Retirement http://www.wisebread.com/taxonomy/term/417/all en-US 5 American Cities Where You Can Retire On Just Social Security http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-american-cities-where-you-can-retire-on-just-social-security" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retired_old_couple_90300353.jpg" alt="Retired couple finding cities to retire in on social security" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The statistics on how unprepared Americans are for retirement can be terrifying. The <a href="http://laborcenter.berkeley.edu/pdf/2015/RetirementSavingsCrisis.pdf">median retirement account balance</a> is $2,500 for all working-age households and $14,500 for near-retirement households, according to a 2015 study by the National Institute on Retirement Security.</p> <p>Two-thirds of working families fall short of conservative retirement savings targets for their age and income based on working until age 67, the report finds.</p> <p>With virtually no retirement savings for the average working household and 45% (nearly 40 million) of working households not having any retirement assets, their best hope for surviving after age 67 may be income from Social Security.</p> <h2>What Social Security Pays</h2> <p>The average monthly Social Security check as of June 2016 was $1,234, according to the Social Security Administration, or SSA. Where could you afford to live on such an income?</p> <p>There are some good options, but before we get to those, let's be a little more generous with the SSA income, based on the government's statistics.</p> <p>While the average monthly benefit was $1,234, 82% of beneficiaries receive a little more &mdash; $1,280 from &quot;Old-Age and Survivors Insurance&quot; SSA beneficiaries. The largest average monthly SSA benefit was $1,348 for retired workers, who made up 67% of the pool.</p> <p>Assuming you're a retired worker receiving the average $1,348 each month from SSA, that's still a low amount of money to live on each month, considering that a retirement planning rule of thumb is to plan on having 70%&ndash;80% percent of your pre-retirement income replaced with SSA, a retirement account, or other form of income in your old age.</p> <p>At 80%, that $1,348 would equate to a pre-retirement monthly income of $1,685, or $20,220 per year. If you were comfortable living on $20,220 per year before retirement, then living on 80% of it during retirement should be just as comfortable, the theory goes.</p> <p>For a couple who are both retired, their SSA income would double to $40,440 per year. But for our purposes, let's assume one retiree is living by themselves.</p> <p>So, where to live on the average SSA check of $1,348 per month for retired workers? In no particular order, here are five cities where it's affordable,</p> <h2>1. Buffalo, New York</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/buffalo_new_york_82224935.jpg" width="605" height="340" alt="" /></p> <p>Buffalo may come as a surprise for being a cheap place to live because it's in New York state. But the <a href="https://smartasset.com/mortgage/top-ten-cheapest-places-to-live">median monthly rent</a> in Buffalo is $512, making it the cheapest city in the U.S. to live in, according to a SmartAsset analysis. Buffalo also has the lowest cost of living at 79.34, meaning that the U.S. average is 100 and that $100 in groceries, for example, would cost $79.34 in Buffalo.</p> <h2>2. Johnstown, Pennsylvania</h2> <p>If you're looking for the cheapest rent in the country, this city of 20,576 residents has it with a gross median rent of $466 per month, according to data from the U.S. Census. Since housing is one of the biggest expenses in life, such low rent can make other expenses a lot more affordable.</p> <p>The <a href="http://places.findthehome.com/stories/10260/city-every-state-cheapest-affordable-rent#50-Pennsylvania-Johnstown">average per capita income</a> in Johnstown is $16,153, according to FindTheHome, putting the average SSA income in retirement above the average there. In this city, you'd be rich.</p> <h2>3. Memphis, Tennessee</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/graceland_memphis_91136155.jpg" width="605" height="340" alt="" /></p> <p>If you're looking for a large U.S. city that's affordable in retirement, Memphis is it. This city of 653,450 has low housing costs. The average apartment rent of $709 per month is 21% below the U.S. average, and the median home value of $98,300 is 46% below the U.S. average, according to Kiplinger.</p> <h2>4. Akron, Ohio</h2> <p>Living in the center of the country is usually cheaper than it is elsewhere, and Akron, Ohio proves that point by being one of the <a href="http://www.cbsnews.com/media/the-15-most-affordable-places-to-live-in-america/16/">most affordable places to live</a> in the country. Its median home price listing in August 2015 was $120,450, and the median household income was $45,628 &mdash; putting the average SSA income at just below the median. The amount of monthly income spent on housing, utilities, and commuting in Akron was 28.9%, allowing retirees to spend about 70% of their income on other things.</p> <h2>5. Indianapolis, Indiana</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/indianapolis_indiana_62568936_0.jpg" width="605" height="340" alt="" /></p> <p>Listed by Trulia as one of the best cities to move to for a high-paying job, Indianapolis has low home prices for <a href="http://www.nbcnews.com/business/consumer/millennials-meet-indianapolis-your-new-dream-city-n623021">Millennials looking for work</a> and for retirees, too. The median home price of $130,000 is $58,900 below the median home price in America. That allows about two of every five renters to be able to afford a typically priced home there. For retirees who sell their homes and have enough money to buy a home outright or put down a large down payment, then living with little or almost no housing costs can leave a lot of room in their budget for other things.</p> <p>The good news is that there are plenty more U.S. cities that are affordable for retirees who only have an income from Social Security. These are only five of them, and are a good start to investigate more when deciding on the cheapest places to retire.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/aaron-crowe">Aaron Crowe</a> of <a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-financial-moves-you-should-make-five-years-before-retirement">5 Financial Moves You Should Make Five Years Before Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-worst-states-for-retirees">The 10 Worst States for Retirees</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-plan-for-retirement-when-you-re-ready-to-retire">How to Plan for Retirement When You’re Ready to Retire</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-can-you-afford-to-spend-in-retirement">How Much Can You Afford to Spend in Retirement?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Retirement America benefits cost of living income relocating social security u.s. cities Tue, 20 Sep 2016 10:30:05 +0000 Aaron Crowe 1795982 at http://www.wisebread.com 4 of the Fastest Ways to Go Broke in Retirement http://www.wisebread.com/4-of-the-fastest-ways-to-go-broke-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-of-the-fastest-ways-to-go-broke-in-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_piggy_bank_66171067.jpg" alt="Man finding the fastest ways to go broke in retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Ah, retirement. The golden years. Time to kick back and enjoy a little well-earned rest and relaxation.</p> <p>Not so fast. For many older Americans, their later years are filled with financial worry. And much of it is self-inflicted.</p> <p>Here are four key mistakes retirees make that can leave them living on financially shaky ground.</p> <h2>1. Investing Too Conservatively</h2> <p>I still remember my high school golf coach stressing the importance of hitting <em>through</em> the ball instead of <em>to</em> the ball. Something similar can be said about investing in retirement.</p> <p>It would be a mistake to think of your retirement date as something you invest to, after which you shift dramatically into an ultra conservative investing mode.</p> <p>Play it too safe with your nest egg and inflation will wreak havoc on your hard-saved money.</p> <p>With the odds increasingly stacked in favor of living a long life, it's important to continue investing in a way that you're likely to at least outpace increases in the cost of living. That usually means maintaining some level of exposure to stocks.</p> <p>One way financial advisers suggest minimizing the fear of stock market investing in your later years is to develop a <a href="http://beta.morningstar.com/articles/714227/bucket-portfolio-maintenance-theres-more-than-one-.html">healthy cash savings account</a> before retirement &mdash; a very healthy savings account.</p> <p>More specifically, they recommend having one-to-two years' worth of living expenses in savings. During times of market decline, the idea is to withdraw from that savings account for living expenses instead of drawing on your investment account, thereby giving your investment account time to recover.</p> <h2>2. Investing Too Aggressively</h2> <p>Of course, the opposite is true, as well. You don't want to hit retirement, realize you don't have enough in your IRA or 401K, and try to make up for lost time by investing like you're a 20-year-old with plenty of time to ride out the markets ups and downs.</p> <p>The time-tested principles of asset allocation still apply. Take a good <a href="https://personal.vanguard.com/us/FundsInvQuestionnaire">risk tolerance questionnaire</a> and set your stock/bond mix accordingly.</p> <h2>3. Carrying Too Much Debt Into Retirement</h2> <p>Ideally, you want to retire your mortgage by the time you retire from your job. Having to continue paying on what for most people is their single largest expense can be burdensome, especially with health care expenses looming as a great unknown.</p> <p>Today, however, more seniors than ever are still making payments on their homes. According to the Consumer Financial Protection Bureau, about 30% of homeowners age 65 and older have mortgages.</p> <p>And not only that. Many seniors are still paying off student loans. In 2014, about 17% of outstanding student loan debt was held by borrowers in their 50s, according to the New York Fed. Some of that debt was incurred for the borrowers' own education, perhaps because they went back to school later in life or they refinanced earlier loans. Some of it was for their kids or grandkids.</p> <p>If you still have mortgage, student loan, or <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=internal">credit card debt</a>, it can be helpful to your sanity and your solvency to delay retirement until such debts are paid off.</p> <h2>4. Keeping the Bank of Mom and Dad Open</h2> <p>According to a Merrill Lynch study, 68% of parents age 55 or older have provided some form of financial support to their adult children in the past five years. That support included helping to make their rent or mortgage payments, pay their cellphone bills, cover their car payments, or pay their health care costs.</p> <p>Many other parents stand ready to help. According to a study by BMO Harris Premier Services, nearly 50% of parents said they'd be willing to put off their retirement if their adult children needed financial help. Some 25% said they would take on debt, and 20% said they'd raid their retirement accounts if necessary.</p> <p>However, in their classic book, <a href="http://amzn.to/2chE54U">The Millionaire Next Door</a>, authors Thomas Stanley and William Danko said many parents mistakenly assume that soon after providing some financial help, their adult children will be financially self-sufficient. Instead, they found that recipients of so-called &quot;economic outpatient care&quot; all-too-easily become dependent on such help, making it bad for the adult children and their parents alike.</p> <p>Far better, they said, to &quot;teach your children to live on their own.&quot;</p> <h2>No Mulligans</h2> <p>My high school golf coach didn't let us take do-overs, or &quot;mulligans,&quot; during practice rounds. He said it was a bad habit. After all, there would be no second chances in a tournament.</p> <p>The same can be said about managing money in retirement. When we get older, we simply won't have time to recover from financial mistakes. So take these lessons to heart as you plan for a financially secure retirement.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/4-of-the-fastest-ways-to-go-broke-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-money-moves-to-make-the-moment-you-decide-to-retire">12 Money Moves to Make the Moment You Decide to Retire</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">5 Ways to Strengthen Your Finances Before Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-personal-finance-calculators-everyone-should-use">15 Personal Finance Calculators Everyone Should Use</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/refinance-these-4-common-debts-before-year-ends">Refinance These 4 Common Debts Before Year Ends</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement adult children cash savings conservative investing debt kids Mistakes mortgages nest egg out of money student loans Mon, 19 Sep 2016 09:00:11 +0000 Matt Bell 1794235 at http://www.wisebread.com 5 Signs It’s Time to See a Credit Counselor http://www.wisebread.com/5-signs-it-s-time-to-see-a-credit-counselor <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-signs-it-s-time-to-see-a-credit-counselor" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_stressed_money_80048959.jpg" alt="Man wondering if it&#039;s time to see a credit counselor" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>About 62% of Americans have <a href="http://www.marketwatch.com/story/most-americans-have-less-than-1000-in-savings-2015-10-06">less than $1,000</a> in their savings accounts, and one in every three Americans has <a href="http://time.com/money/4258451/retirement-savings-survey/">saved $0 for retirement</a>. One of the main culprits behind our inability to save is debt. Whether it's in the form of student loans, credit card balances, or home lines of equity, debt can snowball into a problem too big to handle on your own. Fortunately, credit counselors can be of help when you have trouble navigating the depths of debt yourself. Here are five warning signs that you might need a credit counselor, what will a counselor do for you, and how to choose one.</p> <h2>5 Warning Signs That You Need a Credit Counselor</h2> <p>Here are the telltale signs that you have taken on more debt than you can handle.</p> <h3>1. Living Paycheck to Paycheck</h3> <p>This is a big one. It's one thing to take on a loan, but another entirely for the loan to take on you! If you're consistently spending more than you make &mdash; month after month &mdash; to pay back debt, then an unexpected emergency expense could wreak havoc on your personal finances. Imagine if right now your water heater were to break, or your car suddenly needed a new transmission. Could you come up with the necessary hundreds of dollars to meet these expenses when you're living paycheck to paycheck? (See also: <a href="http://www.wisebread.com/where-to-turn-for-help-when-you-dont-have-an-emergency-fund?ref=seealso">Where to Turn for Help When You Don't Have an Emergency Fund</a>)</p> <h3>2. Making Too Many Late Payments</h3> <p>Paying a high APR on your credit card debt is bad. Paying a higher APR and a penalty fee many times out of the year is even worse. When you make a late payment in 2016, credit card issuers can charge you $27 for the first late payment and up to $37 for subsequent lapses within six months of the first one. Falling 60 days behind a payment would worsen your chances of paying back your credit card debt: A survey of 100 major U.S. credit cards found that the average APR for those falling 60 days behind payments was over 28% in recent years. Assuming that you have a card with a balance of $3,000 and a regular APR of 14.99%, you would pay an extra $403.80 in interest in a year with the higher 28.45% APR.</p> <p>Not too mention that making too many late payments also wreaks havoc on your credit rating as your payment history accounts for 35% of your credit score.</p> <h3>3. Fearing Debt Collectors</h3> <p>Of course, you have to work to make money. However, you'll have a hard time concentrating when you're constantly afraid to pick up the phone or check your mailbox fearing that debt collectors are trying to contact you. While the <a href="https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-debt-collection-practices-act-text">Fair Debt Collection Practices Act</a> limits the times and places that a debt collector can reach you, don't be surprised if unscrupulous ones still try to reach you at work or call you before 8 a.m. in your local time! (See also: <a href="http://www.wisebread.com/4-annoying-things-bill-collectors-cant-do-and-how-to-stop-them?ref=seealso">4 Annoying Things Bill Collectors Can't Do &mdash; And How to Stop Them</a>)</p> <h3>4. Not Contributing to Retirement Accounts</h3> <p>Consider this example: If you were to put away $400 every single month for 35 years in your retirement account with a 7% rate of annual return, you would have a total of $709,985 at the end of the 35-year period. If you were to start 20 years later saving on the same account, you would need to amp your savings to the tune of $2,200 per month to end up with a similar total balance ($709,985) at the end of the same 35-year period.</p> <h3>5. Having No Budget</h3> <p>Last but not least, having no clue about where your money is going is a clear signal that you need help with your finances. Whether you're intentionally or unintentionally refusing to map out your cash flow, you are just hoping that your debt monster will somehow go away. The harsh reality is that it won't and you need a credit counselor to help you figure out the damage &mdash; and the solution.</p> <h2>What Will a Credit Counselor Do for You?</h2> <p>The main objective of a credit counselor is to help you avoid bankruptcy by advising you on a series of financial issues, including money management, debt management, and budgeting. Even in the event that you were planning to file a Chapter 7 or Chapter 13 bankruptcy, you're legally required to obtain credit counseling before filing bankruptcy.</p> <p>A reputable credit counseling agency offers a wide range of services, including budget counseling, savings and debt management education, and debt management plan development. In a DMP, you deposit money every month into an account from a credit counseling agency, which will use the funds to pay your unsecured debts according to an agreed schedule between your creditors and the agency.</p> <p>The U.S. Trustee Program maintains a list of <a href="https://www.justice.gov/ust/list-credit-counseling-agencies-approved-pursuant-11-usc-111">approved credit counseling agencies</a>, providing nonprofit budget and credit counseling services to individuals eligible to file for bankruptcy protection. Depending on the services that you require, the agency may provide them in-person, online, or over the phone. While a credit counseling agency may qualify for nonprofit status, be aware that services may not be free.</p> <h2>How to Choose a Credit Counselor</h2> <p>Here is a useful checklist on how to find the right credit counselor for your unique financial situation.</p> <h3>Look for Additional Lists</h3> <p>Besides the list from the U.S. Trustee Program, look for additional local candidates with credit counseling agencies affiliated with the <a href="http://www.nfcc.org">National Foundation for Credit Counseling</a> (NFCC) or the <a href="http://www.aiccca.org">Association of Independent Consumer Credit Counseling Agencies</a> (AICCCA). Make sure that the agency is licensed to offer services in your state.</p> <h3>Check for Consumer Complaints</h3> <p>To vet agencies for potential consumer complaints, check each one of your choices with the office of your <a href="http://www.naag.org/naag/attorneys-general/whos-my-ag.php">state Attorney Genera</a>l and <a href="https://www.usa.gov/state-consumer">state consumer protection agency</a>. Also, check for the rating, list of filed complaints, and list of customer reviews of any credit counseling agency with the <a href="http://www.bbb.org">Better Business Bureau</a>.</p> <h3>Request Initial Information</h3> <p>Requiring a fee for providing information or requesting details about your financial information at this point are two red flags. Also, you should be the one first requesting information, not receiving any unsolicited mailers, calls, or, even worse, spammy emails.</p> <h3>Inquire About Fees and Financial Aid</h3> <p>Credit counseling should be free or cost nearly nothing. Ask about setup fees and recurring monthly fees. Avoid companies that aren't willing to provide a quote in writing or refuse to help you if you can't pay those fees in full. Reputable credit counseling agencies offer at least some debt and money management workshops or educational materials at no cost. And if you can't afford a credit counselor &mdash; meaning, if it isn't basically free &mdash; avoid them altogether. Plenty offer free or extremely low-cost services, and the last thing you need is more expenses when you're trying to get out of debt.</p> <h3>Verify Credentials and Remuneration of Counselors</h3> <p>Look for certifications through external organizations, such as the NFCC or the AICCCA. Credit counselors receiving kickbacks for you signing up for additional services or making contributions to the agency are indications that the counselors won't put your interest before theirs.</p> <h3>Look Beyond DMP</h3> <p>A DMP is just one of the many services offered by a credit counselor and should only be presented after an extensive review of your financial situation. Avoid agencies that push a DMP from the start. Even when evaluating a DMP, a serious credit counselor would still help you develop better budgeting and money management skills.</p> <h3>Request a Formal Written Agreement</h3> <p>Any verbal promises that aren't captured on paper are just empty promises. For example, promises from a counselor to lower or eliminate interest, finance, or late fees should be in writing. This will help you in case your creditors indicate that none of those promises actually happened.</p> <p>Also, be wary of agencies pressuring you to sign a contractual agreement right away, particularly when it's a DMP. Take your time to review the document and seek additional help in case you can't understand some of the clauses. Don't sign anything unless you fully understand the contract and are satisfied with its terms.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/5-signs-it-s-time-to-see-a-credit-counselor">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-on-the-installment-plan">Retirement on the installment plan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-everyday-money-tasks-youve-been-doing-wrong">12 Everyday Money Tasks You&#039;ve Been Doing Wrong</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-best-money-management-tips-from-john-oliver">7 Best Money Management Tips From John Oliver</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you">5 Surprising Ways Revolving Debt Helps You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-debt-collectors-dont-want-you-to-know">5 Things Debt Collectors Don&#039;t Want You to Know</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Debt Management Retirement credit counselor debt collectors dmp fees financial aid professional help warnings signs Fri, 16 Sep 2016 09:00:11 +0000 Damian Davila 1793877 at http://www.wisebread.com 5 Financial Moves You Should Make Five Years Before Retirement http://www.wisebread.com/5-financial-moves-you-should-make-five-years-before-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-financial-moves-you-should-make-five-years-before-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/older_woman_tablet_91678151.jpg" alt="Woman making financial moves five years before retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Here you are, five years from retirement. The reality of the end of your career is finally hitting home, but you may not feel completely ready to quit work yet.</p> <p>But with adequate planning and preparation, it <em>is</em> possible to feel confident about your life and finances as you approach retirement. Here are five goals that most workers should plan on reaching when they are five years from retirement.</p> <h2>1. Calculate Your Post-Retirement Budget</h2> <p>It may seem too soon, but now is an excellent time to re-evaluate how much money you will need to live on comfortably in retirement. Many workers assume that their expenses will go down in retirement, since they will no longer need to pay for professional clothing, commuting, business travel, and the like. However, depending on how you intend to spend your time in retirement, your expenses could go down by less than you anticipate, or even go up if you plan to travel more or enjoy expensive hobbies.</p> <p>In order to calculate your post-retirement budget, start by listing all of your monthly expenses that will stay the same, including rent or mortgage, car payment, utilities, groceries, personal care, taxes, and insurance.</p> <p>Then tease out what expenses you incur from working. These might include car maintenance, professional clothing, dry cleaning, dining out, tolls/parking, and professional subscriptions. Don't forget to include the kinds of purchases that are not necessarily work-related, like convenience foods or getting a stress-relieving massage, but that you will have less of a need for in retirement.</p> <p>Finally, calculate how much you expect to spend on retirement-related expenses, such as hobbies, memberships, or travel.</p> <p>These three numbers can give you a sense of how much you are currently spending, what not working will save you, and how much you need to have set aside for activities in retirement. Now is the perfect time to start scaling back on the monthly expenses that will stay the same if you are worried about affording your retirement activities.</p> <h2>2. Take Advantage of Catch-Up Provisions</h2> <p>Calculating a post-retirement budget is often a good motivator to start putting more money aside for retirement. Don't assume that five years before you retire is too late to do any good. You still have time to grow your nest egg, particularly if you can take advantage of the catch-up provisions in your tax-advantaged retirement accounts.</p> <p>Tax-advantaged accounts like 401Ks and IRAs have contribution limits that put a cap on the amount of money you can place in them each year. For the majority of taxpayers, the 401K contribution limit is $18,000 per year, and the IRA contribution limit is $5,500 per year. However, taxpayers over the age of 50 may contribute a total of $23,000 per year to their 401Ks and $6,500 per year to their IRAs (as of 2016).</p> <p>Coming up with that kind of scratch to send to your retirement account might be a tall order, but don't forget that both 401K plans and traditional IRAs are tax-deferred. That means you can deduct your contributions from your annual taxes, thereby lowering your current tax burden.</p> <h2>3. Pay Down Your Debt</h2> <p>Entering into retirement while carrying debt can seriously weigh you down, so the five years before retirement is a great time to tackle it.</p> <p>Start with your consumer debt, such as credit cards or a car loan. These are probably charging higher interest than you could earn through any investments, so <a href="http://www.wisebread.com/5-day-debt-reduction-plan-pay-it-off?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">eliminating all of your consumer debt</a> will help your money go further and save you a great deal over time.</p> <p>It's also a good idea retire your mortgage before you stop working (although you should prioritize paying off consumer debt before your mortgage). Owning your house free and clear in retirement offers you more options to handle whatever happens next.</p> <h2>4. Calculate Your Social Security Benefits</h2> <p>All of the arcane details of claiming Social Security <a href="http://amzn.to/2bKOeVe">could fill a book</a> (ahem), but it is a good idea for workers nearing retirement to get a basic understanding of what benefits will be available to them based on various retirement timelines and spousal coordination.</p> <p>In order to determine your benefit, the Social Security Administration uses a complex formula to adjust your earnings to account for average wage changes (this is known as indexing), and then calculate your specific benefits. The Social Security website offers several user-friendly calculators and applications to help you figure your potential benefits. Specifically, the <a href="http://www.ssa.gov/planners/benefitcalculators.htm">SSA benefits calculators</a> allow you to enter your information to learn what you can expect from your benefits.</p> <p>In addition, signing up for a &quot;<a href="http://www.ssa.gov/myaccount/">My Social Security</a>&quot; account can provide you with a great deal of specific information about your particular earnings record and projected benefits. It's an important planning tool for anyone within five years of retirement.</p> <h2>5. Start Planning Your Income Withdrawal Strategy</h2> <p>Many retirees don't really think about how they'll draw down their assets in retirement, assuming that they can just take a small 3% to 4% of their nest egg each year.</p> <p>There are two problems with this scenario. First, if you have a less than robust nest egg, the small percentage you have to live on might not be enough. Second, if you have to withdraw money during a major market downturn, your nest egg may not recover.</p> <p>Instead, you can plan ahead with the bucket method for retirement income, which starts with the assumption that retirees will have to ride out some market volatility during their retirement. With this method, you split your portfolio into separate income &quot;buckets,&quot; each of which will be intended to handle a different time period in retirement. A common allocation would look like this:</p> <h3>Bucket 1: Years 1&mdash;5</h3> <p>This will be the money you live on in your first years post retirement, while the majority of your nest egg remains invested in longer-term assets. Since you want both stability and liquidity in this time period, the money in this bucket will be placed in cash equivalent assets, such as CDs, U.S. Treasury bills, and money market funds.</p> <h3>Bucket 2: Years 6&mdash;15</h3> <p>You won't be tapping this money until you have gotten a few years into your retirement, so you can afford to be a little more aggressive with your investments. This means your second bucket will generally consist of a mix of bonds and stock, leaning more toward the safety of bonds. You want to reasonably protect your principal here, but still allow your money some room for growth.</p> <h3>Bucket 3: Years 16+</h3> <p>You can afford to be aggressive in this bucket of your portfolio, since you have time to let your money grow. This bucket will consist of higher-risk/higher-return assets, such as stocks and other types of equities, since you have at least 15 years to both ride out market volatility and reap potential benefits.</p> <p>Five years before retirement is the perfect time to start planning your retirement income withdrawal strategy, so you can make decisions without feeling the time-crunch of a looming retirement date.</p> <h2>This Is Your Victory Lap</h2> <p>The five years before you retire can be a challenging and emotional time. Feeling prepared for the financial aspect of retirement can give you the freedom to enjoy the last few years of your career.</p> <p><em>Will you be ready to make these key retirement moves when you're five years away?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/5-financial-moves-you-should-make-five-years-before-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-money-moves-to-make-the-moment-you-decide-to-retire">12 Money Moves to Make the Moment You Decide to Retire</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-can-you-afford-to-spend-in-retirement">How Much Can You Afford to Spend in Retirement?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-of-the-fastest-ways-to-go-broke-in-retirement">4 of the Fastest Ways to Go Broke in Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement approaching retirement budgets catch up contributions cost of living debt end of career goals income social security Fri, 26 Aug 2016 09:00:15 +0000 Emily Guy Birken 1779929 at http://www.wisebread.com The 10 Worst States for Retirees http://www.wisebread.com/the-10-worst-states-for-retirees <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-10-worst-states-for-retirees" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/vermont_foliage_72139589.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are you close to retirement? If so, you may want to take some time to see how your state of residence may impact your financial situation. After all, you need your money to last now that you're done working, and you don't want to find yourself strapped because of a high cost of living or taxes. Moreover, older residents should be cognizant of the quality of health care in their state.</p> <p>Here's some advice on where <em>not </em>to move once you retire.</p> <h2>1. Louisiana</h2> <p>Don't get sick as you get older if you live in Louisiana. This state ranks last in the nation in the quality of health care, according to the United Health Foundation. On the plus side, the cost of living is relatively low and taxes are better than many states.</p> <h2>2. Maryland</h2> <p>By most measures, Maryland's cost of living is among the highest in the nation. The state's economy is buoyed by a heavy Federal government presence and many highly paid workers, but it can be hard on retirees looking to save. Maryland has among the highest taxes in the nation, with home prices above the national average, as well.</p> <h2>3. Vermont</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/vermont_foliage_72139589.jpg" width="605" height="340" alt="" /></p> <p>The crime rate is ultralow, the leaves are awesome in the fall, and there's the headquarters of Ben &amp; Jerry's. But it has an effective tax rate of 10.76%, which is above the national average. This is one contributing factor to Vermont ranking as one of the worst states when it comes to cost of living, according to several surveys.</p> <h2>4. Connecticut</h2> <p>The Nutmeg State can boast good proximity to jobs in New York City, and its residents are generally wealthier and more educated than most. But it's less than ideal as a place for retirees. Connecticut is one of the most expensive states in the nation, and its effective state and local tax rate of 13.48% &mdash; one of the country's highest &mdash; doesn't help anyone who's trying to get by on a fixed income.</p> <h2>5. New York</h2> <p>All you need to do is look at the cost of an apartment in New York City to know why retiring there isn't the best move, financially. The rest of the state isn't so bad, but the overall cost of living in New York is considered one of the highest in the country. State income tax of nearly 9% places it in the top tier, as well. It's worth noting that health care in the state is above average in quality, according to the United Health Foundation.</p> <h2>6. California</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/california_golden_gate_88208659.jpg" width="605" height="340" alt="" /></p> <p>On one hand, California has a lot of beautiful places to live, with nice weather and a variety of options to keep retirees active and healthy. But financially, it's a tough place to be for those looking to make their retirement money last. Cost of living? In the top five, according to data compiled by CNBC. Its state income tax is 13.3%, the highest in the country, and most retirement income is taxed. Health care costs are also above average in California.</p> <h2>7. New Jersey</h2> <p>It's not cheap to live in New Jersey, and that's partly due to higher-than-average income taxes and taxes on real estate. While not all retirement income is taxed like some states, residents could be subjected to estate and inheritance taxes of up to 15%. Property is taxed at 2.29%, the highest rate in the nation, and that really stings when you consider that the state has the fourth-highest median home value. On the flip side, New Jersey does rate among the top third in most major health care quality rankings.</p> <h2>8. Nebraska</h2> <p>The Cornhusker State has a relatively low cost of living, until you consider that there are high taxes on retirees and real estate. Nebraska taxes most retirement income, such as pensions and retirement account withdrawals, and some residents pay Social Security taxes. And its effective property tax of 1.88% is one of the highest in the nation.</p> <h2>9. Montana</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/montana_nature_73035269.jpg" width="605" height="340" alt="" /></p> <p>It might be beautiful to retire in Big Sky Country, but don't assume that it will be cheap. Montana has a higher-than-average property tax rate, and taxes all pension and retirement income, as well as most Social Security income, according to the Retirement Living Information Center. Montana is also in the bottom half when it comes to the health care offered to seniors.</p> <h2>10. Rhode Island</h2> <p>The good news about Rhode Island is that most clothing, food, and prescription drugs are exempt from state sales tax. But the state has the 10th highest property tax rate, with the added blow of median home prices being the 12th highest in the country. Retirement income is also taxed at the state level.</p> <p><em>If you're thinking about downsizing for retirement, where are you thinking of living?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/the-10-worst-states-for-retirees">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-financial-moves-you-should-make-five-years-before-retirement">5 Financial Moves You Should Make Five Years Before Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-money-moves-to-make-the-moment-you-decide-to-retire">12 Money Moves to Make the Moment You Decide to Retire</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-that-better-paying-job-out-of-state-may-cost-you">6 Ways That Better Paying Job Out of State May Cost You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement cost of living home values moving relocating states taxes worst places Tue, 23 Aug 2016 09:00:10 +0000 Tim Lemke 1777830 at http://www.wisebread.com 5 Times It's Okay to Delay Retirement Savings http://www.wisebread.com/5-times-its-okay-to-delay-retirement-savings <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-times-its-okay-to-delay-retirement-savings" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/hand_coin_piggybank_75172163.jpg" alt="Woman learning times it&#039;s okay to delay retirement savings" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>About one in five Americans isn't confident about <a href="https://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&amp;content_id=3328">having enough money</a> for a comfortable retirement. If you're among them (or even if you aren't), putting off retirement savings seems like terrible advice. But if you're handling an ever-growing debt monster or an imminent threat of past contributions becoming taxable income &mdash; it may be okay to temporarily put a hold on retirement savings.</p> <p>Here are some of the very few instances you should ever consider temporarily delaying saving for retirement.</p> <h2>1. Paying Back a Loan From Your 401K</h2> <p>According to a study from The Wharton School of the University of Pennsylvania, 20% of Americans <a href="http://www.pensionresearchcouncil.org/publications/document.php?file=1271">take out a loan</a> from their 401K plans. Even worse, there is evidence that treating your nest egg like a credit card can quickly become a bad habit: 25% of 401K borrowers take out a <a href="http://www.nytimes.com/2013/08/17/your-money/one-dip-into-401-k-savings-often-leads-to-another.html?_r=0">third or fourth loan</a> and 20% of them take out five or more loans!</p> <p>While the full loan balance is generally due within five years, it becomes due within 60 days when terminating employment or failing to meet the established repayment schedule. Any outstanding balances become taxable income, triggering not only applicable income taxes but also additional tax penalties.</p> <p>Letting a 401K loan become taxable income will leave you with an unexpected, large tax bill next year and make you miss out on all the interest gains until retirement age. If you need to put retirement savings temporarily on hold to pay a 401K loan back ASAP, it's an understandable choice.</p> <h2>2. Dealing With Major Medical Expenses</h2> <p>If you're facing a major medical expense, you'll probably need all the help you can get. If your medical and dental expenses for the year are more than <a href="https://www.irs.gov/publications/p502/ar02.html">10% of your adjusted gross income</a> (7.5% if you or your spouse are over 65 or turned age 65 in 2016), you may qualify for hardship withdrawals from your retirement accounts. But a better option might just be to adjust the withholding on your paycheck using the <a href="https://www.irs.gov/individuals/irs-withholding-calculator">IRS Withholding Calculator</a>. This might allow you to pay for the expenses out of pocket by giving your budget more breathing room for the rest of the year. Sure, your retirement savings rate might temporarily slow, but at least you won't actively dip into them, either.</p> <h2>3. Eliminating High-Interest Credit Card Debt</h2> <p>In 2015, 21% of Americans believed that they would be in debt forever, up from 9% in 2013 and 18% in 2014. And high interest debt &mdash; such as credit card balances &mdash; are a big culprit.</p> <p>Instead of mortgaging your future to high-interest debt, <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">pay it off quickly</a>, and commit to putting the savings on interest payments toward retirement contributions. You'll probably even end up saving more toward retirement in the long run than if you kept making minimum credit card payments and wasting money on interest and fees. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">When to Use a Balance Transfer Offer</a>)</p> <h2>4. Building an Emergency Fund</h2> <p>Thinking that your 401K is already your emergency fund is one of the <a href="http://www.wisebread.com/6-emergency-fund-myths-you-should-stop-believing">emergency fund myths</a> you should stop believing. Taking a loan from your 401K is very often a bad idea because of the reasons explained earlier. Instead, take a couple of months to build an emergency fund that meets your unique financial situation. (See also: <a href="http://www.wisebread.com/figuring-the-size-of-your-emergency-fund?ref=seealso">Figuring the Size of Your Emergency Fund</a>)</p> <h2>5. Being Stuck in a Bad Forced-Transfer IRA</h2> <p>If a recent job change resulted in your previous 401K being forcefully transferred to an IRA, you might temporarily reconsider your retirement savings.</p> <p>If your forced-transfer IRA charges outrageous fees, you're better off holding off on your contributions until you qualify for your new employer's qualified plan. In the meantime, you could put the money that you would contribute to the IRA in an investment or saving account with a better return or pay down high-interest credit card debt.</p> <p>Once you set up your 401K with your new employer, roll over the entire balance from the forced-transfer IRA to the new account to improve the performance of your nest egg.</p> <p><em>What are other times it's okay to put off retirement?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/5-times-its-okay-to-delay-retirement-savings">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">5 Ways to Strengthen Your Finances Before Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account">5 Questions to Ask Before You Borrow From Your Retirement Account</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-signs-you-arent-saving-enough-for-retirement">10 Signs You Aren&#039;t Saving Enough for Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt">5 Ways to Pay Off High Interest Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k borrowing money debt emergency funds IRA loans medical expenses Thu, 11 Aug 2016 09:30:31 +0000 Damian Davila 1769335 at http://www.wisebread.com 12 Money Moves to Make the Moment You Decide to Retire http://www.wisebread.com/12-money-moves-to-make-the-moment-you-decide-to-retire <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/12-money-moves-to-make-the-moment-you-decide-to-retire" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retired_couple_happy_86773289.jpg" alt="Couple making money moves the moment they retire" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You deserve a big pat on the back, a rousing rendition of <em>He's a Jolly Good Fellow</em>, and a fat slice of cake when you decide to retire. You should enjoy it, too, because it's not necessarily all perfect bliss from that day forward. Rather, you have to devise a plan to keep yourself fed, clothed, housed, and healthy until the day you die, and that prospect is perhaps more daunting than the 45 years of solid work you put in.</p> <p>To help you along the way without having to breathe into a brown paper bag for the rest of your life, here are a few suggestions on what to do with your money when you set a date to punch your final card.</p> <h2>1. Establish Your Income Goals and Needs</h2> <p>Money matters rarely work without a plan in place, and that's exactly what you'll need when you retire. In anticipation of this major life milestone and transition, you'll need to take a hard and honest look at your finances to see where you're at currently, and figure out where you want and need to be. That might mean cutting the proverbial fat from your current budget, or it might mean contributing to your savings at a higher, more rapid rate. Whatever the case, changes will need to be made to set yourself on the right track. Financial expert Steve Anzuoni, of Fairway Financial, details a few practical steps to achieve this.</p> <p>&quot;First establish your income goals and needs, and then list all your expenses and liabilities; then you need to make sure that your monthly recurring expenses are covered by guaranteed income, not potential income,&quot; he says. &quot;Once that is taken care of, it's then a matter of allocating monies to different 'buckets' to account for inflation, future income needs, emergencies, and fun/vacation money.&quot;</p> <p>That last piece of the puzzle is important. Retirees often plan based on their current needs in the current economy. To stay ahead of the curve, it's a good idea to think ahead and plan for those what-if scenarios that pop up from time to time and can, in a worst-case situation, decimate your finances. Inflation and emergencies in particular can bleed you dry if you're not prepared, and now's the time for that consideration.</p> <h2>2. Eliminate Your Consumer Debt</h2> <p>You want to be as financially prepared as possible when retiring, and that means freeing yourself from the grips of consumer debt. The last thing you want to worry about when you settle into retirement are credit card payments, so concentrate now on eliminating them altogether. If you have the extra cash on hand, pay them off. If not, look into ways to reduce the required monthly payments to make them more manageable with the goal of being payment-free by the time you say so long to your coworkers and colleagues. We cover a million and one ways to help <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">pay off your debt</a> here at Wise Bread.</p> <h2>3. Manipulate Your Mortgage</h2> <p>Along with your consumer debt, you should try to pay off your mortgage &mdash; if you can swing it. This feat may not be feasible if you've recently purchased a home, but if you've lived at the same residence for the past 20 years or more, you might be able to meet this goal. Otherwise, find ways to reduce the mortgage to make it fit better into your new, tighter budget.</p> <p>&quot;Owning your home not only means a lot less money going out every month, it means a lot less worry should things get tight,&quot; says financial adviser Scott Hanson of Hanson McClain Advisors. &quot;Conversely, if you are unable to pay off your mortgage before you retire &mdash; even if you have as little as five to seven years remaining on the note &mdash; you might consider working with your lender to lower your interest rate and extend your loan out 15, 20, or even 30 years. Simply put, not only is cash-flow king, but why spend what are likely to be the healthiest years (of your retirement) struggling to pay down a mortgage at the expense of maintaining your pre-retirement standard of living? Money not going out is the same as money coming in.&quot;</p> <h2>4. Downsize Your Living Situation to Cut Costs</h2> <p>If you have more space than you realistically need, it's time to downsize. You can (hopefully) take the money from the sale of your home and purchase a new place that better suits your lifestyle, perhaps even in cash if you've tended well to your existing mortgage over the years and you're savvy about your new purchase.</p> <p>Financial planner Charlie Reading, author of the book <em>The Dream Retirement: How to Secure Your Money and Retire Happy</em>, agrees.</p> <p>&quot;If you have a house where the mortgage is paid off, an easy way to boost your retirement income is to move to a smaller or a cheaper house,&quot; he says. &quot;Releasing this equity and moving into a smaller home can provide you with valuable funds that you can use to generate an income. You also have the option of equity release here, however financially downsizing is likely to be a more astute choice if that is practical.&quot;</p> <h2>5. Relocate to a More Affordable Area</h2> <p>Along with downsizing your home, take some time to think about where you want to live and the associated cost of living in that area. If you live in an expensive area now, maybe it's a more sensible to move someplace where you'll get more bang for your limited bucks. Of course, you'll need to be happy wherever you move, so along with the financial factors you'll also want to consider your quality of life. Are there things to do to keep you occupied and social? Is transportation nearby? Is it relatively easy for family and friends to visit? Will you get fast and easy medical attention when you need it? These are all important questions to answer when contemplating a move to a new area.</p> <h2>6. Invest in a Rental Property to Earn Additional Income</h2> <p>I'm an investor in rental properties, and I wholly plan to use those properties to bring in additional income for savings and retirement for as long as the properties make money &mdash; and sense. If going this route is a legitimate option for you, I highly recommend it. Just beware of the hidden costs. If you manage the property yourself, like I do, all the income is yours (but don't forget to set aside a decent stash for taxes). If you require assistance, however, like from a management company, you could be looking at fees between 30% and 50% of your net income. There are more affordable options, like through the Evolve Vacation Rental Network, which charges the lowest fees in the industry at just 10%.</p> <p>Consider this anecdote: Jim and Laurel Whillock <a href="http://evolvevacationrental.hs-sites.com/case-study-kona?__hstc=235270366.eb7f97e450deb1291f24fe4d5e0ac9ed.1460397740307.1466114738612.1466171762596.19&amp;__hssc=235270366.1.1466171762596&amp;__hsfp=877489778">invested in a vacation property</a> on the Big Island of Hawaii as a way to earn income in retirement. They purchased a one-bedroom condo on the beach and hired a property manager, who charged a 43% fee, to help with the logistics and operation. During the first six months, the condo was occupied 35% of the time, earning the couple only $6,500. After switching to Evolve, in a 12-month period, the couple booked 260 nights generating rental income of $48,199, an increase of 242%.</p> <p>In any case, what I'm saying is, do your research before thrusting yourself into the rental-income market; there are other management options out there. The goal is to make money, not lose it &mdash; especially when finances are tighter during retirement.</p> <h2>7. Phase Your Retirement Over an Extended Period</h2> <p>Not ready to go all in for retirement? That's perfectly okay. There's no &quot;right&quot; way to retire, and if you need more time to ease into the transition, by all means take it.</p> <p>&quot;Go down to three days a week and enjoy the benefit of not taking your pension as early, and the growth that comes with it,&quot; Reading suggests. &quot;This doesn't have to be your current job &mdash; why not start working in a role you have a passion for, even if it doesn't pay you quite as much as your current one does? Who knows, maybe this will become your new purpose, and you won't ever want to stop.&quot;</p> <h2>8. Develop a Strategy for Medical Insurance</h2> <p>We're starting to enter into territory that nobody likes talking about, especially those nearing or at retirement age. But ensuring that you have proper medical coverage while also getting all your other end-of-life ducks in a row isn't something you can put aside or overlook. This is reality, however harsh it seems, and these items must be addressed &mdash; the earlier, the better.</p> <p>&quot;Because medical insurance can be very expensive, it may actually prevent you from being able to retire,&quot; Hanson warns. I strongly suggest you check into your options before retiring. If you can't afford to purchase medical insurance, you may be forced to find another job until you can apply for Medicare at age 65.&quot;</p> <h2>9. Re-evaluate Your Other Insurances for Optimal Protection</h2> <p>While you're assessing your medical insurance situation, it's a good idea to check in with your other insurance plans to make sure you have the kind of coverage you need at this stage, but also to see where you may be able to cut costs &mdash; though the latter should never affect your quality of life. Don't reduce coverage you'll need down the road just to save a few bucks in early retirement. To make the right decisions, you may want to enlist the help of an insurance adviser.</p> <p>&quot;[Insurance advisers] can advise on ways to adjust your insurance profile &mdash; around both your home and auto policies,&quot; says insurance expert Angi Orbann. &quot;They may be able to find cost savings and they will help you ensure that you are adequately protected as you move into the next phase of your life. An insurance adviser may not be the first person you think of when it comes to your money and retirement, so it's an important tip to remember.&quot;</p> <h2>10. Create a Last Will and Testament</h2> <p>Fact: 41% of Boomer Americans don't have a will, according to USA Today &mdash; and if you're among them, it can spell big trouble for your estate when you pass.</p> <p>Licensed funeral director Kelli Hoodman explains.</p> <p>&quot;Creating a will tells loved ones how one's property should be distributed after one passes away,&quot; she says. &quot;Depending on how complex one's estate is, one may want to contact an attorney or simply create a will online. Without a will, one's finances and property are distributed by the state, and they may not land in the hands the deceased would've wanted them to be in.&quot;</p> <p>Don't overlook the funeral planning, either. Your last will and testament isn't just about who gets what. It's also as much about where you'll go when you pass. You should have the final say in that while you're alive and kickin'.</p> <p>&quot;Expressing final wishes for funeral planning in a will is important, but it should not be the only place they are documented,&quot; Hoodman adds. &quot;Funeral planning is best done with a local funeral home or cremation society. Otherwise it may take time for a will to be found, and one's final wishes might not adhered to.&quot;</p> <h2>11. Preplan Your Funeral Services</h2> <p>It probably won't be your best day ever, but preplanning your funeral is not only therapeutic, says Hoodman, but it's also fiscally intelligent.</p> <p>Funeral costs rise each year, and a traditional funeral and burial today can cost over $10,000. Cremation, which has recently become America's preferred method of disposition, is far less expensive at only a couple thousand dollars, depending on which services are selected.</p> <p>&quot;No matter which choice one makes, inflation and other factors raise the price of cremation, burials, and funerals over time,&quot; Hoodman says. &quot;Companies like Neptune Society offer preplanning services that allow retirees to create a legal document that states one's wishes for memorials, cremation, and other matters concerning death care planning. Over the many decades a retiree may live, preplanning now could save them hundreds or thousands of dollars.&quot;</p> <h2>12. Designate a Power of Attorney</h2> <p>Lastly, if you want to be in control of your life &mdash; and afterlife &mdash; choose someone close to you whom you trust implicitly as your Power of Attorney.</p> <p>A Power of Attorney (POA or attorney-in-fact) makes decisions for a person when that person can no longer make decisions for themselves. For example, if a senior is diagnosed with Alzheimer's, an attorney-in-fact would be legally permitted to make financial and medical decisions in that senior's stead.</p> <p>&quot;Choosing someone trustworthy is crucial for this role,&quot; says Hoodman. &quot;A retiree should ensure that their POA knows their preferences on medical dilemmas, like whether or not to use life support, and their financial information to ensure their money is spent properly.&quot;</p> <p>You don't like being taken advantage of while you're alive, so it's important to ensure that you won't be taken advantage of in death, either.</p> <p><em>Have you made any money moves to prepare for retirement?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/12-money-moves-to-make-the-moment-you-decide-to-retire">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-of-the-fastest-ways-to-go-broke-in-retirement">4 of the Fastest Ways to Go Broke in Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-financial-moves-you-should-make-five-years-before-retirement">5 Financial Moves You Should Make Five Years Before Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">5 Ways to Strengthen Your Finances Before Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-personal-finance-calculators-everyone-should-use">15 Personal Finance Calculators Everyone Should Use</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-occasions-when-you-should-definitely-hire-a-financial-advisor">7 Occasions When You Should Definitely Hire a Financial Advisor</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement aging debt downsizing estate planning goals investing medical care money moves mortgages relocating rental properties Tue, 09 Aug 2016 10:00:14 +0000 Mikey Rox 1768664 at http://www.wisebread.com How to Tell if Your 401K Is a Good or a Bad One http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-tell-if-your-401k-is-a-good-or-a-bad-one" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_thinking_laptop_88870639.jpg" alt="Woman learning how to tell if her 401K is good or bad" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you work for a company, there's a good chance that your employer offers a 401K plan. (Some organizations offer 403b plans, which operate similarly.) These funds give you the chance to invest in a series of mutual funds and other investments, with the added benefit that any money you contribute is deducted from your taxable income.</p> <p>Not all 401K plans are the same, however, and there is a wide range in the amount of expenses and the quality of investments offered.</p> <p>It's not easy to immediately know if your 401K plan is a good one, and whether it's worth putting money into. But here are some things to examine.</p> <h2>Do You Get a Company Match?</h2> <p>Arguably the most positive aspect of a 401K plan is the ability of companies to match a certain percentage of employee contributions. Typically, a company might agree to contribute up to 5% of a worker's earnings, if the worker does the same. This match is essentially free money, so it usually makes participating in the 401K plan a no-brainer, even when the plan is otherwise subpar.</p> <p>If your company does not <a href="http://www.wisebread.com/401k-or-ira-you-need-both" target="_blank">contribute to your 401K plan</a> or offer a match, you'll want to examine other characteristics of the plan to determine whether it's worth it to contribute. You may find that contributing to a traditional or Roth IRA is a better alternative.</p> <h2>Examine the Investment Options</h2> <p>A 401K plan is only as good as the investment options in them. There's no perfect menu, but a strong plan is anchored by one or two mutual funds that mirror the broader stock market. These are called &quot;index&quot; funds, because they are designed to mirror the performance of a specific index, such as the S&amp;P 500. A good plan will also have some large-cap, mid-cap, and small-cap funds, and the ability to access international and real estate investments. Older investors will want to see a selection of quality bond funds.</p> <p>You'll want to look for a diverse array of investments, but there is a point at which more options aren't necessarily better.</p> <p>&quot;More funds can just confuse you,&quot; said Ralph Grauso, founder of ASC Financial. &quot;You don't need three different types of large-cap growth funds.&quot;</p> <h2>Check the Fees</h2> <p>One of the most common criticisms of 401K plans is that they often contain funds with high expenses. The best 401K plans should offer access to the lowest cost funds available.</p> <p>Management fees, plan operating expenses, and other costs can take a chunk out of your returns without you even being aware. Over time, that can lead to tens of thousands of dollars in lost earnings. A survey by AARP noted that 80% of 401K plan participants don't know what they are paying in fees. Most information on fees is available by reading plan and fund documents, but you may still have to do some digging.</p> <p>&quot;If you're investing for 30 years or more, those fees are going to take a huge chunk of your money,&quot; Grauso said.</p> <p>Grauso said it's best to find funds with expense ratios of less than 1%. Index funds are particularly low in cost because they are not actively managed, and often perform better than managed funds anyway, he said. Look for low-cost index funds from a broker such as Vanguard, and stay away from niche funds with high costs.</p> <h2>Study the Fund Performance</h2> <p>Ultimately, you want to put your money in funds that will generate a nice return and help you develop a sizable nest egg. Predicting future performance is not possible, but you can get a good sense of the quality of a fund by examining its long-term performance.</p> <p>Look at five-year and 10-year returns, and compare them to a comparable benchmark. (For example, a large-cap fund should be compared to a large-cap index.) It's also worth comparing funds to the overall performance of the stock market and the S&amp;P 500. If the fund has historically generated returns that are in line with or better than the overall stock market &mdash; especially after fees are taken into account &mdash; that's a good sign. Stay away from funds that appear to underperform the market and their respective benchmarks.</p> <h2>Who Is the Custodian?</h2> <p>When employers set up 401K plans, they partner with a company that actually manages the plans and many of the investments. Usually, it's with a brokerage firm such as Fidelity, Vanguard, or Charles Schwab.</p> <p>The best 401K plans will be managed by companies who have the expertise and ability to offer quality investment options with low fees, easy online account access, and research. It is worth noting that these custodians manage not only the plans, but many of the mutual funds in them, and that is often viewed as a conflict of interest. If it seems like the custodian is favoring their own underperforming plan in favor of a better plan from another company, that's a bad sign.</p> <h2>Look for Institutional Class Shares</h2> <p>There are many high-quality mutual funds that are unavailable to average investors unless they can meet very high account minimums. But, investors can often access these funds through their 401K plans, because companies can guarantee a sizable combined investment from their employees. Mutual fund companies will often waive fees and other expenses if certain investment levels are met. These funds are often advertised as &quot;institutional class,&quot; or &quot;premium class,&quot; and usually it translates into very low-cost funds for the investor. Fidelity's 500 Index Fund Premium class, for instance, has an expense ratio of just .045%.</p> <h2>Is There a Self-Directed Option?</h2> <p>A typical 401K plan will allow investors to put their money in any of about a dozen mutual funds. But some will offer the ability for account holders to take a more active role, through self-directed brokerage accounts. This is a good option for those wishing to have more direct control over their investing, though evidence is mixed on whether this actually results in higher returns for the investor.</p> <h2>Is It Wrapped in an Annuity?</h2> <p>Many 401K plans have an annuity option, in which earnings are disbursed in the form of monthly payments. This is a nice option to have, as it ensures a steady stream of income in retirement. However, some plans are &quot;wrapped&quot; in an annuity contract that is often expensive and with minimal benefit to the investor.</p> <p><em>How good is your 401K?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-your-retirement-is-on-track">8 Signs Your Retirement Is on Track</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-8-rules-of-investing-you-need-to-know">The Only 8 Rules of Investing You Need to Know</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-paying-off-your-mortgage-early-costing-you-money">Is Paying Off Your Mortgage Early Costing You Money?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-occasions-when-you-should-definitely-hire-a-financial-advisor">7 Occasions When You Should Definitely Hire a Financial Advisor</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-this-hidden-cost-sapping-your-retirement-savings">Is This Hidden Cost Sapping Your Retirement Savings?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement index funds investing portfolio retirement stocks Fri, 05 Aug 2016 09:00:12 +0000 Tim Lemke 1764992 at http://www.wisebread.com 8 Signs Your Retirement Is on Track http://www.wisebread.com/8-signs-your-retirement-is-on-track <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-signs-your-retirement-is-on-track" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_retirement_accounts_78210119.jpg" alt="Couple finding signs their retirement is on track" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You feel like you're a diligent saver, and are doing all you can to ensure you have a comfortable retirement. But how do you know if you're doing things right? It's hard to predict how much money you'll need, and it seems impossible to know if you're on the right track when retirement is years or even decades away.</p> <p>Thankfully, there are some easy ways to tell if your retirement planning is sound. If your portfolio has most or all of these characteristics, keep up the good work and don't fret!</p> <h2>1. Most of the Funds Are in Tax-Advantaged Accounts</h2> <p>When saving for retirement, it's important to place your money in accounts that shield you from paying unnecessary taxes. A 401K is a common plan offered by employers that allows you to contribute and invest in a variety of different mutual funds. Any money you contribute will be deducted from your taxable income. It's also possible to invest in a Roth IRA, which allows you to invest and avoid paying taxes on any gains. If all or most of your money is in these accounts, you'll be saving thousands of dollars and will have a much higher net return on your investments.</p> <h2>2. You've Been Contributing Heavily</h2> <p>It's hard to know exactly how much you should put into your retirement accounts, but &quot;as much as you can&quot; is usually good advice. If you're maxing out your allowable contributions to 401K or IRA plans (or both), you're probably doing quite well. For 401K plans, you can contribute up to $18,000 annually. IRA plans can accept $5,500 in contributions each year. Even if you're not maxing out these accounts, contributing enough to take advantage of your employer's match of 401K contributions is one good threshold to hit. As much as people like to talk about stock market gains helping them get rich, the truth is that your portfolio's value is helped a lot more by the amount you're contributing in the first place.</p> <h2>3. You've Seen Steady Growth Over Time</h2> <p>Take a look at your portfolio's performance on a line chart. Are you generally seeing an upward trend, without a lot of wild ups and downs? Does it seem like your savings is steadily growing over time, even during periods when the stock market is not doing well? A good retirement portfolio should generally be free of volatility, and see steady gains as time goes on.</p> <h2>4. Your Projections Look Good</h2> <p>No one knows how the stock market will perform in the future, but you can make some reasonable assumptions based on historical market returns. The S&amp;P 500 has seen average annual growth of about 7% since 2006, and annual average gains are even higher the farther you go back. If your portfolio's performance has been in line with these annual averages, you're probably in good shape, as long as you're contributing a significant amount.</p> <p>It may be possible to project how much money you'll have in retirement by taking the amount you have now, then adding your contributions and the annual average return through your retirement year.</p> <h2>5. Your Investments Are Focused on Growth</h2> <p>Unless you are close to retirement, your portfolio should be heavy on investments that promise growth over the long term. This means a big dose of stocks, rather than bonds or cash. Small cap and value stocks should be a driver of most retirement portfolios, as they often promise the most growth potential.</p> <p>It's tempting to want to be conservative with your investments, because stocks can be risky, and no one likes to feel vulnerable to a bad day in the stock market. But building a large retirement next egg requires you to overcome your fears and recognize the positive historical returns of stocks.</p> <h2>6. Your Portfolio Is Well-Balanced</h2> <p>It's always a good exercise to examine your investments to see if you are too heavily invested in any one sector or asset class. Sometimes, your portfolio can get out of whack, and will require rebalancing of your assets. If you are working hard to keep your investments nicely balanced, you'll likely be shielded from any major swings in the market and should see solid growth over time. There is one caveat here, which is that buying and selling during rebalancing could have tax implications, so you'll want to weigh the costs and benefits each time you're considering it.</p> <h2>7. You're Not Paying Too Much in Fees</h2> <p>A robust retirement portfolio should probably contain some mutual funds and/or exchange traded funds (ETFs). But these investments often come with management fees, commissions, transaction fees and other costs. A typical investor pays about 1.5% in fees, according to Rebalance IRA. That could add up to thousands of dollars over time. To avoid losing money to fees, look for investments with very low expense ratios, and those that trade without a commission. Low-cost investments often outperform those with higher expense ratios anyway. So if the costs in <a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds" target="_blank">your retirement portfolio</a>&nbsp;are low, that's one more thing you're doing well.</p> <h2>8. You Haven't Spent Any of It</h2> <p>There may be times in your life when you'll be tempted to withdraw money from your retirement accounts to pay for other expenses. There's a cost to doing this; any money taken early from these accounts is subject to being taxed, and you'll have to pay a 10% early withdrawal penalty if you take money early from a 401K. And of course, on top of these penalties and taxes, you'll lose out on any future growth this money might have accrued. If you've been diligent about not touching your retirement savings early, you'll be in much better financial shape than if you had raided these funds.</p> <p><em>How's your retirement looking?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-signs-your-retirement-is-on-track">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one">How to Tell if Your 401K Is a Good or a Bad One</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-best-online-brokerages-for-your-ira">5 Best Online Brokerages for Your IRA</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-you-shouldnt-invest-like-warren-buffett">7 Reasons You Shouldn&#039;t Invest Like Warren Buffett</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-best-money-management-tips-from-john-oliver">7 Best Money Management Tips From John Oliver</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-retire-rich">How to Retire Rich</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement contributions ETFs growth index funds investing on track portfolio stocks tax advantaged Thu, 28 Jul 2016 09:00:11 +0000 Tim Lemke 1760749 at http://www.wisebread.com Retire for Half the Cost in These 5 Countries http://www.wisebread.com/retire-for-half-the-cost-in-these-5-countries <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/retire-for-half-the-cost-in-these-5-countries" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/tropical_destination_travel_54008208.jpg" alt="Finding countries where you can retire for half the price" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you're getting close to retirement, but you're planning on working an extra couple of years because you just &quot;don't have the money,&quot; think again. Retiring in North America is expensive! Why not live somewhere tropical and exotic for at least half the year and cut your expenses down considerably? In this article I'm going to list five destinations where you can do just that. (See also: <a href="http://www.wisebread.com/5-incredible-places-to-retire-abroad-that-anyone-can-afford?ref=seealso">5 Incredible Places to Retire Abroad</a>)</p> <p>Note: Costs of food, housing, transportation, and entertainment are compared to New York City using <a href="https://www.expatistan.com/cost-of-living/">Expatistan's</a> cost of living index.</p> <h2>1. Mexico</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/mexico_travel_8998281.jpg" width="605" height="340" alt="" /></p> <ul> <li>Food = 64% cheaper</li> <li>Housing = 83% cheaper</li> <li>Transportation = 72% cheaper</li> <li>Entertainment = 64% cheaper</li> <li>One-bedroom apartment = $300-$500 per month</li> <li>Total cost of living = $1,200+ per month</li> </ul> <p>If you hear &quot;Mexico&quot; and your mind automatically wanders to an American-owned resort in Cancun with a bartender on the beach and jet skis on rent, you'd be forgiven for thinking that Mexico isn't half the price of home.</p> <p>But this isn't Mexico! The real Mexico's not only extremely affordable, but it's rich in culture, history, and natural beauty. You can rent beautiful apartments in retirement havens like San Pancho, Sayulita, and Oaxaca for under $500 a month.</p> <p>A dinner out at a nice restaurant with a bottle of wine won't likely cost you more than $10 per person and your grocery bills will be cut in half. Mexico is the perfect place to retire, which is why so many snowbirds head there for half of the year.</p> <h2>2. Thailand</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/thailand_beach_travel_87109807.jpg" width="605" height="340" alt="" /></p> <ul> <li>Food = 48% cheaper</li> <li>Housing = 68% cheaper</li> <li>Transportation = 54% cheaper</li> <li>Entertainment = 55% cheaper</li> <li>One-bedroom apartment = $300-$500 per month</li> <li>Total cost of living = $1,000+ per month</li> </ul> <p>Who doesn't want to spend their golden years in the land of smiles? Thailand is the ultimate budget friendly destination for people looking for a change of scenery in retirement. The above cost of living indexes are compared to Bangkok, Thailand's capital and most expensive city.</p> <p>If you choose to live on one of the country's beautiful islands, you could cut these costs down considerably. A nice one or two-bedroom bungalow with a kitchenette, a few blocks from the sea, won't cost you more than $500 and you'd have a hard time paying more than $7 for a local meal.</p> <p>Big beers at 7-11 only cost a couple of dollars and you can rent a motorbike here for around $3 a day (less if you rent monthly).</p> <p>Thailand is wonderfully exotic, but it still has a lot of the amenities that you'd hope for from home. Good grocery stores, 7-11s, great restaurants, gyms, malls, and excellent accommodation options. Pair this with some of the best beaches in the world, friendly people, and incredibly low prices, and you've got one of the world's top retirement hot spots.</p> <p>One downside of Thailand may be that there are a lot of young people and on some of the islands, monthly parties can get out of hand. But aside from the Full Moon Party on Koh Phangan and the water festival in Bangkok, most of Thailand still has a slow-paced tropical charm. Who knows, maybe you're looking for a party during retirement?</p> <h2>3. Albania</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/tropical_destination_travel_54008208.jpg" width="605" height="340" alt="" /></p> <ul> <li>Food = 66% cheaper</li> <li>Housing = 84% cheaper</li> <li>Transportation = 67% cheaper</li> <li>Entertainment = 64% cheaper</li> <li>One-bedroom apartment = $300-$500 per month</li> <li>Total cost of living = $1,250+ per month</li> </ul> <p>Maybe one of the last places you thought you'd visit, let alone live in, Albania has had a turbulent history. Cut off from the world by a brutal communist dictator for nearly a half-century, the country lost much of its reputation as a vacation spot during that time. But today, Albania is moving forward and the people are extremely welcoming.</p> <p>Again, the cost of living indexes are comparing New York City to Tirana, Albania's capital, but Tirana is the country's most expensive place to live. Instead, head down to the Albanian Riviera along the Adriatic coast and check out towns like Himara, Vlora, and Saranda. You won't find anywhere else in Europe where you can rent an apartment for $400 per month with a stunning view over the Adriatic sea.</p> <p>In Saranda, there's a huge selection of accommodations in skyscraper-style apartment blocks all along the water's edge, while in quieter Vlora and Himara, you won't find as much variety but you can still find well-priced places to stay.</p> <p>The Albanian Riviera is known for beautiful beaches, sunny weather, and delicious seafood. You can get a fish dinner at a restaurant overlooking the water for around $10-$15. Albania is definitely affordable and it has a lot of amenities as well.</p> <p>Note: Driving in Albania can be frustrating and dangerous. If you do decide to buy or rent a car, however, don't miss the drive between Vlora and Saranda along the coast. It is one of Europe's most scenic road trips.</p> <h2>4. Malta</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/malta_beach_city_60448332.jpg" width="605" height="340" alt="" /></p> <ul> <li>Food = 32% cheaper</li> <li>Housing = 66% cheaper</li> <li>Transportation = 47% cheaper</li> <li>Entertainment = 43% cheaper</li> <li>One-bedroom apartment = $685-$1,000 per month</li> <li>Total cost of living = $1,750+ per month</li> </ul> <p>The Brits already know that Malta is the perfect place to retire, but few Americans can even place this tiny Mediterranean island on the map. Located just below Sicily and about 62 miles north of Africa, Malta is the most fascinating country you've never heard of.</p> <p>Steeped in a rich history, blessed with azure waters and natural beauty, and inhabited by some of the friendliest people in Europe, Malta might just be the most charming place on this list. It's a bit of a stretch to say that it's half the price of most U.S. cities, but you can get a nice one-bedroom apartment here for around &euro;600 ($685). Food in restaurants is considerably cheaper than in the U.S., as is the local produce and alcohol in grocery stores.</p> <p>There are three islands in Malta that are inhabited, but you'll likely choose between Gozo and the main island of Malta. The main island has many more amenities and more areas to explore, but is a lot more built up than the quieter, more natural island of Gozo.</p> <p>Whichever island you choose, all are connected by an excellent network of buses and ferries, so you're never more than a couple of hours from anywhere. There are also ferries to nearby Sicily and Malta is well connected to Europe via flights with Air Malta.</p> <p>Did I mention that Malta is considered to have the best year-round climate in the world?</p> <h2>5. Croatia</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/croatia_beach_scene_59256040.jpg" width="605" height="340" alt="" /></p> <ul> <li>Food = 46% cheaper</li> <li>Housing = 75% cheaper</li> <li>Transportation = 41% cheaper</li> <li>Entertainment = 52% cheaper</li> <li>One-bedroom Apartment = $500-$700 per month</li> <li>Total cost of living = $1,550+ per month</li> </ul> <p>Another Mediterranean hot spot, Croatia has a few cities that are great for retirement, but in my opinion, Split is the best. The old town has history, a beautiful setting along the Adriatic Sea and great dining options.</p> <p>The temperature here never gets below 45&deg;F and in the summer, you have your choice of some of the region's best beaches.</p> <p>For history buffs, Diocletian's Palace is one of the best examples of Roman architecture anywhere in Europe and there are numerous old churches, cathedrals, and basilicas to explore.</p> <p>Split also has an excellent expat community and there seems to be something going on every week. Whether it's hiking, a music festival, concerts, plays, or beach parties, you'll never get bored in Split. This seaside town pretty much has it all, and you can get it for less than half the price of most cities in the U.S.</p> <h2>Visit First and Check With the Tax Authorities</h2> <p>There's a lot more to consider than just the cost of living when choosing the best place for retirement. You want to make sure that your chosen destination has enough amenities and activities to keep you satisfied.</p> <p>You'll also want to look into the tax situation to ensure that you don't get into any trouble with the IRS. But this stuff is easier than it sounds. Once you choose the perfect place, head down there for a month or two and see if you enjoy it while staying longer-term.</p> <p>There are so many places around the world to choose from and luckily for Americans, many of them are much cheaper than home.</p> <p><em>What's your favorite vacation spot? Could you retire there? Tell us why in the comments below.</em></p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <p>&nbsp;</p> <p style="text-align: center;"><a href="//www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fretire-for-half-the-cost-in-these-5-countries&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FRetire%20for%20Half%20the%20Cost%20in%20These%205%20Countries%20(1).jpg&amp;description=Retire%20for%20Half%20the%20Cost%20in%20These%205%20Countries" data-pin-do="buttonPin" data-pin-config="above" data-pin-color="red" data-pin-height="28"><img src="//assets.pinterest.com/images/pidgets/pinit_fg_en_rect_red_28.png" alt="" /></a> </p> <!-- Please call pinit.js only once per page --><!-- Please call pinit.js only once per page --><script type="text/javascript" async defer src="//assets.pinterest.com/js/pinit.js"></script></p> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Retire%20for%20Half%20the%20Cost%20in%20These%205%20Countries%20%281%29.jpg" width="250" height="374" alt="" /></p> <script type="text/javascript" async defer src="//assets.pinterest.com/js/pinit.js"></script></p> <p style="text-align: center;">&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nick-wharton">Nick Wharton</a> of <a href="http://www.wisebread.com/retire-for-half-the-cost-in-these-5-countries">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-i-saved-enough-for-a-down-payment-while-working-in-china">How I Saved Enough for a Down Payment While Working in China</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-mid-sized-cities-for-millennials">The 5 Best Mid-Sized Cities for Millennials</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-lessons-i-learned-about-money-after-living-in-mexico">7 Lessons I Learned About Money After Living in Mexico</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-let-these-expenses-spoil-your-retirement-abroad">Don&#039;t Let These Expenses Spoil Your Retirement Abroad</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement Travel cities cost of living expats foreign countries living abroad things to do Wed, 13 Jul 2016 09:00:19 +0000 Nick Wharton 1740461 at http://www.wisebread.com Ask the Readers: Where Would You Like to Retire? http://www.wisebread.com/ask-the-readers-where-would-you-like-to-retire <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/ask-the-readers-where-would-you-like-to-retire" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_walking_beach_73944157.jpg" alt="Couple deciding where they&#039;d like to retire" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p><em>Editor's Note: Congratulations to <a href="http://www.wisebread.com/ask-the-readers-where-would-you-like-to-retire#comment-793594">Matt</a>, Kristin, and Mary for winning this week's contest!</em></p> <p>A big part of retirement planning is deciding where you will live. Some areas offer greater benefits to retirees, including more affordable housing, lower taxes, and better health care. But for some people, living near family or in an area that you've always loved is more important.</p> <p><strong>Where would you like to retire?</strong> What makes this location so appealing? What is the most important factor when you consider retirement destinations?</p> <p>Tell us where you would like to retire and we'll enter you in a drawing to win a $20 Amazon Gift Card!</p> <h2>Win 1 of 3 $20 Amazon Gift Cards</h2> <p>We're doing three giveaways &mdash; here's how you can win!</p> <h3>Mandatory Entry:</h3> <ul> <li>Post your answer in the comments below. One commenter will be randomly selected to win a $20 Amazon Gift Card!</li> </ul> <h3>For Extra Entries:</h3> <ul> <li>You can tweet about our giveaway for an extra entry. Also, our Facebook fans can get an extra entry too! Use our Rafflecopter widget for your chance to win one of the other two Amazon Gift Cards:</li> </ul> <p><a class="rcptr" href="http://www.rafflecopter.com/rafl/display/79857dfa253/" rel="nofollow" data-raflid="79857dfa253" data-theme="classic" data-template="" id="rcwidget_cm9gxoub">a Rafflecopter giveaway</a> </p> <script src="https://widget-prime.rafflecopter.com/launch.js"></script></p> <p>If you're inspired to write a whole blog post OR you have a photo on Flickr to share, please link to it in the comments or tweet it.</p> <h4>Giveaway Rules:</h4> <ul> <li>Contest ends Monday, July 18th at 11:59 p.m. Pacific. Winners will be announced after July 18th on the original post. Winners will also be contacted via email.<br /> &nbsp;</li> <li>You can enter all three drawings &mdash; once by leaving a comment, once by liking our Facebook update, and once by tweeting.<br /> &nbsp;</li> <li>This promotion is in no way sponsored, endorsed or administered, or associated with Facebook.<br /> &nbsp;</li> <li>You must be 18 and US resident to enter. Void where prohibited.</li> </ul> <p><strong>Good Luck!</strong></p> <div class="field field-type-text field-field-blog-teaser"> <div class="field-items"> <div class="field-item odd"> Tell us where you would like to retire and we&#039;ll enter you in a drawing to win a $20 Amazon Gift Card! </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-jacobs">Ashley Jacobs</a> of <a href="http://www.wisebread.com/ask-the-readers-where-would-you-like-to-retire">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-the-readers-200-giveaway-what-is-your-top-question-about-personal-finance">Ask the Readers $200 Giveaway: What is Your Top Question About Personal Finance?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one">How to Tell if Your 401K Is a Good or a Bad One</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-incredible-places-to-retire-abroad-that-anyone-can-afford">5 Incredible Places to Retire Abroad That Anyone Can Afford</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-the-readers-should-kids-get-paid-for-doing-chores">Ask The Readers: Should Kids Get Paid For Doing Chores?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-the-readers-how-did-you-spend-your-first-paycheck">Ask the Readers: How Did You Spend Your First Paycheck?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Giveaways Retirement Ask the Readers retirement Tue, 12 Jul 2016 10:00:08 +0000 Ashley Jacobs 1747307 at http://www.wisebread.com 401K or IRA? You Need Both http://www.wisebread.com/401k-or-ira-you-need-both <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/401k-or-ira-you-need-both" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/IRA_cash_401k_27036895.jpg" alt="Here&#039;s why you need a 401K and a Roth IRA" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There are two primary tax-advantaged ways to save for retirement. You could contribute to a workplace retirement plan, such as a 401K plan, or open an Individual Retirement Account (IRA).</p> <p>But which one should you use? In some cases, the answer may be &quot;both.&quot; Here are three considerations as you decide which plan(s) works for you:</p> <h2>1. Does Your Employer Provide Matching Money?</h2> <p>If your employer offers a 401K plan and matches some of the money you contribute, start your retirement savings there. That's the easiest money you'll ever make.</p> <p>Under a typical arrangement, your employer may contribute 50 cents to one dollar for every dollar you contribute, up to 6% of your salary. Even at the low end, that's a guaranteed 50% return on your money. So, at very least, contribute the full amount that's eligible to be matched.</p> <p>At that point, you'll probably have an important decision to make. You very likely need to contribute more than 6% of your salary in order to save enough for retirement. (Do you know <a href="http://www.wisebread.com/one-smart-thing-you-can-do-for-your-retirement-today">how much <em>you </em>should save</a>?)</p> <p>If so, should you simply contribute more to your workplace plan? Or, would you be better off investing those additional dollars through an IRA? Questions two and three will help you decide.</p> <h2>2. Does Your Plan Have What You Need?</h2> <p>Does your workplace plan offer the right investment choices in order for you to follow your strategy of choice? This is especially important if your employer doesn't match contributions, since it means selecting low-cost investments likely to generate strong returns is even more important.</p> <p>If you're keeping it simple by using a target-date fund, it <em>may</em> be fine to use your 401K exclusively for your retirement savings.</p> <p>But what if you're following a more involved strategy &mdash; one that includes the use of a gold fund, for example &mdash; but your 401K plan doesn't offer the necessary investment choices?</p> <p>This would be one good reason make use of an IRA, where you'll have access to a wide range of investment options.</p> <h2>3. How Much Do the Investments in Your Plan Cost?</h2> <p>Even if you're keeping things simple by using a target-date fund offered through your 401K, check on that fund's fees. In particular, find out what its <em>expense ratio</em> is. That's the percentage of the fund's assets deducted each year to cover fund expenses, such as management and administrative costs. If your fund has an expense ratio of .5%, that means for every $1,000 you have invested, $5 is going toward these expenses.</p> <p>Expense ratios vary quite a bit from fund to fund. For example, Vanguard's target-date fund for people planning to retire in 2050 charges just .16%, whereas American Funds' 2050 target-date fund charges .76%.</p> <p>That may not sound like a big deal, but let's say you now have $25,000 in your 401K plan, contribute $500 per month, and earn an average annual return of 7% before expenses, no matter which fund you choose.</p> <p>After 35 years, if you had used the fund charging .16%, you'd end up with more than $1,080,000. If you had used the fund charging .76%, you'd end up with about $150,000 less.</p> <p>So, if the type of fund you'd like to invest in is available for a lower cost outside your 401K plan, that would be another reason to consider an IRA.</p> <h2>Final Factors</h2> <p>Keep in mind that IRA annual contribution limits are much lower than 401K plan limits &mdash; $5,500 vs. $18,000 (or $6,500 versus $24,000 for people age 50 and older). If you contribute 6% of your salary to your 401K in order to take full advantage of your employer's match and then max out an IRA, it's possible you'll still need to invest more. So, head back to your 401K plan and finish out your retirement plan investing there.</p> <p>Also, while a high income will not make you ineligible for your employer's 401K plan, there <em>are&nbsp;</em><a href="https://www.irs.gov/uac/newsroom/irs-announces-2016-pension-plan-limitations-401-k-contribution-limit-remains-unchanged-at-18-000-for-2016">income-based eligibility restrictions for IRAs</a>.</p> <p>There's much to be said for simplicity, but depending on how you answered the questions above, using your workplace plan <em>and </em>an IRA may turn out to be more profitable. Yes, it'll involve a little more work than investing in your workplace plan alone. But being able to follow your strategy of choice and avail yourself of investments with lower fees could pay significant dividends down the road.</p> <p><em>So, which is it for you? 401K or IRA?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/401k-or-ira-you-need-both">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-choose-a-roth-401k-or-a-regular-401k">Should You Choose a Roth 401k or a Regular 401k?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/403b-vs-401k-how-are-they-different">403B vs. 401K: How Are They Different?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/three-easy-steps-to-take-for-a-better-401k">3 Easy Steps to Take for a Better 401k</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement 401k contributions employer matching individual retirement account IRA Thu, 07 Jul 2016 09:01:07 +0000 Matt Bell 1746129 at http://www.wisebread.com Don't Let These Expenses Spoil Your Retirement Abroad http://www.wisebread.com/dont-let-these-expenses-spoil-your-retirement-abroad <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/dont-let-these-expenses-spoil-your-retirement-abroad" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/globe_world_coins_80768379.jpg" alt="Learning how to keep expenses from spoiling retirement abroad" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The relatively low cost of living in countries like Mexico, Thailand, and Spain makes them <a href="http://www.wisebread.com/5-incredible-places-to-retire-abroad-that-anyone-can-afford">popular destinations for retirement</a>. Your fixed retirement income goes further here, affording the possibility of a little luxury, as well as adventure in your later years.</p> <p>Standard of living, climate, and culture are all massive draws, but retiring abroad can also come with unexpected bills. Take, for example, medical costs, taxes, inheritance restrictions, and house buying fees which are completely different to home. While the everyday cost of living might be favorable, these &quot;one off' costs can stack up.</p> <p>Here are some specific (and perhaps unexpected) bills to watch out for.</p> <h2>Assets and Visas</h2> <p>In order to get a visa as a retiree, you will need to demonstrate that you have the income or assets to support your lifestyle. Because it is assumed you will not work (you're retired, after all), the visa type may prohibit you from taking on employment to supplement your income &mdash; making your pension or other assets absolutely crucial.</p> <p>The amount required to get a visa varies from location to location. For example, to retire to Thailand you must prove you have a monthly income of around $2,000. Although this might seem low to those of us living in Western Europe or North America, this income is double that of the average Thai.</p> <p>If retirement in Mexico floats your boat, you will need to prove you can afford it. A temporary visa which lasts for up to four years requires you to have an income of just over $1,500 a month, or just over $25,000 in the bank. A permanent visa, on the other hand, means you need over four times that in the bank, or a monthly income of over $2,500.</p> <h2>Exchange Rate Woes</h2> <p>Wherever you're headed, if you draw income or pension in one currency, and are planning on spending in another, then you need to understand and make allowances for exchange rate fluctuations. If not, you might find yourself with a hefty bill to pay.</p> <p>For example, if you are planning on buying a house in your new retirement location, and will have a mortgage outstanding on it in a local currency, your payment might change significantly because of the exchange rate. Add in the potential fluctuations in mortgage payments due to interest rate changes, and you might struggle to predict exactly what your housing bills will look like on an ongoing basis.</p> <p>If you own property in your home country, one option is to mortgage that property, and use the cash to buy outright in your adopted country. This means that the mortgage you will be paying is in the same currency that you draw income in, removing one source of worry.</p> <h2>The Cost of Good Health</h2> <p>For something that is truly priceless, keeping in great health can be pretty costly. Because a trip to the hospital can be relatively cheap in many popular retirement destinations, many expat retirees prefer to pay out of pocket for their health care as they need it.</p> <p>Paying for health care is a personal decision, and depends largely on your ease of access to funds, and your attitude to risk. Be warned, though, that in some countries such as Thailand, hospitals have been known to turn away people who cannot prove their ability to pay, either with ready cash or valid insurance. Carry a credit card on you if you choose not to invest in an insurance policy here!</p> <h2>Home Sweet Home</h2> <p>Buying a new home is seldom stress free &mdash; and doing it abroad is likely to create some unexpected bills and charges. Make sure you're very clear on the costs involved.</p> <p>Across Europe, for example, house buying comes with a whole range of fees which vary from country to country, and quickly mount up. Throw in the additional costs of having documents checked by a notary, or translated by an official translator, and buying somewhere to live can be especially pricey.</p> <p>It is well worth keeping up with the local news in the country you move to, as your liabilities don't necessarily end once the purchase is complete. Homebuyers in Spain have been pursued for tax the authorities deemed payable on property bought up to a decade ago, because of the high numbers of overseas buyers taking advantage of the massive slump in prices. You might not be able to change unexpected bills like these, but at least you can be forewarned.</p> <p>Part of what makes life overseas exciting is the opportunity to gather new experiences along the way. However, some of these differences can make life that little bit more challenging, too. Many of the costs associated with retiring abroad are unavoidable &mdash; but by being aware in advance, you can better manage the bills as they come in.</p> <p>There's no substitute for your own research. If you're thinking of building a life abroad for your retirement years, then get your finances prepared, so you can enjoy peace of mind.</p> <p><em>Are you planning to retire abroad? What do you think &mdash; does the lower cost of living outweigh the risk of financial surprises?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/claire-millard">Claire Millard</a> of <a href="http://www.wisebread.com/dont-let-these-expenses-spoil-your-retirement-abroad">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-ways-to-avoid-bank-fees-while-traveling">11 Ways to Avoid Bank Fees While Traveling</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-i-saved-enough-for-a-down-payment-while-working-in-china">How I Saved Enough for a Down Payment While Working in China</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retire-for-half-the-cost-in-these-5-countries">Retire for Half the Cost in These 5 Countries</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-amazing-honeymoons-that-only-seem-expensive">5 Amazing Honeymoons That Only Seem Expensive</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-get-taken-how-to-evaluate-an-exchange-rate">Don&#039;t Get Taken: How to Evaluate an Exchange Rate</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement Travel abroad exchange rates expats health care overseas retirees second homes unexpected bills visas Wed, 06 Jul 2016 09:00:11 +0000 Claire Millard 1745832 at http://www.wisebread.com 5 Questions to Ask Before Buying a Second Home in Retirement http://www.wisebread.com/5-questions-to-ask-before-buying-a-second-home-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-questions-to-ask-before-buying-a-second-home-in-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_house_retirement_21246021.jpg" alt="Couple asking questions before buying second retirement home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's nice image: You, your children, and your grandchildren gathering every summer at the lake house you bought after you retired from the workforce. Or maybe you instead picture these same children bringing their grandchildren for long weekends at the downtown city condo you purchased immediately after heading into retirement.</p> <p><a href="http://www.wisebread.com/how-to-retire-rich" target="_blank">Buying a second home after retirement</a> can be a reward for years of hard work. It might also be a good investment if you buy the right property; real estate, after all, has historically increased in value.</p> <p>But buying a second home in your retirement years can also be a financial misstep. These potential pitfalls are why you need to ask five key questions before you invest in that second home after you retire.</p> <h2>1. How Will You Pay for It?</h2> <p>Buying a second home is fairly simple if you plan to use cash from your savings. You still have to be careful, though, to make sure that such a big expenditure won't eventually make it more of a struggle to meet your other retirement goals. It might not be easy to take that long-awaited cruise if you've spent too much of your savings on a second home.</p> <p>If you need to finance the purchase of a second home with a mortgage, you might face an even bigger challenge. Under federal law, lenders can't reject you for a mortgage loan because of your age. They can, though, reject your application if they think you don't have enough income to afford your monthly mortgage payments.</p> <p>Lenders rely partly on your debt-to-income ratio when making mortgage decisions. Lenders want your total monthly debts, including your new mortgage payment, to equal no more than 43% of your gross monthly income. Income, of course, isn't just money you receive from a salary. You can also count Social Security payments, pension payments, monthly rent checks, money from legal settlements, and any other recurring source of monthly income. But if your income is so low that your debt-to-income ratio sails over that 43% mark, you'll struggle to get the mortgage you need to buy a second home.</p> <h2>2. Can You Afford It?</h2> <p>This, of course, is the big question: Even if you can buy a second home, can you afford the monthly expenses that go with it now that you can no longer rely on your regular paycheck?</p> <p>If you are financing the second home with a mortgage, can you afford to add those monthly payments to your existing expenses? And even if you are not taking out a mortgage, you'll have to face the normal expenses associated with owning a home: Furnaces go out, water heaters leak, and utility bills add up. If you buy a condo as a second home, are you okay with paying association dues each month?</p> <p>In short, can you afford the financial burden of owning that second home?</p> <h2>3. Who Will Maintain It?</h2> <p>Homes require regular maintenance. Someone has to mow the lawn, shovel the walks, sweep the floors, and replace fading paint jobs. Is this something you are willing to do, even as you get older? You might think your children will be happy to spend a few hours pulling weeds and mowing the lawn. But are they really okay with that?</p> <p>You might need to hire a service to handle the regular maintenance of your second home. That will ease your burden. But these companies don't come cheap. Can you afford the additional expense of hiring someone to maintain your second home?</p> <h2>4. How Often Will You Use It?</h2> <p>You might dream of spending months at your vacation home surrounded by visiting family members. But that dream might not be realistic. Your children and grandchildren have lives of their own. They might visit far less than you expect.</p> <p>And what about you? You might think now that you'd like to spend every summer at the lake house in that quaint, touristy town. But after three or four summers, you might get tired of that restaurant you've eaten at every visit or you might no longer have the appetite for all those fudge shops and antique stores. Yes, you might get bored with your second home, too.</p> <p>Instead of vacationing in the same spot, you might instead want to travel to new places each year. If so, a permanent second home might not be the best choice.</p> <h2>5. What Happens After You Die?</h2> <p>We don't like to think about dying. But when you buy a second home in your retirement, you need to consider it. What will happen to that second home after you pass on?</p> <p>You might want to leave it to one of your children. You'll have to decide, though, who gets it, without causing strife among them. What if none of your children want the home? They'll then have to go through the hassle of selling the property after you die. You'll need to determine before your death, just how the proceeds of that sale &mdash; if there are proceeds &mdash; will be divvied up.</p> <p><em>Have you considered buying a second home?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-questions-to-ask-before-buying-a-second-home-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/frayed-relationships-damaged-credit-and-costly-additions-what-a-multi-generational-home-might-cost-y">Frayed Relationships, Damaged Credit, and Costly Additions — What a Multi-Generational Home Might Cost You</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-questions-to-ask-before-signing-a-lease">10 Questions to Ask Before Signing a Lease</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-of-the-fastest-ways-to-go-broke-in-retirement">4 of the Fastest Ways to Go Broke in Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Retirement condos family maintenance mortgages second homes vacation homes Fri, 24 Jun 2016 09:00:03 +0000 Dan Rafter 1737542 at http://www.wisebread.com Using Your Roth IRA as an Emergency Fund — Ever a Good Idea? http://www.wisebread.com/using-your-roth-ira-as-an-emergency-fund-ever-a-good-idea <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/using-your-roth-ira-as-an-emergency-fund-ever-a-good-idea" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_piggy_bank_73354919.jpg" alt="Woman using Roth IRA as emergency fund" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You know you need an emergency fund, that pool of savings that you can dip into to cover the costs of replacing everything from a burst water heater to your car's blown transmission. But does it ever make sense to use a Roth IRA as that emergency fund?</p> <p>The short answer? It might. If you're careful about your withdrawals.</p> <p>You usually think about Roth IRAs as retirement vehicles. But with a Roth IRA, you can also withdraw from your <em>contributions </em>at any time without penalty, even if you are younger than 59 &frac12;. That's because you've already paid taxes on your contributions.</p> <h2>No Penalties From Contribution Withdrawals</h2> <p>Because of this quirk, a <a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k" target="_blank">Roth IRA can work as an emergency fund</a> <em>and</em> retirement fund at the same time. You make your yearly deposits &mdash; for 2016, you can contribute a maximum of $5,500 every year into a Roth IRA (unless you are 50 or older, in which case you can contribute a maximum of $6,500 a year) &mdash; and watch that money grow as you near retirement. But if an expensive emergency comes up, you can withdraw the funds you need, as long as what you are withdrawing is coming from the money you contributed to your Roth IRA, and not from the dollars that those contributions have earned.</p> <h2>You'll Pay for Earnings Withdrawals</h2> <p>In other words, withdrawing your contributions is never penalized. Withdrawing from your Roth IRA's earnings, though, will leave you with a penalty and a tax hit. If you withdraw the money that your Roth IRA has earned before you hit the age of 59 &frac12; &mdash; aside from a few special circumstances &mdash; you'll not only pay taxes on those dollars, you'll also have to pay a penalty of 10% of whatever you withdraw.</p> <p>Say you withdraw $2,000 worth of earnings on your Roth IRA before you turn 59 &frac12;. Not only will you have to pay taxes on that money, you'll also have to pay a penalty of $200.</p> <p>Fortunately, it's not easy to withdraw your earnings too early. You'll have to request the withdrawal from your brokerage, mutual fund, or bank. These financial institutions will know if your withdrawal request is high enough to cut into your earnings. If this does happen, it's best to find an alternative source of funds, unless you are not bothered by the idea of paying extra taxes or an additional penalty.</p> <h2>The Annual Cap Means You Can't Pay It Back</h2> <p>There is another disadvantage to using a Roth IRA as an emergency fund. Say you withdraw $2,500 to buy a new furnace. You can still only contribute your maximum to your Roth IRA each year.</p> <p>If you can only contribute $5,500 each year, you can't make up for that $2,500 withdrawal by contributing $7,000 instead. This could slow the pace of your retirement savings.</p> <p>You'll also need to be careful with your investments if you plan on using your Roth IRA as an emergency fund. You should place your money in safer, more conservative investment vehicles such as CDs and bonds. That way, the odds are greater that more of your money will be available in case of a financial emergency.</p> <p>Whether you use a Roth IRA, a traditional savings account, or some other savings vehicle as your emergency fund, one factor doesn't change: You need to build and maintain that fund. How much money you need in your emergency fund varies, but most financial experts recommend that you have at least six months of daily living expenses saved up. More, of course, is even better.</p> <p><em>Have you ever pulled money from a Roth IRA to cover an emergency? Would You?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/using-your-roth-ira-as-an-emergency-fund-ever-a-good-idea">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. 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