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Friday November 17th 2017

Three Best Place to Retire on the Cheap

Finding the perfect spot to retire is on the mind of many people these days. With the volatility of the stock market and other investments, retirees evaluating practical retirement options are looking for affordable options that suit their lifestyle. Three cities have been named in the media lately as the best places to retire an they are not as far away as you might think.

St. Augustine, Florida

There is a reason we all think about Florida as a retirement capital. In Smart Money’s March, 2011 issue, the city of St. Augustine, Florida was selected as the second most attractive retirement spot for retirees. With an average home price of $115,400, it is hard to beat this quaint old beach town for affordability. To sweeten the picture even more, Floridians do not have to pay state tax.

The St. Augustine beaches are second to none, stretching out over miles of pristine Atlantic white beaches. Located about forty five minues south of Jacksonville Beach, and a major airport, and tugged into the northeast section of Florida, St. Augustine offers moderate temperatures and a summer ocean breeze to cool hot summer days. With a small population of about 13,000, St. Augustine graces retirees with a small town vibe, free from the stress of larger cities.

As the oldest US city, discovered in 1513, St. Augustine’s historic downtown is quaint and memorable with brick streets and Spanish architecture. There is no shortage of shopping and restaurant venues. With Flagler college in the heart of the city, this small college town has a diverse population, filled with tourists, college kids and retirees.

Lexington, Kentucky

While some retirees want the beach, others favor rolling hills and the four distinct seasons offered by a city like Lexington, Kentucky. Boasting an intellectual population, with almost 40% of the residents having a college degree, Lexington promotes the idea of lifetime learning. Citizenas over 65 can audit classes for free, filling any empty seats they find at the University of Kentucky.

Median home prices are an affordable $144,200, as printed in CNN Money.com’s article “25 Best Places to Retire”. With 29% of the population over 50, there is plenty of company for outings to great restaurants and equestrian events, or to take in a basketball game.

Bellingham, Washington

For retirees looking west, Bellingham, Washington is a city that should not be overlooked. The average price of a home is $$258,450, which is a real bargain for the west coast. The fact that there is not state income tax makes this city even more attractive. Located geographically close to both Seattle and Vancouver, this community is home to an international airport and a picturesque downtown harbor.

A state college and nationally acclaimed hospital also call Bellingham home. A farmers market located in the downtown area hosts local vendors offering a quaint shopping experience. The beneficiary of moderate temperatures, Bellingham offers residents a break from the heat, and the extreme cold weather that many other parts of the country claim.


Figuring Out Your Financial Goals

Most people have a general idea of what their financial goals are, but they never dig down to the specifics. If you want financial independence, for example, what does that mean? It is important to create a detailed explanation of your financial goals so that you can begin to work seriously toward them. You will have better success meeting your financial goals when you have a better understanding of exactly what they are. The sooner you start, the more you will be able to take advantage of accumulating interest that could speed you toward your goals even faster.

Make a List

Begin with a broad list of your financial goals. Think of big things, like buying a new home or paying for college tuition for your children. Once you have defined the big goals, do some research into possible ways to achieve those goals. If you want to send your kids to college, find out about the tuition and housing rates at some of the schools in your area. Give each of your goals a real number to achieve so that you can create a realistic time frame for reaching that number.

Prioritize

Once you have a good list of goals, you need to decide which ones are the most important. You may not be able to afford to save for college tuition and pay for braces at the same time. Think about each of your goals realistically and arrange them in a manner that makes sense. When they are arranged by importance, you can focus your money and energy on the goals at the top of the list first. Once those goals have been met, you can begin to work on goals that are further down the list. The importance of some goals may change as time passes, so you should update your priorities once every other year or so.

Scrutinize Spending Habits

The toughest part of working toward a financial goal can involve adjusting your daily spending habits. When you start to buy a new electronic gadget, think about how much money you are spending. How far would that amount of money put you toward your goal if you put it in savings instead? How long would it take you to make up that amount of money if you did not apply it to your goal. Find ways to remind yourself of how important the goals are. You should also allow yourself some fun money in your budget so that you don’t feel like you are always sacrificing.

Make a Solid Plan

The best way to keep on track toward your financial goals is to create a realistic plan that you know you can follow for the long term. Some of your goals may take years to accomplish, so your plan needs to fit your lifestyle comfortably for a long time. Create a budget that allows you to put a specific amount of money toward your goals so that you can reach them in a timely manner, but don’t make the budget so strict that it is impossible to live up to.


Seven Budgeting Basics

A budget is simply a plan… a plan that you make to tell your money where to go. A written budget will show where every dollar you goes and make your income work for you. Getting started is easier than you might think!

1. Track your spending for a month.

The first step in setting up a budget is to figure out how much money is coming in and how much is going out each month. You probably have a pretty good idea how much is coming in, but you may be surprised to see how much is going out.

2. Categorize your expenses.

You can come up with whatever makes sense to you, but some common categories are:

    • Savings & Retirement

    • Housing & Utilities

    • Food

    • Transportation

    • Medical/Health

    • Personal

    • Recreation

    • Debts

3. Pay yourself first.

Even if you can only save $5 or 10 each week, do it! The quickest way to wreck a budget is not having an emergency fund. When those unexpected expenses come up, you need to be prepared.

4. Figure out where adjustments are needed.

Are your expenses in line with your income? Maybe you found some money leaks… you know, those little expenses like fast food and movie rentals that really add up over a month’s time. You might not be able to do much about your fixed expenses, such as housing and utilities, in the short term; but you can take of control of those money leaks.

5. Reconcile your outflow with your inflow.

If you are fortunate enough to have more coming in than going out, you need to assign it a job; maybe paying down debt or adding to your emergency fund. If your outflow exceeds your inflow, you will have to cut some expenses or create additional income. This is the most important part of budgeting, because it’s the part that calls for action. Don’t forget, this is a process, and it may take two or three months to make your budget reconcile.

6. Use cash.

This is especially important for variable expenses like groceries, clothing, and entertainment. For example, withdraw only the amount of cash that you plan to spend in a shopping trip and discipline yourself to spend only that amount. Spending cash is much more painful than using your debit card!

7. Stick with it.

Your budget won’t be perfect the first month, or probably even the second month. It takes time and persistence to develop a written plan that will work for you. Keep in mind that your budget will change over time, hopefully for the better if you pay off debt or increase your income.

A budget is a powerful tool that you can use to change your future. A certain amount of self-discipline is needed, but the effort you put forth will be worthwhile as you take control of your money.


Preparing Your Loved Ones for the Worst

In most households, one spouse takes care of the finances and the extent of their discussion about their personal finances with their spouse are limited to occasional “can we afford this” questions and answers. Many couples prefer to conduct finances this way in order to stave off potential arguments about their finances and because some spouses just do not care to be concerned with the ins and outs of their family’s finances. However, should the financial guru of the family pass unexpectedly, the other spouse can be left in financial chaos.

It’s a Tough Topic

Thinking of unexpectedly passing can be a hard thought to swallow, but you should not let fear stop you from preparing your spouse in the event of your death. Being on the financial side of the relationship, you need to make sure your spouse at least understands personal finance basics in the case of your unexpected demise and what your family’s financial standing entails.

This can be accomplished a variety of different ways, but there are two popular choices that can get the job done. The first would be to sit down and get your spouse involved in your family’s finances. Share every financial decision and all pertinent information in order to ensure they know everything that is going on. Should he or she not wish to do this, you can decide to write a letter with all the financial he or she would need in order to continue without you.

Gather All Financial Information in One Place

Whether you decide to talk things out or write a letter, you need to make sure your spouse understands and has all the knowledge he or she needs. This includes account numbers and any information he or she could possibly need in order to access all your family’s investments and assets.

Your spouse will need a list of all accounts, and who is assisting in your estate planning, insurance agents, mortgage officers, and any other important people that are a part of your family’s financial security; any safe deposit boxes and how to access them; and finally, a list of all expenses including mortgages, phone bills, car payments, etc. Your spouse will need to know every possible detail. Include anything you think they could possibly ever need to know.

Keep it Up to Date

After you have everything in order, you need to make sure you keep it all up to date. This is especially important if you choose to leave everything in a letter instead of telling your spouse about everything you decide to do. Finances change over time, accounts get opened and closed every day, agents get fired and new agents get hired, a list of old account numbers and contacts helps no one. In such a difficult time, you do not want to leave you family any worse than they already will be. The death of a spouse is hard enough. Don’t leave your family open to financial insecurity as well.


Women: Is Your Financial Planner Giving You the Right Advice?

Many women are finding themselves solely in control of their financial planning after a divorce or after the death of a spouse. Unfortunately, the majority of financial planners are used to dealing with men. Research shows that most women have investment accounts that are only two-thirds the size of a typical man’s account.

Add to that the longer average lifespan of women and you have many ill prepared for retirement. If you are a woman who needs to handle her own investments through a financial planner, there are some things you should keep in mind about the service you receive.

Sexual Discrimination Problems

The fact that men have been the traditional financial agents for most marriages means that investment planning has become very male-oriented. Most of the financial planners are men who are used to working with other men. It is very easy for a male financial planner to slip into the habit of doing what they believe is best for their female clients without regard to what the client really wants or needs. Investors tend to guide women toward more narrow investment plans because they feel that women are not prepared to handle riskier options. Some planners can be outright disrespectful of female clients because they do not believe women understand the intricacies of investments.

Life Expectancy and Income Differences

The problem with this unfair treatment of women in the financial world is that women are more likely to need to handle their own investments sooner or later. Most women in the United States will outlive men by an average of 10 to 20 years. Since women tend to earn lower incomes than men, it is much more important for women to invest their money wisely so that they will be able to live comfortably once their spouses have passed. When a financial planner gives a woman bad advice, it can have a serious detrimental impact on her future.

Communication Challenges

Sometimes the perceived discrimination is really a problem in communication. Since the financial world has always been primarily male, it can be challenging for a financial planner to deal effectively with a female client. Men process their thoughts and plans differently than women do.

Many veteran financial advisers are used to working in a fast-paced environment with men who want to cut to the bottom line quickly. Women tend to want their advisers to explain all of their options in more detail and discuss what would be the best choice. It can be difficult for an adviser to change his communication style to accommodate a female client.

Cookie Cutter Investment Plans

Another problem for women in the investment world is that the most commonly used investment plans were created with male investors in mind. Women have different financial needs because of several factors, which means that a male-oriented plan may not be the best option.

Financial planners need to break free from the investment models they are comfortable with in order to offer more effective options for their female clients. If you are a woman receiving financial advice through an established financial planner, you need to take an active part in making sure that your portfolio is unique to your specific situation. If you aren’t getting the answers you need, or if you don’t fully understand your portfolio and investment strategy, it’s time for a different financial planner.


Five Financial Imperatives for Young Adults

The way you handle your money when you are younger can have a dramatic impact on your quality of life as you get older. Here are five financial lessons you must learn if you are to maintain your financial security in the future.

Write it All Down

The first step in organizing your finances is to write everything out. Make a list of the things that you spend money on. Include everything that you know you will buy during a normal month, such as your utility bills, car payments, house payments or rent, groceries, gasoline, and entertainment.

Don’t forget to include special expenditures that happen on an irregular basis, like car tag renewals or birthday presents. Once you have a complete list of what you spend, you can compare that to the amount of money that you earn.

Recognizing What You Want versus What You Need

If your spending habits exceed your earnings, you will need to make some changes to your budget. Look at the items you usually buy and determine if those items are things you really need or things you really want.

Keep the necessities, but cut back on the things that are not vital. You should always allow yourself a certain amount of money for entertainment, but make sure that it is an amount that you can comfortably afford.

Control Your Credit

Credit will be an important part of your financial life. A good credit rating can lead to better interest rates on loans for cars or mortgages, as well as better rates on auto and health insurance. Make sure you check your credit rating at least once every year to make sure it is accurate. You can keep your rating positive by paying debts in a timely manner.

Try to use credit cards sparingly. Remember that a credit card is really just a convenient bank loan. When you make a purchase using credit, make sure it is an amount that you can pay in full when your next credit card bill comes. Carrying a balance over several months accrues expensive interest payments that make your purchase much more expensive than it was originally.

Begin Retirement Investments Early

The earlier you begin saving money toward your retirement, the better your later years of life will be. It can seem strange to put money away for your senior years when you are just starting out in life, but you need all of that time to create a nest egg that will allow you to do what you want to do when you retire.

Remember that you are planning for a time when you will not work at all, which means that your savings will have to cover all of your expenses. On average, people are living 20 – 30 years after they retire, which means you need to save enough to pay for up to 30 years of life without a regular income.

Create a Safety Net

Unexpected things happen to everyone. Make sure you always keep some money in a savings account to help cover expenses when your car breaks down or you need to replace an appliance. Emergencies can cut deeply into your regular budget if you do not have any savings to help cover the costs.


Start your ROTH… Now!

If you are in your twenties, you should be thinking now about your retirement nest-egg. Why? Simply, the earlier you start the more you get to benefit from the power of compound interest? If you invest $1 when you are 25, that dollar may be worth as much as $21. If, however, you wait until you are 35, to save that dollar, it will be worth around $10, or less than half of the total amount (calculations assume 8% annual return). Every dollar you save when you are 25 is worth two dollars when you are 35.

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5 Retirement Plans for the Self-Employed

Self employment means that one is responsible for setting up and maintaining one’s own retirement plan. If this is neglected, the financial future of the self employed person may be in trouble. Besides the obvious problem of not having enough money to be comfortable at retirement time, setting up a retirement plan can provide significant tax savings, either now or in the future.

Here are some of the available retirement plans and their benefits and drawbacks for the self employed person.

401(k) Retirement Plans

A solo 401(k) can be established for the self employed, although 401(k) plans were designed for an employer to implement. Choosing a 401(k) can mean more expense than other plans in setting up and maintaining the plan.

Individual Retirement Accounts (IRA’s)

Another plan that was not meant for the self employed but can still work is an Individual Retirement Account (IRA). The most common types of IRA’s are Roth and the traditional type. The biggest advantage to either a Roth or traditional IRA is in taxes.

Using a Roth IRA, an individual pays taxes on earnings, then makes the retirement payment and there are no further taxes due when it’s time to receive distributions at retirement. Although there are other rules and regulations, usually if a self employed person thinks he will be in a higher tax bracket when retirement comes, then a Roth IRA is the right decision.

Traditional IRA’s are paid into before taxes are made on earnings and will not be taxed until retirement distribution. This works out very well if the tax payer thinks he will be in a lower tax bracket at retirement, thus paying less tax on the same amount of money.

SIMPLE Retirement Plans

SIMPLE stands for Savings Incentive Match Plan for Employess or Small Employers. In reality, a SIMPLE plan is an IRA, but it was created specifically for small businesses. Again, it can be used by self employeed individuals if they’re sole proprietors.

A SIMPLE plan is easy to establish and inexpensive to maintain. It’s a commonly offered plan by many financial institutions and it has lower contribution limits than other available IRA plans.

SEP Retirement Plans

A retirement plan written for self employed persons and small business owners, an SEP is also a type of IRA plan, much on the order of the SIMPLE plan. LLC’s, sole proprietorships and S and C corporations all qualify for this retirement plan.

As a rule, contributions to a SEP IRA are completely tax deductible, with even investment earnings only taxed at withdrawal. Contributions are made before taxes are paid. If a withdrawal is made from an SEP plan before 59 1/2 a 10% penalty may be charged by the IRS, in addition to income tax on the amount. Withdrawals after 59 1/2 years of age will be taxed at the rate of ordinary income.

SEP IRA’s have great benefits in that there is minimal administration involved and annual contribution limits are high, but with no requirement to contribute amy certain amount. If the income fluctuates somewhat from year to year, a self employed person has the freedom to adjust contributions accordingly, allowing the fund to grow quickly at times and more slowly when income is lower.

Keogh Retirement Plans

This plan was written especially for self employed persons. It can be structured two ways: As a defined benefit plan and as a defined contribution plan. A defined benefit plan is similar to a pension plan, while a defined contribution plan is similar to a 401(k).

Since Keogh plans are not as common as other plans the self employed can use because they’re harder to set up and expensive to maintain.


Retirement Can be More Affordable Than You Think

According to investment experts, you need a lot of money to retire. Based on the numbers they give, planning a retirement within the means we are accustomed to, can be more than a full time job in itself. How can we meet the high goals that have been set for us?

In this declining economy, many of us are barely managing to stay financially afloat on a day-to-day basis. Now we read reports in financial magazines and on Internet sites claiming that we need to set aside three million dollars for retirement. Is this a viable plan for the average American? Or are we doomed to financial adversity in our ‘golden’ years?

Who Can Afford The Luxury of Retirement?

You probably have not thought about the “withdrawal rate” on your retirement funds. The withdrawal rate is just what it sounds like…the rate at which you withdraw funds from your retirement account. Let’s assume you felt you could live comfortably on $30,000 a year. If your retirement fund has $300,000, then you have a 10% withdrawal rate.

The experts say that you cannot afford to exceed a withdrawal rate over four percent. The thinking behind that statement is simply this: if you go above that figure, you’ll run out of money before retirement! That would mean you’d be on a fixed income of a mere $1,000 per month. How could you possibly meet your monthly living expenses with such meager means?

Time for a Reality Check

Magazine headlines aside, let’s look at this from a logical standpoint. You simply can’t compare your personal living situation to that of a consensus poll. The figures might look eye-catching and provoke you into buying a particular written publication, but isn’t that the point? It’s all about selling an article. This is not to say there isn’t a grain of truth to what the so-called consensus is bringing to our attention. However, it is to remind you to read those statements with a grain of salt.

Just as everyone’s living situation and personal expenses varies greatly, so do the financial requirements for retirement. Planning for the future takes careful thought and a little finesse. So many factors can determine the resources you will need for your retirement. For instance, will you have financial responsibilities that could put you in debt somewhere down the road? How many years off is retirement? Will you have a sufficient source of income once you are no longer employed? What plans do you envision for yourself upon retirement that might alter your way of planning from a financial standpoint?

If you feel you should have no outstanding expenses by retirement age, then perhaps you won’t require such a high rate of investment. Conversely, if you plan to see the world through extensive traveling and living your life on high quality standards, you’d be wise to spend less now and save for later.

What’s Really Important in Retirement?

Upon reaching those ‘golden years’ of retirement, is life really about living lavishly? Does retirement dictate the remainder of your days spent lounging on a sun-drenched island, sipping one umbrella-topped drink after another….buying a yacht and sailing halfway around the world?

Decide what retirement means to you. If you enjoy having a daily routine in your life, you probably only need to pay for one or two vacations a year during retirement. When you figure in your social security earnings, you may be able to get by on much less than 4% of your retirement fund.

What’s really important to most of the older people I know is spending time with grandkids. Being a globetrotting granny is not a realistic picture for most senior citizens. And with low living expenses and some smart choices, you may not need to save $1,000,000 for retirement. Just because you make $40,000 a year now, doesn’t mean you need to make $40,000 a year when you retire. After all, you won’t be paying a mortgage then, will you?

The investment in the quality of life you can live – not the quantity of material possessions you can own will be what really makes your elder years golden. Spending time with family and friends, and taking the time to appreciate the beauty and the love that surrounds you will be the best way to spend your retirement years. And you don’t need a big budget to do that.


How to Choose a Finanacial Planner

There are times when you may want to use a financial planner, rather than handling finances yourself. No one can say when you really need some help with finances, but some situations can be complicated, such as coming into a large inheritance or managing multiple real estate properties. Some people just become overwhelmed at the number of financial options available and want someone to steer them in the right direction. As with many types of professionals, finding a good financial planner takes some good old-fashioned research.

A great way to select a financial planner to work with is by getting a referral through word-of-mouth. For example, those working in the finance industry, such as your accountant, could know some planners that could help you. You can also check with your friends and family to see if they can recommend a certain financial planner for you. By getting referrals first hand from people that you know, you are likely to get some good recommendations, before looking for a planner yourself in business directories or online.

Understanding Professional Designations.

There are many different acronyms used to designate professional certifications in the financial services industry. Having an understanding of them will be a great help in finding out about the financial planner you are planning on hiring.

Here are some of the most common designations used:

  • CPA – Certified Public Accountant – A CPA is an accountant that has been subject to one of the strictest licensing and knowledge requirements in the industry. Many CPA’s have years of experience and are especially knowledgeable on issues pertaining to taxes.
  • PFS – Personal Financial Specialist – Accountants who have earned the CPA designation can opt to undergo more specific education on financial planning. They are required to have a certain number of years of experience in addition to passing a PFS exam.
  • CFP – Certified Financial Planner – CFPs are able to provide wider range of financial advice and are required to have at least 3 years of experience in financial planning, pass a series of exams and follow a code of ethics that is very strict.
  • ChFC – Chartered Financial Consultant – Most ChFC are insurance professionals. They specialize in certain aspects of financial planning and have met additional knowledge requirements.
  • CRPC – Chartered Retirement Planning Counselor – These planners specialize in helping individuals plan for their retirement. CRPCs follow a strict code of ethics and have passed additional examination from the College of Financial Planning.

While these are some of the most common designations that are currently in use, you should note that there are more than 50 professional designations in the industry. Some financial planners could have none, while others could hold multiple ones.

Meet With Prospective Planners.

After you have found a selection of planners that appear to meet your needs, it is time to interview them. All reputable financial planners will agree to hold a first meeting at no charge. This is beneficial to both parties. You will have the opportunity to explain your needs and ask for clarifications on things that you are unsure of, and the planner can judge whether they are the right person to help you.

Find Out How Your Planner Will Be Paid.

Financial planners earn money in a few different ways. Knowing how your planner is compensated in very important, as you want to deal with a person who has what’s best for you in mind and is not just interested in making sales to earn money for themselves.

Here are the ways financial planners are compensated:

  • On commission – This is the most common compensation model for finance professionals. Whenever one of their clients purchases an investment, a predetermined percentage of the purchase price is deducted and paid to them. While this does not necessarily mean a conflict of interest, you should carefully check the reputation of the planner to make sure they are not simply recommending investments that will make them the most commissions.
  • By flat fee – This is also a common compensation method in the industry. Some planners charge you by the hour or a flat rate to put together a complete financial plan for you. This reduces the possibility of conflicts of interest, as the planner will be paid regardless of whether you buy any investments.
  • Fee based on amount of assets – This option is not nearly as common as the other two, but it is becoming increasingly popular. Some planners will charge their clients an annual fee that is a percentage of the total assets which they have invested through them.

Once you have done your research, choosing a planner will be much easier and less confusing. Having someone else helping you manage your money will help you look to the future with confidence.