All Posts Tagged With: "401k plan"
Sometimes the Best Movement is Standing Still
Michael Bowler | RSS | Fri, Jun 05 2009 | 0 Comments
As we have covered before, we are about to enter a solid recovery. Many people have lost lots of money in the recession in all sorts of investments and are wondering what they should do from here. If you have not already unloaded those bottomed out stocks, hold on to them. If your retirement money is in any stock related format, do not even touch it. Stay put and ride the tide back up. Essentially, yes, this is a form of timing the market, but sometimes you just have to. You rode the Dow down from 12000 points to 6500 points. Why not ride it back up with the same stocks. Most of the stocks you hold, if the company has not gone bankrupt, will go back to their original status.
If you have invested in financial organizations that have not already filed for bankruptcy, you are in good shape to ride the recovery tide back up to prosperity. If you have not already diversified your 401k to minimize losses, do not bother now, Ride it back up where it was and then make plans from there. With the market at such a low and stocks that were once in the double digit dollar figures per share currently trading for pennies, this is the time when everyone and their mother will begin to buy.
Sure, read that Wall Street Journal issue that was on your front porch this morning. Check your IRAs, your 401k plan, and the stocks you are currently holding. The only thing you need to remember is that what you are reading is the lowest your investment will go. As mentioned in previous articles, “a rising tide lifts all boats,” and your ‘boat’ will surely rise with the oncoming tide. If you miss a major value incline now, it could be very devastating. Why lose so much value now and sell so low when you can just regain the value.
Of course a recession is difficult. This only happens every twenty years, just like any cycle you will find in any industry or any part of life. As difficult as it may be to hang on, this is the worst time to sell because we’re at the bottom. Some analysts, who this author agrees with, actually call this an artificial bottom. The bottom should not have been lower than a 7000 point Dow Jones average.
Flaring emotions and investors raging with adrenaline and anger actually brought the economy to an artificially low bottom. Selling in an artificial bottom is more unwise than words can express. Resist the urge to sell. In fact, if anything, try to buy more. It will raise the overall economy, doing good for all industries you have your fingers in.
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Tags: rising tide, retirement money, bankrupt
Income Streams for Life
Michael Bowler | RSS | Thu, May 14 2009 | 5 Comments
“Now his pension plan’s been cut in half and he can’t afford to die,” sings John Rich, of the country music duo Big & Rich, in his new, controversial song, Shutting Detroit Down. Two things nobody is ever financially ready for, especially if he or she is a money spender: retirement and death. Financially speaking, it is hard to die at the right time, unless you know much more than anyone else and can plan your death. People are so wrapped up in saving for retirement, 401k plans, life insurance plans, IRAs, money markets, or anything else they can find that will provide extra money for retirement and death. If you die too early, the paychecks your family was living off of are gone. If you die too late, you impoverish your family or confine yourself to an unpleasant local retirement home by depleting your savings.
One unexpected side effect of the recession is a jump in sales of fixed immediate annuities, which dispense guaranteed income for life. New York Life reported an 82% sales increase this quarter alone. A man at retirement age paying them $100,000 now will receive $650 a month for life, which is perfect for a retired man whose house and vehicle are paid off and bills are low. That’s equal to 7.8% of the total each year, double what most retirement investments pay out.
Christopher Blunt, who runs New York Life’s retirement division believes that annuities offer the best way to lock in guaranteed retirement income. Retirement income is generated from a stock-and-bond portfolio requires keeping plenty of assets in reserve in case they’re needed to fund a long life or contend with a nasty bear market,” he says. The point is that you can get the same retirement income as you could from your portfolio, with 25% to 40% less principal.
The way they generate superior retirement income is by transferring it from those who do not collect it to those who do. For instance, if you pay them $100,000 and die three days later, your money is lost and goes to someone who is still collecting. However, if you live until you’re 85 and you have been collecting since you were 65, you have received $156,000 over the tenure of the relationship, over 50% profit. If you are lucky to live to 95, you have likely received $234,000, with a profit of nearly 150% of what you paid. For those who are healthy at 65, it is a good investment, especially if that person also has savings and stocks to tide over through bad times or to leave to their families. Assuming you are in good health, there are few downsides to a fixed annuity, especially if you keep your product features simple. You pay $100,000 of your savings to provide for the rest of your life. If you have been saving well for retirement, you likely still have $350,000 to leave to your family whether you collect or not.
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Tags: revenue, retirement, death
Medicare and Social Security to run out by 2037.
Jennifer McClelland | RSS | Tue, May 12 2009 | 3 Comments
While we may not all look forward to retirement, or maybe aren’t planning properly for it, for many of us it’s going to happen. However, now if you will be retiring before 2037, you may want to start looking into a very serious saving plan for yourself and your family.
Today there was a report that came out that announced that Social Security would run out of money by 2037, four years sooner than first thought.
In 2016, Social Security will start paying out more benefits than it takes in, which is what will lead to the depletion of the fund by 2037.
Medicare is actually faring worse than Social Security, is has been giving out more benefits than it was taking in since 2008 and will be depleted by 2017.
There is a serious problem with these programs now, the fact there are so many baby boomers going into retirement now is what is depleting the funds. While I don’t support a completely privatized Social Security/Retirement program, I don’t and can’t appreciate the fact that this money comes out of my paycheck every time I’m paid just so I won’t be able to benefit from it at all in the future. When social security runs out, I will be 51.
Right now I haven’t even finished college and this news has me worried. I have to think about my 401 (k) and other retirement plans just so I won’t have to eat out of a dumpster and live in a box during my “golden” years.
There should be some type of reform to the current social security system. I think that there is a problem that needs to be addressed.
My solution would only benefit those, like me, who are worried about 40-50 years down the road not being able to afford the cost of living. I would propose that the taxes withheld for social security and Medicare from each paycheck actually go to the person who is earning that money and is put into a government backed fund of some kind, instead of giving the money to those who have already retired. Of course the problem with that is that those who are retiring now will not be able to draw social security from what is being earned now, and that money will have to come from somewhere.
Some have said that removing the income tax cap would be a better option. Why is it fair for someone who makes $250,000 a year to pay the same amount of tax as someone who makes $5 million a year? While both of these people are obviously not anywhere near poverty, of course the person making $5 million a year can afford to pay more in taxes, even though that person is more likely to spend that money on hiding assets.
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People who make less are less likely to save for retirement
Tags: social security system, retirement program, 401k plan
