Quick Ways to Save Money Right Away

The quickest way to get to an early retirement, or financial independence is to cut down on your spending. There are really two reasons for this, one is that it gives you more money to put to work for you by saving in tax deferred investments, paying down high interest debt if you still have any, paying down your mortgage, or investing in taxable funds if you have the rest covered.

Wise bread made a quick list of 10 things you can do this week:

10 Ways to Save $100 This Week

1. Track Your Spending, and Make a Budget

2. Pack Your Lunch

3. Check If You’re Being Over-Serviced

4. Negotiate Your Bills

5. Vow to Reuse, Repair, and Repurpose Instead of Buying New

6. Get to Know Your Credit Card

7. Change Your Living Situation

8. Clean Out Your Pantry

9. Create a “Cheap Fun Club” With Friends

10. Sell Your Stuff

You can check out their site for the details, but it is a great place to start if you haven’t already accomplished those 10 steps.

There are a lot of other things you can do to cut back on big areas, like cutting down on transportation costs whenever possible.

Retirement is quicker and easier than you think, just use our retirement calculator to see how quickly you can retire!.

IRAs and Your Retirement Planning

While no one relishes the prospect of old age, what you save while you still work will be what you have to live on when you retire. It is important to bite the bullet and take on the prospect of planning your life as a senior citizen. There are many ways to save your money, each varying in what they provide for you when the time comes to use your savings. Among the more common options are the 401k and the Individual Retirement Account (IRA). IRAs are accounts, not investments. The money you put into your IRA can be used to invest in a number of things, ranging from annuities to gold. There are many different types of IRAs, but the ones most people know and care about are the traditional and Roth types. Which type you choose will depend largely on your own personal situation as each has different benefits.

How IRAs Work

With both the traditional and Roth IRAs, the earnings of your investments will be reinvested, creating growth in the funds that you will have when you retire. Those words “when you retire” are key. The IRS does not take kindly to IRA contributors withdrawing money early; “early” being any time before you get to age 59 ½. You can do so whenever you want, but you will have to pay a 10 percent penalty along with income tax on the amount of the early withdrawal. There are exceptions to this rule, but in general it will cost you to dip into your IRA prior to retirement. Exceptions include:

  • Using the money to purchase a first home.
  • The contributor’s disability.
  • The contributor’s death.
  • Using the money to cover the cost of higher education.

There are also certain limitations when it comes to how much you can put into your IRA. Presently, those limits stand at $5,500 per year, ($6,500 if you are over the age of 50) but are subject to change. It should be noted that putting more into an IRA than is allowed by the IRS can result in a penalty of six percent.

Traditional VS Roth IRAs

The differences between the two lie largely in when you get taxed. With a Traditional IRA, the money you put in will not be taxed until you start to take it out. The hope is that by the time you start to take disbursements you will fall into a lower tax bracket and thus pay less. On the other hand, with a Roth the contributions are not deductible so you pay the taxes prior to disbursement; this means that the money grows and will not be taxed again. Ever. Even when you withdraw it. This is why many consider it the best tax break around. The Roth is therefore considered exempt from taxation whereas the traditional IRA has the taxation postponed or “deferred.” At this point it may sound like the Roth is the way to go. Not so fast. Remember, the traditional IRA is deductible this means that you would wind up with a considerable chunk of your money back each year up until retirement. For most people this will be a better bet when compared to waiting till they retire to get their money.

IRAs VS 401ks

IRAs are often compared to 401ks, but what is the difference? A 401k is a retirement plan offered by your employer. You will have to set up your IRA yourself through your bank or a mutual fund. Your employer may match the money you put in. Your 401k contributions will be taken from your pre-tax salary, they will however be taxed once you start to take money out of the 401k. Do you have to choose between an IRA and a 401k? No. Getting to the amount that you will need for your retirement will require that you make use of all the tools for avoiding taxation that are available to you; this includes your employer’s 401k. If possible, contribute to both.

85 percent. That is how much of your present income it is estimated that you will need when it comes time for you to retire. Given the fact that you may live for a long time after retirement, it is important that you make sure that you have as much saved up as possible. Social security alone will not be enough. The 85 percent rule isn’t for everyone, if you have a lower income, you may need more than 85 percent, but if you already have a high income but low expenses, you may be able to live off of much less. You can use a retirement calculator or a talk to a financial advisor to determine the amount you will need and thus the amount you will need to save. A 401k is good, but it will likely not be enough for you to live on, therefore an IRA could be the key to a good quality of life in your senior years.

Retirement is quicker and easier than you think, just use our retirement calculator to see how quickly you can retire!.

The Advantages of Owning a New Car

The decision to buy a car always starts out with a single question: new or used? The new versus used car debate is an old one with ardent defenders on both sides of the argument. Even raise the idea of buying a new car instead of a used one in certain circles and you will be shouted down, often with the quote that “a used car loses ten percent of its value in the first year.” This is the main go-to fact of people who like used cars. While this may be true, there is a lot more to consider when making a vehicle purchase than just the first year of ownership.

What Goes into Buying a Car

For most of us, a car is more than just a basic means of transportation. Elements like comfort, like being able to enjoy an interior that does not smell bad, all factor into the driving experience. Additionally, a new car allows you to relax without wondering what the previous owner did to it. The purchase of a car is one of the largest most of us ever make, and like the purchase of a home, can greatly affect your savings and your ability to retire early. Your choice of vehicle as you plan your retirement years is therefore very important.

The Truth about Depreciation

One of the facts that the used car camp tends to forget is that used cars depreciate as well. So, yes, you lose money on your new car for each year you own it, but what happens if instead of trading it in after a few years, you continue to drive it? That is where you start to see the hole in the traditional used car advice. It is probable that a used car will only have a limited amount of drivable life left when it gets purchased. This means that the owner will have to replace it. This point usually can come anywhere from a matter months to a few years at best. The car will not be worth a lot of money at this point, which means that the owner will not be recouping much of the initial cost if they sell it. However, a new car owner who takes care of their car can still have a roadworthy vehicle that does not need to be replaced; this vehicle can last them 10 years or even longer. A new car owner can save themselves the cost of having to switch out vehicles a few years down the road. Keep in mind that a used car owner does not always know what was done to their vehicle prior to them buying it. They never know just when their vehicle is going to start having problems.

  • Initial Cost

One of the things that may discourage you from buying a new car is the sticker price. If you spent your younger years driving pre-owned cars, new car prices may seem at first to be absurdly high. It is important to keep in mind the fact that financing is generally cheaper when it comes to new cars than for used, so you can actually save money in the long run.

  • Lower Maintenance Costs

There is no way around it, buying a used car involves buying a certain amount of uncertainty. A new car on the other hand, will have a warranty and depending on the type of car you buy, you may be able to get free scheduled maintenance after you have driven it for a certain number of miles. This is something that you have to consider when weighing the cost of a particular vehicle.

  • Insurance

Insurance is another important factor that you need to consider when purchasing a car. New cars are more expensive, therefore they come with a higher risk for an insurance company. So yes, you will likely be paying more in insurance when compared to a used one. This may seem to be an argument for used cars until you consider the fact that there are many ways that this cost can be mitigated. One way is to choose the type of vehicle carefully. For example, if you opt to go with a sports car, the ultimate high-risk vehicle, you can expect to pay a lot of money to your insurance company. Sports cars are not the best option for you if you want to retire early. An example on the other end of the scale would be minivans. Minivan drivers are profiled as low-risk by most insurance companies, so you can expect to save a lot of money if you choose to get one.

  • Gas Mileage

Newer car models usually get better mileage than older ones. Technology is constantly improving and better mileage is one of the main selling points of cars and car manufacturers are continually refining their designs to provide drivers with more miles for their money.

The ability to save money is the most important part of being able to retire early. In most cases, a new car eliminates the expense of constant repairs that many used car owners face and may last you a long time before you need to trade it in. Do not let the high sticker price scare you, choosing new instead of used can actually help you achieve your retirement goals in the long run.

Retirement is quicker and easier than you think, just use our retirement calculator to see how quickly you can retire!.

Handling Healthcare Needs After You Retire

One of the unfortunate facts of life is that the older we get, the more we need healthcare coverage. It is impossible for anyone to know ahead of time how much money they will need to cover their healthcare costs later in life. Anyone paying attention to the recent debate regarding healthcare policy will know that medical services are not cheap. In fact, they are quite expensive, so expensive that illnesses calling for serious medical treatment are among the leading causes of bankruptcy in the United States. Some studies have claimed that a couple that plans on retiring in 2040 will need to have saved almost $500,000 in order to adequately cover their healthcare needs.

Post-Retirement Healthcare

So what are your options? You may have stellar healthcare coverage from your present employer, if so, good for you, but you should note that it may not last for much longer. Remember, there is no requirement that an employer provide their retirees with healthcare coverage. Companies all over the country are cutting back on healthcare benefits for their retired employees. In fact, less than a third of all companies with more than 200 employees still offer health benefits to retirees and only a tiny fraction of small companies offer any kind of retiree healthcare package. So what happens when you retire? The most basic option available to you will be Medicare. An important point: while retirees’ health coverage is rare and becoming rarer, it is still worth it to ask your employer if they provide it.

A Basic Guide to Medicare

This is the government’s plan for people over the age of 65, to provide them with basic medical benefits. Treatments and procedures will have to be deemed medically necessary for them to be covered under Medicare. It comes in three forms, Part A, Part B and Part C and Part D.

  • Part A covers hospital care and hospice care if this proves necessary. Under part A, those who receive hospital care will only have to pay a deductible.
  • Part B covers outpatient services, including those from a hospital or doctor’s office, as well as fees for lab tests and so on.
  • Part C involves a Medicare Advantage Plan. In this case you will have to be a part of a health maintenance organization (HMO) or preferred provider organization (PPO) that has been contracted by Medicare to deliver healthcare services. These usually require less out-of-pocket spending than standard Medicare.
  • Part D provides prescription drug benefits to those who are covered under parts A and/or B.

Note the term “basic medical benefits.” The emphasis there is on “basic.” The coverage supplied by Medicare is not extensive and you will still face a considerable number of out-of-pocket expenses. Medicare was never intended to be a solution for all of a senior citizen’s healthcare needs. It is important to ensure that you have enough money available to cover these. These expenses include:

  • Co-payments
  • Medications
  • Medicare premiums
  • Dental care
  • Eyeglasses

One solution to these other expenses is to purchase supplemental insurance, also referred to as “Medigap” insurance. This is insurance sold by many private insurance companies and covers the various additional costs of healthcare. Another fact to note is that Medicare does not cover long-term care, something that many seniors need in the later years of their lives. Long-term healthcare is often the most expensive aspect of healthcare for seniors. There is such a thing as long-term care insurance but this can be very expensive. Long term care has to be factored into your retirement healthcare plans.

Working Past 65

The best advice for most people is to work past retirement age in order to pay for healthcare. While working though your old age does not figure into the beach-and-cruise dream that many of us have, it is often a very practical solution. Foregoing your extended vacation provides extra money which will come in handy. A longer working life also means that you are not spending as much money (if any) from your savings. Any investments you have made that have not fared well during the recent recession will have time to recover. One of the options that you want to avoid, and one that many people find themselves choosing out of necessity, is to simply not seek healthcare and not purchase prescribed medications. Doing this may exacerbate your medical conditions and cause you to wind up with even higher medical bills in the future.

Planning your retirement healthcare is not a fun activity, but is essential nonetheless. It is important to realize how big a role healthcare plays after you stop working. One factor that will help to postpone the time when all of this becomes an issue is to do everything to maintain your health while you still have it, meaning to adopt a healthy lifestyle with a proper diet and lots of exercise. While improving your lifestyle choices is no guarantee of health, it may prolong your healthy years.

Retirement is quicker and easier than you think, just use our retirement calculator to see how quickly you can retire!.

How Does Social Security Fit Into Your Retirement Plans

Really, Just How Does Social Security Fit Into Your Retirement Plans?

Ah, that is exactly what we are here to discuss. Many if not most people spend hours poring over their 401 (k) investment options and never once think about their eventual Social Security income. I want you to factor in what social security will mean for you. You not only should you statistically must.

  • More than Half of retired couples income is based on Social Security
  • Higher earners receive an estimated 25% of their income from Social Security
  • It is the only guaranteed source of income to last your entire life long or short
  • It’s the only source that will automatically pace itself with inflation

Yes it does pay to plan on receiving your monthly benefit.

OK, this just might be a little too hard hitting for you! We have been trained from birth practically, to not expect to have Social Security available to us when we get to our own retirements. Yes our parents, we all want them to have everything they need, can expect to have it last for them; but not us. The amazing truth of the matter is that those of us nearer retirement age, let’s say 50 to 55 are most likely to see no change at all to their projected payment schedule.

Just why should you care? Because it will make up a big and I do mean big part of your actual retirement income. Yes that is why you should care about, what you do between now and then to shore up your entire portfolio.

Just what can you expect to receive by the time you retire?

Others of us who are just a little bit younger can rest assured that the current system funding will allow for cashing in the Treasury bonds from the Social Security Trust Fund. Not to mention that if and when the bonds run out, and you should think of the system as a bond in your personal plan, payroll taxes will be able to pay out a minimum of 75 percent of monthly payments for decades to come.

That’s if nothing and I do mean nothing is done to increase SS income and funding. As hard as it is to know what is going to happen in the political arena, we all should know that there are ways to make positive fiscal changes for the Social Security system. Our current policies will provide and planned improvements are always on the table.

Think of it as a bond holding in your portfolio.

Just why would it be a good mind set to think of your eventually monthly payments as a bond holding and a part of your portfolio. Because you’re scheduled payments are virtually guaranteed and indexed to inflation. Yes you can count on it now, not just think it might be a nice bonus if you ever get it! Wow what would that look like and just how can you calculate it into your monthly planning now.

There it is projected payment schedule. That’s the point Just how will you be able to calculate your monthly Social Security payments and just what will that mean to your retirement goals, long term. Yes your final monthly payment is based on a complex formula, but the foundation of it is based on your average lifetime earnings. If you are 45 years of age or older you should be aware of your average earnings so far and be able to give it a good eye ball estimation into the next few years.

Depending on how old you are now your projected retirement age will be somewhere between 65 and 67 and receiving your payments earlier will reduce your monthly payments. Waiting a little longer will increase your monthly payment. Just which would be best for you will depend on a closer look at your entire retirement planning and actual saved and invested income.

How long should you work and how does your spouse factor in?

I know you are working hard to plan for the future and figure all of this out, but do not make the mistake of not including your spouse’s income in to your projected plan. It is easy to think that it as an individual’s income. Most families today have two incomes and it is not always the male partner with the largest income. If the unthinkable does happen and hardship hits you will be eligible for 100 percent of your spouse’s payment if it is larger than your own.

A vast majority take their benefit when they reach full retirement but it may pay for you to wait. It is necessary to look at your overall plan as you move forward. It’s a work in progress and should be adjusted from time to time. If you would say based on your genetic and inherited health that you should live at least an average, if not an above average life expectancy than you may fare better by waiting a little longer to take your retirement benefit.

Who should retire first or should you both retire at the same time?

With married couples it does pay off to consider how to maximize their total combined benefit, keeping in mind one of them may eventually collect payments as a surviving spouse. To balance this, the best strategy may be for the highest earning spouse to wait as long as possible to begin receiving their Social Security benefit.

Lastly it is worthwhile to mention working while you are receiving your monthly benefit. Is this an acceptable plan? Yes, you will lose less than you might think. In the long run when you reduce your benefit by working you will actually earn it back with a larger payment when you actually stop working and begin to earn your total benefit amount.

Retirement is quicker and easier than you think, just use our retirement calculator to see how quickly you can retire!.

Various Streams of Income for Retirement

Income for Retirement
For those who wish to do so, retirement is one of the most crucial points in their lives—possibly the biggest turning point since graduation, finding a career, getting married or having children. At that point in our lives, we all want to have a fund of some sort that we can dip into any time we need the money to pay our bills, buy groceries or simply get ourselves a present. Many employees in the United States are covered by an employer-based pension plan. Here is some information on the subject of setting aside sums of money during our working lives so that we will not be financially strapped when the time comes to retire. The information and guidelines outlined here apply whether or not one is covered by a pension plan provided by his employer.

Social Security

You can tap into your Social Security savings as early as when you are 62. However, it is better to wait until you turn 70—the monthly benefits that you will receive will be greater than if you began taking them out sooner. In addition, those who were born in the period from 1943 to 1954 are entitled to the full benefits of SSI when they reach 66. In the meantime, good investing strategy is crucial for ensuring that you will have the maximum benefits on retirement. Research all of the possibilities, consider your current financial situation and goals and get advice from experts to determine what approach will work best for you.

Investing in Wall Street

Wall Street has been a symbol of the American financial market for at least a hundred years now. You can make huge profits from investing here regardless of which way their market is going—“up, down or sideways” according to a report by Fox Business. One of the reasons why such is the case is tax deferral—the money is indexed in such a way that taxes will not be imposed on the income. Even if the market should go down, Wall Street guarantees that you will always receive from one to four percent of what you initially put in. Best of all, you cannot be deprived of your gains, which are locked in.

Traditional vs. Roth IRAs

Even better than either of the above is the ever popular IRA account, of which there are two types—the traditional IRA and the Roth IRA. Only the former is a tax-deferred investment, though the latter generally will not be taxed provided that the account holder meets certain conditions. For instance, if the holder uses the money to purchase his first residence, then he can withdraw a lifetime maximum of $10,000 free of tax. Roth IRAs also have the advantage of the capability of being merged: If the holder is outlived by his spouse and if that spouse has her own Roth IRA account, then hers can be merged with that of the deceased. No penalty is imposed for the merger.

The money that the holder puts into a Roth IRA is, however, taxable at his present marginal tax rate. But when it comes out of the account, that is when the tax advantage of this type of account over the traditional IRA really comes into play. The principal withdrawal is not taxed and if the holder is over 59½ years old, then he can also make growth withdrawals beyond the principle without having to pay taxes on that. Nor is there any tax liability for capital gains, dividends, interest or any other transaction that takes place within the account. It is also possible to pass the money in a Roth IRA on to one’s heirs.

Traditional IRAs

Although the Roth IRA was created to remedy many of the problems posed by traditional IRAs, the latter still has many advantages that might make it more advantageous for some people. Within certain income limits, the funds that go into a traditional IRA are tax deductible. Nor does a traditional IRA have the income limits of a Roth IRA, where you cannot contribute if above a certain income.

Retiring free of state income tax on retirement funds

Depending on which state you live in, you might be able to retire without having to pay state income taxes on Social Security or 401k, or on your pension funds. To find out if the state in which you live is one of those, go to the website of that state’s government.

Some last words

America is right now in the midst of what is probably the biggest financial crisis in its two-hundred-year history. For that reason, making wise financial plans for your retirement is more crucial than ever. With such effective planning you should be able to retire wealthy and bequeath some of that wealth to your descendants! It always helps to be proactive rather than reactive—and also not to be greedy. That is guaranteed to kill your retirement.

Retirement is quicker and easier than you think, just use our retirement calculator to see how quickly you can retire!.

Looking at Retirement Preparations

Retirement PreparationsHow to Prepare for Retirement

Only a few more years to go, and I’ll be able to retire. But before I break out the golf clubs and buy that RV, I better do some serious planning. There’s lots of questions I need answered. How much money will I need? What about my health insurance? How long should I plan for? Do I want to stay where I am, or be adventurous and live in some tropical paradise sipping margaritas on the beach all day long?

Well, first things first. Guess I better figure out how much money I’m going to need, and how long I’ll need it to last. Since I’ve made it this far, I’d like to stick around a while and enjoy the fruits of my labor. Think I’ll make a list of the most important points so I don’t forget them.
1. How will these changes impact my budget both positively and negatively? I may lose my health insurance, so I better look at some other options. I wonder if I should keep my home, or maybe sell it and move somewhere smaller? I might save quite a bit in taxes and utilities, since these always seem to be increasing.
2. What kind of lifestyle do I want to live? Should I be frugal or live a little? Guess this will depend on how much if any traveling I want to do, how much golf I may want to play, how many times I want to eat out and so on.
3. Some payments like my mortgage will be history, but I may still have a car payment and some credit card debt. I better factor those into my plans.
4. Since I’m planning on retiring at age 55, I’ll probably be sticking around for many years. The savings account needs to be as big as possible, otherwise I’ll wind up tapping into my IRA’s and other retirement funds.
5. Oh yeah, there’s inflation and taxes. Those can cause me to lose buying power over the years. Better think about increasing my investments and catching up on any late payments and old debts before then.

Now that I’ve got the budget started, guess I better figure out where the money’s going to come from for me to live on. You can’t count on pensions these days, but there are still plenty of sources of income out there for me.
1. Social Security
2. Retirement Accounts like 401(K), IRA’s and Keogh’s
3. Pensions–only 37% of retirees have these now, but it’s a pretty reliable source of income if it’s available.
4. Savings Accounts and CD’s
5. Stocks and mutual funds–there’s lots of fluctuation in the market, so this one’s falling out of favor with many of us for generating dependable retirement income.
6. Home equity–you see lots of commercials for reverse mortgages, but these should be looked at very carefully before pursuing–a last resort option.
7. Annuities and insurance
8. Inheritance–nice work if ya’ can get it, but don’t count on it. Your benefactor may outlive you!
9. Rental income and Royalties–real estate is always a good investment, and if you’re an inventor, author or musician, that royalty check in the mail is always nice!
10. A job–if all else fails, you can always go back to work part-time. But the inheritance sounds better, don’t you agree?

I feel pretty good now, but what happens if I get sick after I’ve retired? I’ve got health insurance now, but what about later on? Here’s some options I could consider.
1. Medicare–you better start familiarizing yourself with this before you become eligible for it, otherwise you’ll be scrambling for answers. You’re eligible at age 65, but it doesn’t pay for everything. Expect to have some out-of-pocket expenses, unless you’ve got supplemental coverage.
2. The ABC’s (and D’s) of Medicare–Part A pays for inpatient hospital care, skilled nursing and hospice care. Part B is for doctor’s visits, outpatient hospital care, physical therapy and home health. Part C is often called Medicare Advantage, a health care plan managed by private insurance companies and approved by Medicare. It combines Parts A, B and sometimes D. And speaking of D, it covers prescription drugs.
3. Medigap and Supplemental Coverage–these are sold by private insurance companies and cover whatever Medicare doesn’t pay for. If you have lots of health issues, these can save you lots of money over the long run.
4. COBRA–If you plan to retire before age 65, like myself, you’ll need coverage before Medicare. COBRA covers retirees up to 18 months before age 65. You can also see if your HR department offers retiree health benefits, or you can price some policies through private companies.

Finally the fun stuff! Time to take it easy, but where should I go to take it easy?
1. Visit the kids and grandkids–see the sights while you see the kids.
2. Visit places you always dreamed of–the Grand Canyon, Italy, maybe Disneyland.
3. Sell the ol’ homestead and buy an RV–it may take some getting used to, but if you love the freedom of the open road there’s nothing better!
4. Take a cruise–there’s lots of great deals out there, and everything’s included–food, drinks, entertainment. Visit Hawaii, the Caribbean or Alaska.

If you have a passion for traveling abroad, perhaps you should take the ultimate plunge and move to another country. This is a great option for adventurous retirees because the cost-of-living is much lower than in the US. While many retirees call Florida or Arizona home, others opt for locations like Mexico, Costa Rica and Malaysia. A couple can own a nice home, have high-quality health care and see the sights for as little as $500-600 per month. That’s what I call living!

Well, there you have it. There’s lots to think about, but as you see retirement is a world filled with possibilities!

Retirement is quicker and easier than you think, just use our retirement calculator to see how quickly you can retire!.