Post #7 – Retirement Planning Simplified, Part I
For those of you who would like a simple method to quickly estimate the amount of assets necessary to fund your retirement, and how much you need to save annually, the next couple blog posts are for you. The essence of retirement planning simplified. This post will provide a 4-step process that can be used to estimate a ball-park retirement nest egg figure to fund a 30-year retirement. This method is for those people who, whatever their age, are just starting a serious retirement savings plan and at this point need a rough target figure. This 4-step process will only provide a rough figure because it requires a lot of assumptions about the future that may not yet be known. The retirement lifestyle you hope to live, the future inflation rate, and future market returns, etc. are variables that will affect your final nest egg size. As you get closer to your retirement date, you should work with a financial planner to help you apply more rigor to the process I have presented here. The 4 steps are:
Post #6 – What can you expect from Social Security and Medicare? Part II
I have done a lot of reading and talked to many professional financial planners about what changes may be coming to federal old age entitlement programs as well as private pensions and state government retirement programs. I will provide the general thinking by experts on what may lay ahead for the old age entitlements and how you should allow for them in your retirement planning. These views are not my own but a summary of the perspective of several financial planning and policy experts with no agenda other than trying to predict the changes to these entitlement programs and how they might impact peoples’ retirements.
Post #5 – What can you expect from Social Security and Medicare? Part I
I originally intended this blog entry to be about estimating the future size of your retirement nest egg and what your subsequent savings rate should be. But this discussion is greatly impacted by your future social security and medicare benefits. The Social Security Administration sends out an annual benefit statement to each person who pays social security taxes. If you have not received this annual statement, you can get a copy of it at this site. Unless you are only a few years away from collecting social security, it would not be prudent to rely on the benefit promised in your social security statement. Because the social security program has accumulated a large future “unfunded liability,” the benefit amount forecasted will likely be higher than what you will actually receive. So before tackling how to estimate the size of your retirement nest egg, it may be a good idea to review the magnitude of the unfunded liabilities for both the medicare and social security programs and discuss any adjustments you should consider making in your retirement planning.
Post #4 – Retirement Savings and the Cost of Waiting
Although asset returns are certainly important to reaching your financial goals, your level of savings will be the single largest determinant of how much and how fast you accumulate wealth. And in the early years your savings rate has the biggest impact because your savings have more time to compound to reach your retirement asset goal. Most people have heard of the “The Law of Compound Interest.” Albert Einstein called this law the 8th wonder of the world. In this blog I present a simple example of the impact of a person’s savings rate over a 40-year period. This example will illustrate very well the law of compound interest and the cost of waiting to start saving for retirement.
Post #3 – The 2nd and 3rd Most Important Rules of Personal Finance
In my last blog post, “LBYM” The First Rule of Personal Finance, I emphasized the importance of people adopting good financial behavior of “Living Below Your Means” to form the foundation of wealth accumulation. If you do not LBYMs and free up cash for retirement savings or, for that matter, any other financial goal, all the other retirement and investment planning concepts and strategies are useless. In this blog I want to touch on what I believe are the 2nd and 3rd most important rules of personal finance.
Post #2 – “LBYM” – The First Rule of Personal Finance
The financial advisory guru, Dave Ramsey, www.daveramsey.com, once wrote that wealth accumulation is 90% behavior and 10% knowledge, and I could not agree with him more. The ability to retire someday is mostly about a person practicing good financial behavior, week after week, year after year… The more education you acquire about personal finance and investment planning, the better your results will be. But the most basic fundamental principles of personal financial management must be employed to accumulate the nest egg required for retirement.
Post #1 – The Necessity of Retirement Planning
With the decline of old fashioned company defined pensions, an insolvent social security system, and the recent decline of housing values, it is important for everyone to pay more attention to their retirement and investment planning. That is, if you plan on ever retiring from your full time work. In fact, it is imperative that you do proper retirement planning even if you do not plan to retire. You may want to continue working, but in today’s turbulent world, whether you continue working may not be your choice. Therefore, retirement planning in today’s world is more important than ever. You may have heard of the term “Ownership Society.” What that really means is, today, when it comes to retirement, you are “on your own.” I cannot stress enough the importance of taking responsibility for your own retirement. Whether you have a pension coming or not, everyone should take their retirement planning seriously. One thing we can all be sure of, there will be no bailouts for older Americans who have not planned for their own retirements.