get started.

Roth IRA

A Roth IRA provides a unique advantage that a traditional IRA does not. While a Roth IRA doesn’t offer you the same tax break as a traditional IRA, your earnings on your contributions won’t be taxed when you pull the funds out. Additionally, Roth IRAs don’t have age restrictions, but they do have income eligibility restrictions: single tax filers must have a modified adjusted gross income of less than $135,000 to contribute. Anyone with earned income who is older than 70 ½ can’t contribute to a traditional IRA.

Manage Your Debt

It’s important to manage your debt while you save for retirement. Whether it be a student loan or a car loan, your debt is accruing interest. Tackling your debt as soon as possible will give you more control over your finances in general. Make sure that you don’t forgo contributing to your retirement accounts in order to pay off your debt, however. If you focus solely on debt repayment, you could end up in an awkward position that might delay your retirement age. Develop a financial game plan that will allow you to pay off your student loans and save for retirement at the same time.

Create a Budget

It can be easy to ignore the numbers in your bank account because you know you’re always going to have enough money to go out on weekends and buy whatever you want, and it can be incredibly easy to fall into the habit of living paycheck to paycheck. Set aside some time on a weekend to map out your monthly expenses including things like gas, eating out, and entertainment. Mapping out your spending will allow you to see where you can cut back and focus on your priorities.

Savings Accounts

Life can throw some pretty unexpected curveballs your way. If you aren’t careful, one financial emergency could devastate you financially. When mapping out your budget, be sure you’re making some contributions to your savings account. Savings accounts aren’t going to produce a significant amount of interest or return on investment, but you’re going to have a much easier time accessing your funds than you will with a retirement account. If you’re using a traditional bank like Wells Fargo, they will typically only offer you .01%-.03% interest on the funds in your savings account. If you take your finances seriously, it might be time to open a separate savings account with a bank like Synchrony that offers 1.65% and no minimum APY.

Saving for retirement doesn’t have to be as complicated or challenging as it might seem—use this helpful advice to take charge of your life and your finances.

 

 

Should You Consider a Late Retirement?

If you don’t have enough saved for retirement, a late retirement is probably the easiest way to catch up on retirement savings. A few more years of work mean much more money to invest at a time when you may be at your earning prime. Of course, inadequate retirement savings isn’t the only reason to keep working. Some people love their jobs, and can’t imagine retiring to a more quiet existence.

So should you consider retiring late? Here’s what to consider as you make your decision.

Benefits of Late Retirement

A late retirement means more time to save money, and less time spent with a fixed income. You may also earn delayed retirement credits through Social Security, which can mean up to an 8% increase in annual payouts. If you’re worried about pinching pennies in retirement, that’s money that’s hard to turn down.

Working into retirement doesn’t even have to mean staying at your current job. You might cut back to part-time work or become a consultant. If you have some savings, then late retirement might mean a more flexible approach to how you work.

Signs a Late Retirement Might Be for You

So how do you know if a late retirement is the right choice? Some signs that continuing to work could be in your best interests include:

  • You don’t have a compelling reason to stay home.
  • You’re in good health and are able to keep working.
  • You like, or can at least tolerate, your job.
  • You don’t have enough saved to retire now.

How to Avoid Late Retirement Penalties

Early retirement can cost you a lot, but there are no real late retirement pennies—aside, of course, from the gamble that you might not live as long as you hope. The one penalty you need to watch out for is the Medicare late enrollment penalty. You must enroll when you turn 65. If you don’t, you could pay higher premiums for the rest of your life. That’s money you could put toward your savings, and money you can’t afford to lose if you’re already worried you don’t have enough.

You Only Live Once

If you’re on the fence about late retirement, it’s time to get realistic about things. Talk to your spouse, your children, to other loved ones you trust, and to a retirement advisor. If you can make retirement work now, you might want to. You only get one life, and you don’t know how long you’ll have. You might be happier knowing you spent time with your family instead of toiling away at the office—but only an informed conversation can help you make that decision.

If you think you have enough money, one way to build a small extra pile of cash is through a reverse mortgage. Available to seniors over the age of 62 who own their homes, this option taps into your home’s equity to give you money. You don’t have to repay the funds as long as you live in your house and comply with the loan’s terms. The money can be used to start a savings account, as a rainy day fund, or even to help support your grandkids.

Preparing for Retirement: Top Tips for Making Money-Smart Moves

For many in the UK, retirement is an anxious time. On the one hand, you can’t wait until you can stop working. On the other, you’re worried about living on a fixed income. You worry about your pension, your personal savings, your insurance, and what you’ll do about rising healthcare costs.

Here’s what you need to know to make smarter money moves and survive when it’s time to hang up your work shirt forever.

Scoping Out Your State Pension – What You Need To Know

Your state pension is the minimum amount of money you’re entitled to during your retirement. You can claim a state pension when you reach your state pension age. Check out when you’ll reach that age on Gov.UK’s state pension calculator.

You can also consider putting off your claim if you want to stay working longer. This deferral of your pension accumulates your pension benefits until you’re ready to retire.

Buy More Life Insurance

Most people don’t think of buying life insurance as a retirement strategy, but it’s a secret that big banks and hedge funds employ all the time. For the individual retiree, the reasoning stems from a somewhat forgotten approach to financial planning taught by Dr. Solomon Stephen Huebner at the Wharton School of the University of Pennsylvania in America, during the early 1900s.

His concept of Human Life Value stated that an individual should purchase permanent life insurance to fully insure the value of his life – forever – and that human life is the ultimate property, and source of all other properties, which needs infinite protection.

Just as one does not ever reduce the amount of home insurance, auto insurance, or liability insurance over time, regardless of one’s bank account size, one should never reduce the amount of life insurance in force on one’s life.

And, because permanent life insurance includes cash surrender values, it can be used to supplement your pension benefits at retirement.

The cash values in a life insurance policy grow at guaranteed rates, are tax-free, and participating or “with profits” policies pay dividends which may be used to supplement other income sources.

If structured properly (you should talk to a life insurance agent about this), your policy will provide significant protection against stock market losses or corrections, give you options to draw an income during a recession or depression, and the savings component of permanent insurance is accessible for any reason during your lifetime.

Consider a Lump Sum Annuity

When you retire, it’s tempting to take your pension as a lump sum. And, in the UK, you can withdraw up to 25% of your pension pot for this purpose. But, what should you do with it? That depends on your total financial plan.

However, a popular option is to annuitize the lump sum.

Annuitization means that you exchange your savings for guaranteed monthly income. You no longer have access to that savings, but you do have an income you cannot outlive.

Make Smart Cuts

The important thing here is to make cuts in your lifestyle that will not interfere with your long-term goals or activities which you have been planning a lifetime for. Many people get to retirement and suffer from a condition where they are tasked with reducing their lifestyle.

This is something that most people find unappealing for obvious reasons. Because you’re not making an income subject to regular raises anymore, some smart cuts are in order. But, those cuts shouldn’t interfere with your ideal life.

In most cases, this requires a little creativity. If part of your retirement plan was to travel, for example, you could compromise on the size of your home, selling it and rent a flat in a low-cost neighbourhood.

Or, at least buy a smaller home.

Then, you could travel in relative freedom with the money from the sale of the house, or at least part of that money.

Another way to save money would be to not travel. If travelling wasn’t part of your retirement dream, then you could work on other ways to cut expenses. You could still downsize your home, but perhaps you could also buy a bicycle and sell your vehicle.

This will help you stay active and reduce transportation costs.

If you can’t ride everyday, you could downsize your vehicle by buying an older model or work out a ride-sharing agreement with a friend of relative. Or, pay for ride-sharing through any of the popular ride-sharing services on the market now.

Joel Rowe works in the personal finance industry within the pensions sector. He has growing concerns on the futures of baby boomers and likes to write on the topic in the hopes of helping people live better lives once they reach retirement.

Downsizing in Style: A Mini-Guide for Restless Retirees

When most people retire, they often think about living on less. In fact, this is the telltale sign that you’re about to leave and retire from work: you transition to a fixed income.

But, how do you do this, exactly? If you’re like most people, you’re scared. You don’t want to live on less, have less, and potentially run out of money. Here’s how to downsize without feeling the pinch.

Make Plans To Travel

You don’t have to sit at home all day. In fact, this is probably not healthy – especially after you retire. You should make plans to get out and travel. Travelling can help you feel like you’re not downsizing at all. In fact, in many ways, you’re not actually downsizing. You’re upsizing your entire life.

Of course, if you spend a lot of time travelling, the one thing you can downsize is your home because you don’t need the space. You can either put things in storage that don’t fit in the new home or flat or you can sell them or give them to family.

But, having yearly travel plans is a great way to expand your horizons and see a world you may never have seen during your working years.

Move To A New Area

Moving to a new area can allow you to keep the same size home without paying the high cost you are right now.

You know what they say, right? Location, location, location. Except, this time around, you’re not looking for something with good appreciation potential. You’re looking for something that didn’t appreciate. That could mean living in an economically depressed area, but it could just as well mean living in a slow-growth area that’s not in the slums.

In some cities and towns, you can travel just a few streets down and end up getting the same sized home for £100,000 less.

How To Stick To Essentials Without Making Sacrifices

You’ve probably been told that, when you retire, you need to make sacrifices. What you really need to do is prioritize what you want out of life. Since you can’t afford to have it all, you need to think carefully about what you want and what you don’t want.

Make decisions based on what’s really important to you. So, if you really want to stay in the house you’re in now, what would you have to get rid of? IF the house isn’t as important as other things you own, then you have your answer – sell the home.

Of course, you have to be realistic about things. You can’t have your cake and eat it, too. So, if you’re faced with the dilemma of affording a new car, a home, and all the creature comforts you’re had for years, versus a declining income, you have to really think about what matters most and then get rid of the things that you can’t afford and don’t want (as much).

It can be a difficult decision to make, but it’s necessary. And, at the end of the day, you’ll be happy because you’re not struggling financially to have things that you can’t afford.

Give Furniture To Family First

Don’t forget to ask your children or grandchildren what furniture they might want. You’ve had it for years, but it might be time to give it up. At the same time, you don’t want to just hand it over to a stranger.

Of course, if none of your family wants your furniture, you can put it on consignment and sell it. Just make sure you’re not disinheriting your family first.

Live With Family

A good way to handle this is to use funds for your home and have an annexe, or a granny flat, built as an extension of your son or daughter’s home. That way, you can live independently, and not interfere with the family but you won’t be far away, either.

You’ll have your own rooms, and the extension doesn’t even have to have a shared entrance or an entrance into the other home. The idea is to have a home that is really close to your children’s so that you can call on them when needed and they can help you if necessary. Otherwise, you live alone.

And, the best part is that it will increase the value of your children’s home – something you may not care about for yourself but it will certainly be much appreciated by your children.

Ben Bailey is a financial consultant who has carved out a niche working with baby-boomers. From pensions to downsizing he often writes on these topics for over fifties and personal finance sites.

Net Worth: August 2010

I don’t know if I’ve ever loved Girl Ninja more than I do right now! On last months, Net Worth Update, I predicted my NW would go down by three thousand dollars after some wedding/honeymoon/moving expenses. Fortunately, Girl Ninja, coupled with some Stock Market positivity, actually helped my NW increase! Totally not expected, but I’m a happy camper 🙂

Here’s the breakdown…

Assets:

Checking Account: $4,216, -$1,823. Still keeping the checking above the normal $1,000 balance I generally try and keep, because I leave for Aruba one week from today and want access to quick cash in case Girl Ninja gets kidnapped or something…only kidding…kind of.

Savings Accounts: $13,047, +$0. No change here because I’m keeping my cash in the checking account until after I get back from the honeymoon. I’m keeping my fingers crossed this Dual Income No Kids thing is as cool as I hear. Should provide for some major saving capabilities for the rest of the year.

Roth IRA: $13,851,+$1,114. Still haven’t made my 2010 Roth Contribution, but I’m 75% sure I will before time is up. Just waiting for life to settle down a bit before I part ways with another $5,000.

TSP (401K): $15,069, +$1,603. The standard 5% contribution heads this direction each month. I also get that 5% fully matched. I invest in virtually the same funds in both my Roth IRA and in my 401K so they generally perform the same.

Liabilities:

Student Loan: $0. That’s right. My student loan is still $0 and it will be FOREVER. I’m not quite sure if I’ll ever take this account off my NW updates. It feels too darn good to re-post it each month and it reminds me I Punched Debt In The Face!!!!

Credit Card: $0. I typically show my CC balance for each month, even though I pay it off in full. Right now the balance is $0 because I just sent in a payment. I use my CC for just about every purchase I make. Some months it’s a couple hundred, others a couple thousand.

Even with a $2,500 honeymoon deposit and $800 in home furnishings, my net worth went up +$2,496. There are really only three explanations for this: 1) Girl Ninja started moving her money in to my/our checking account, 2) the stock market went up, 3) I lived within my means. All said and done, this leaves me with a Net Worth of $46,186. Ready or Not $50K…here I come!!!!!

**I chose not to include possessions (including my car) in my NW calculations, which would probably increase my worth by about $8K.**

Meet vulnerable Ninja…

Humility. It’s definitely a quality I lack. In fact, I’m quasi-arrogant. No, I don’t go around telling people how great I think I am. But honestly, sometimes I think that to myself.

This rings especially true in my financial life. I’m always comparing myself to my peers. I don’t like being average. Wait, let me rephrase that. I HATE BEING AVERAGE. While I don’t think the desire to surpass mediocrity is necessarily a bad thing, I do believe it leads to pride. And pride, my friends, leads to arrogance. And arrogance leads to being a douche bag. And last time I checked, I don’t want to be a douche bag. I mean look at this guy and tell me he doesn’t scream “Douche”….

It’s not uncommon for me to measure my financial success by comparison.

It generally looks like this….

Do I make more money than most of my friends? Yup

Do I have a larger savings than most of my friends? Yup

Do I have more in retirement … ? Yup

Do I have less debt … ? Yup

Does that make me better than them? Yup

Wait. No. No, it doesn’t. There is nothing wrong with answering “Yup” to the first four questions, but when I answer “Yup” to the last one, I’m in definite need of a douche-bag-reality-check.

Do I make more money than most of my friends? Sure, but why does that make me better than them? Answer: It doesn’t. Being that I graduated from a small private college, I have quite a few friends that went to work in the non-profit sector. They get paid diddly squat (haha, the word diddly is funny). They may not make as much as I do. And they may not be able to afford some of the “luxuries” I can. But what they lack in income, they more than make up for in life experiences.

Yeah, I make $65,000 per year, but when was the last time I went to Africa in an effort to stop child soldiering like my friend Jed? Oh wait, that’s right. I haven’t. Maybe my income’s not so awesome after all.

Last night, I was reminded I’m not as great as I think I am. I need to stop using my peers as a metric to evaluate my level of success. It doesn’t matter how much THEY make, how much debt THEY have, or how much THEY save. All that truly matters is that I am doing the best I can, with what I got.

Okay I’m going to go rescue a puppy or donate a kidney or something 🙂

Do you ever struggle with pride?

How do you keep yourself humble?

Who inspires you the most (my guess is it’s not your friend that MAKES the most, but your friend that DOES the most)?