Planning for Retirement
Many people just starting out in the workforce might not be thinking about retirement planning just yet, however, the earlier you start planning and saving for retirement the better off you will be.
Even if you start out putting only a few dollars a week into an IRA or 401k it can still make a difference when compounded over forty or fifty years. The website below allows you to calculate how much you would have when you retire if you put away a certain amount of money each year for retirement. For example, suppose you start with $500 in your retirement account and put in an additional $4,800 a year (only $400 a month) for 40 years. At the end of 40 years when you are ready to retire, the money would grow to $806,000 when you earn an annual interest of 6% on the money.
http://www.moneychimp.com/calculator/compound_interest_calculator.htm
Play around with the calculator and see how much you need to invest each year to have what you think you will need to live on when you retire.
Planning for Retirement
Retirement accounts have been struck particularly hard in the last few decades. First you had the boom of the tech era followed by the crash that started after September 11th. As stocks were bottoming out, people took the money out of stocks and instead started investing it in real estate. Now real estate and stocks are both losing money hand over foot so what should you be doing?
Most employers no longer offer pensions and social security is not enough to live on so how can we prepare for retirement? So how much money will you need?
The first thing to do is to determine where you want to be for retirement. Are you content to live in a condo or small house in the middle of nowhere or do you want to spend your retired days on the beach in Florida or even traveling the world?
Once you know what you want to do during retirement, you need to realistically determine approximately how long you might live after retiring. People are living much longer now so you need to take that into account when determining how much money you will need for retirement.
The third thing you need to consider is whether you will fully retire or do you want to continue working part time while retired as this will affect the money you can expect.
Exploring Individual Retirement Accounts
1. Who can contribute?
IRAs are a great way to save towards retirement. Taxpayers younger than 70 1/2 on December 31st are eligible to contribute to an IRA.
2. How much can I contribute?
If you do not have a retirement plan with your employer, you can put $5,000 a year in an IRA ($6,000 if you are 50 or older) into a traditional IRA as long as you make at least that amount of taxable income during the year. Contributions can be made for a taxable year any time from January 1st of that year to April 15th of the following year when taxes are due.
3. What’s the benefit to having an IRA?
IRAs are a great way to save towards retirement. Traditional IRAs allow people to save money with pretax dollars. Roth IRAs allow people to put money into an account with after tax dollars and the money grows tax free. That means that you won’t have to pay taxes on the interest that accrues on your investment. Another great benefit of an IRA is because it is a way to save for retirement the money in your IRA will be protected from bankruptcy.
4. When can I get my money out of the IRA?
Money put into an IRA generally can’t be taken out before you reach 59 1/2 years old without a penalty. However, there are a few instances where the IRS will kindly give you a pass to use the funds before reaching before reaching 59 1/2 without a penalty, these include:
* distributions for the cost of medical insurance while unemployed,
* distributions to buy a home for first time home buyers (this is limited to a distribution of $10,000),
*distributions to pay for a qualified higher education for your education, your children’s education, or your grandchildren’s education.
5. How do I get an IRA?
Talk to someone at your local bank or check out opening an account online through a trading company like Scottrade or Sharebuilder. The process is very simple and only takes a few minutes. Once you set up your IRA you can use the money deposited in the account to invest in stocks, bond, mutual funds or just leave it in your money market account to accrue interest.
Investing for Retirement - Real Estate
Real estate prices are falling, stock prices are falling, so where can I put my money? While few people have money to play with these days, it doesn’t take a lot now to have some nice savings later.
Yes, market prices are dropping. While this isn’t a great market for people trying to sell, it is great if you have money to spend and it doesn’t cost as much as you might think.
Real Estate Auctions. If you have some money set aside for a down payment, consider checking out auctions. You can get some excellent deals as long as you have money for the initial payment and can come up with a mortgage or the remaining balance within 30 days of the close of the auction.
http://www.williamsauction.com/ This website has auctions on a monthly basis with some properties starting at $1,000. While the lower end auctions often need rehab work, if you are not interested in rehabbing, there are plenty of other properties in very good condition. Check back every month for the new properties because while there might not be something you are interested in one month, the next month there might be several.
When attending auctions in person or online, you need to first check out the property you are interested in. Look for any repairs that will be needed to modify the property for your needs. If you are going to rent out the property, does it have appliances, are new carpets needed, what repairs are necessary to make it hospitable. You need to take all these costs into consideration when determining how much you are willing to bid on the property. Once you know all these expenses, determine what you are willing to bid and stand firm. In these auction settings it is easy to get caught up in the excitement and desire to win, however, you can’t let that cloud your judgment. Once you have determined what you would like to pay, you should also determine the absolute most you would be willing to pay and still be profitable.
Real estate auctions can be a great way to find a vacation home at a great price or to start developing a few properties to rent out for some extra income.