Planning On An Early Retirement?

Posted on June 22, 2008
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When we’re young and fresh out of college, we don’t generally consider the future as a whole. What we’re typically focused on is the ideal career. Not that this is bad. It’s actually a great thing. We acquired our education, and now we’re playing the corporate field, and vying for the job that will set us up with a great lifestyle. We can soon purchase that home and ditch the apartment routine. A new car is probably in order since we can now afford something a bit nicer. Then before we know it, we’re married with a family. Okay, stop right there! It’s time to consider early retirement planning. Yes I do realize that this is slightly far off yet, but there’s no such thing as too early when it comes to retirement. The years can fly by much quicker than most of us anticipate.

I recall my 21st birthday like it just happened. Can you believe that? Sadly it was now ten years ago. YIKES, does that time ever sail by! There’s no altering it, stopping it, or even slowing it down. You simply have to take it as it comes. Since it moves so quickly, it’s prudent to get a jump start on things. Think about how long you wish to stay at your current career. How much should you be setting aside for the golden years of rest and relaxation? I do realize that it’s difficult to begin early retirement planning in your 20s, but if you can, then go for it. Wow, will you ever be glad you did so! If done properly, you could probably retire by the time you hit your 40s. That would be CHOICE for most of us.

What does early retirement planning consist of? Well, this all depends on what you’re currently dealing with and have in mind for the future. If you have children, you may also want to contribute to a college fund of some sort. On the other hand, if you’re single or simply married, you can begin the investing with ease. Even if it’s only 100 bucks each month in a savings account, it’s well worth it. Consider an IRA early on. This is a wonderful route when it comes to early retirement planning. The options range from stocks, to bonds, to savings, to real-estate investments. The choice is up to you.

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The Power Of Compound Interest

Posted on May 31, 2008
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A compounding investment is one where the interest you are credited with is poured back into the principal investment. So for example, if you invest a thousand dollars at 5% interest, at the end of the first year you will still have your one thousand dollar principal, plus fifty dollars interest earned, for a total investment of $1050.

By rolling each of your allocated interest income returns back into your original investment, in other words allowing it to accumulate or compound, you produce a very powerful effect over time.

The average working life is forty years. If a young person 20yrs of age decides to have just $100 per month of their income automatically invested each month until age 60, they would invest a total of $48,000 (($100 x 12mths) x 40yrs). However… if they had it invested at 10% return and allowed their interest income to accumulate within their investment fund, they would end up with a nest-egg over ten times the size of their total investment amount and would reap a payout of over $584,000 by the time they reach age 60!

The period of time that your investment has to accumulate, and the interest rate at which it is earning income, are critical factors in the multiplication process. Further, if you use leverage by investing in real estate, you can really magnify your returns over time.

Typically, one can purchase residential real estate for a 20% down payment. If you follow Hans Jakobi’s Real Estate Secrets teachings, you can even do it for no money down. But assuming 20% down, if you invest forty thousand dollars to purchase a $200K property, when that property appreciates 5% it will be worth $210K. That $10K is a 25% return on your forty thousand dollars invested. Once the property is worth $300K and it increases another 5%, it will be worth $315K. You will then have generated a 37.5% return that year on your initial forty thousand dollars invested.

It is definitely worthwhile getting educated about financial matters because if you apply sound knowledge to your investments, you can dramatically alter your lifestyle and retire years early.

One excellent source of financial education is Success University. Their curriculum includes dedicated sections for both finance and real estate from world experts such as Jay Abraham, Carol Tuttle, and Greg Reid amongst many others. You can check out the Success University curriculum by accessing their two dollar 14 Day Trial membership via the peeling web page graphic in the top right hand corner of the page I linked to in the above paragraph.

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Where To Put Your Investment Dollars

Posted on April 16, 2008
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One particular piece of mutual fund advice usually heard from personal money and financial managers is to avoid penny stocks. These tend to be small cap companies that were delisted from major exchanges for a host of undesirable reasons, and their shares, which trade from under $5 to fractions of a penny on the so-called bulletin board exchanges, tend to be illiquid.

This can offer a huge problem for an investor who can buy literally millions of shares for a few thousand dollars, who is suddenly unable to liquidate the position. Most or all of one’s money can be lost on such an exchange due to a low number of participants or illiquid conditions.

Bond investing is a staple of the diversified portfolio, and as with other investment vehicles sought by mutual fund money managers, there are a lot of choices. There are low yield bonds, often issued by government entities, that offer steady returns for little risk. There are higher risk, and thus higher yield “junk bonds” issued by struggling companies or financially uncertain institutions. All of these are available in the long and short term and are priced according to the mechanics of the debt market.

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Financial Planning Tips - The 401k Retirement Plan

Posted on February 8, 2008
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The article below is from a series of articles and videos about financial planning …

The 401k retirement plan has taken the corporate world by storm since 1979, primarily because of it’s affordability to employers. While pensions often sucked companies dry, 401k providers charge a small monthly administration fee (usually around $100) and this will give employers and employees many different investment options. After signing a contract, you specify a percentage of your income to be deducted and invested into a special account where it can gain interest over the years and profit with the economy. Sometimes employers agree to match your contributions and your final pay-out could be twice as much as you’ve invested by the time you receive it.

What makes the 401k retirement plan different from other pension benefits is its flexibility and the amount of control you have over it. Some options include: What percentage or flat monthly rate do you want to contribute? Also, where do you want to invest? Your employer will provide you with a list and you can choose between stocks, mutual funds, bonds, money market investments, company stock or any combination of the aforementioned. You may also select a financial adviser to make the choice for you. As with anything in life, there are risks. If your employer goes bankrupt, you may lose a huge portion of your retirement savings, especially if heavily invested in company stocks. You may decide to participate more actively in where your money gets invested because some annuities may be poor performers, while others are winners. Many financial planners will advise you to diversify where your money goes so you don’t “put all your eggs into one basket.”

Check with your company to see which 401k retirement plan you’re under. Either defined benefit or defined contribution. Under a defined benefit plan, your employer controls the final pay-outs, which don’t fluctuate as financial markets do, but instead are based upon your salary history and years employed. With a defined contribution plan, you’ll have more control over how much you contribute and where it’s invested, but less guarantee on how much you get back.

When you leave a company, generally your 401k retirement plan remains active for the rest of your life. If you feel uncomfortable entrusting your savings to the care of your ex-employer, or if your company charges a fee for looking after your account, you may rollover 401 k benefits into an Individual Retirement Account. Look into the rollover 401 k if you’re switching employers too. You’re allowed to draw on your 401k retirement plan after age 59 1/2 and you will then pay taxes on what you take out. Most plans have a minimum distribution requirement you must abide by, meaning that once you reach age 70 1/2, you’ll have to start to withdraw some of your money, unless of course, you’re still working. The only plan that is exempt from the minimum distribution rules is the Roth IRA. You may decide to take a crash course in investing and take a more active role to ensure maximum returns.

For more information on 401k retirement plan options, consult with your employer, local banker or advisers at Fidelity Financial. Remember, the earlier you plan for your retirement, the better you will ensure a secure future.

For more tips and videos on financial matters, visit: Financial Management

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