When you retire, you may well have accomplished some important financial goals, such as sending your children through college and paying off your mortgage. Yet, you can’t relax just yet, because your retirement could easily last two or three decades, which means you’ll need at least two or three decades’ worth of income — which, in turn, means you’ll need the proper savings and investment strategies in place. And, just as importantly, you’ll also need to be aware of the types of risk that could threaten these strategies.
Let’s consider some of these risks:
If you’re a small-business owner, with no full-time employees (except possibly your spouse or business partner), you’re probably used to taking care of just about everything on your own. So, if you’re thinking of establishing a retirement plan — and you should — you might also be attracted to “going solo” with an “Owner-only” 401(k).
An Owner-only 401(k), sometimes known as an Individual 401(k), has been around for a few years now, and has proven quite popular — and with good reason. This plan is easy to establish, easy to administer and, most importantly, gives you many of the same benefits enjoyed by employees of a company that offers a traditional 401(k) plan.
These benefits include the following:
A presidential election is almost upon us. But if you have young children or grandchildren, you know what’s really important this week is Butterfingers, not ballots, and Pop Rocks, not the popular vote.
Yes, it’s Halloween time again, which means you’ll see plenty of witches and vampires scurrying around. You’ll no doubt find these characters more amusing than frightening, but you don’t have to look far to find things that are a bit more alarming — such as these scary investment moves:
Paying too much attention to the headlines — Some headlines may seem unnerving, but don’t abandon your investment strategy just because the news of the day appears grim.
Chasing “hot” investments: You can get “hot” investment tips from the talking heads on television, your next-door neighbor or just about anybody. But even if the tip was accurate at one point, by the time you get to a “hot” investment, it may already be cooling down. And, even more importantly, it simply may not be appropriate for your individual risk tolerance and goals.
Oct. 21-27 is National Save for Retirement Week, established by Congress to remind Americans of the importance of — you guessed it — saving for retirement. So why not mark the occasion by considering ways in which you can boost your own financial resources for those years in which you’re officially a “retiree”?
If you’re somewhat concerned about your financial prospects during retirement, you’re not alone. Check out a few of the findings from the Employee Benefit Research Institute’s 2012 Retirement Confidence Survey:
When you add a child to your family, either through birth or adoption, it’s obviously an exciting and joyful time in your life — and it’s also a busy one, as you deal with all the challenges and commitments faced by all parents. However, hectic as your life may be, you’ll still need to think about making some key financial arrangements to accommodate your new child.
Here are some suggestions to consider:
As an investor, you can sometimes still feel you’re at the mercy of forces beyond your control. This may be especially true today, when the Federal Reserve has warned of an approaching “fiscal cliff.” What can you do in the face of such a dire prediction?
First of all, you need to understand what led to the Fed’s remarks. Here’s the story: Some $1.2 trillion in spending cuts are scheduled to begin in 2013 while, simultaneously, the Bush-era tax cuts — including the reduction in capital gains and dividend taxes — are set to expire. This combination of spending cuts and higher taxes could take some $600 billion out of the economy, leading to a possible recession — and maybe something much worse, at least in the eyes of the Fed.
As you’re well aware, we’re living in difficult economic times. Consequently, you may be forced to make some financial moves you wouldn’t normally undertake. One such move you might be considering is taking out a loan from your 401(k) plan — but is this a good idea?
Of course, if you really need the money, and you have no alternatives, you may need to consider a 401(k) loan. Some employers allow 401(k) loans only in cases of financial hardship, although the definition of “hardship” can be flexible. But many employers allow these loans for just about any purpose. To learn the borrowing requirements for your particular plan, you’ll need to contact your plan administrator.
Generally, you can borrow up to $50,000, or one-half of your vested plan benefits, whichever is less. You’ve got up to five years to repay your loan, although the repayment period can be longer if you use the funds to buy a primary residence. And you pay yourself back with interest.
You may be unaware of it, but September is Life Insurance Awareness Month. And when you consider the lifetime of benefits you and your family may receive from life insurance, you might agree that a month isn’t too long to spend on this important part of your overall financial picture.
Unfortunately, too many Americans are uninsured or under-insured. In fact, nearly a third of all consumers think they need more life insurance, according to the 2012 Insurance Barometer Study, published by the nonprofit LIFE Foundation and LIMRA, a research and consulting organization that specializes in insurance and financial services. And it appears that one of the main reasons so many people lack sufficient life insurance is their perception that they can’t afford it. Yet, the cost for basic term life insurance has fallen by about 50 percent over the past 10 years, according to the LIFE Foundation.
School is back in session. If you have school-age children, you’re probably busy getting them acclimated to another year of hitting the books. But the school years go by quickly, so it won’t be long before your kids are ready to head off to college. Will you be financially prepared to help them?
It’s certainly a challenge, especially given rising costs of higher education. Consider these figures from the College Board: For the 2011-2012 school year, the average cost (including tuition, fees, room and board) was $17,131 per year for an in-state student attending a public, four-year college or university. For a student attending a private four-year school, the comparable average cost was $38,589 annually. And these numbers are likely to increase in the years ahead.
So, what can you do to help meet the high costs of higher education? For starters, you need to save and invest — early and often. And you’ll also want to choose investments that are particularly well suited for college. Here are a few suggestions:
Of course, despite its economic benefits, college is not for everyone. So if you wanted to provide financial help to a grandchild who seems likely to choose a different route in life, what could you do?
One possibility is to set up a custodial account, often known as an UGMA (Uniform Gift to Minors Act) or UTMA (Uniform Transfer to Minors Act). You can fund a custodial account with many different types of investments, but the use of the money is entirely up to your grandchildren when they reach the age of termination in whatever state in which they live. But if your reason for funding a custodial account is simply to provide a gift, then you might not be concerned with how the money is used.