Retirement Planning - Important Questions You Must Ask Yourself

The decision of how to handle your retirement is entirely yours. You can either develop a plan of action or leave the burden in the hands your children. One thing that is for sure is that every day that goes by we are all getting closer to our retirement; we are all aging.
On January 1, 2011 the first baby boomers turned 65 and they will start they next phase in life. In the past, retirement used to be blissfully perceived as being a delightful transition from a busy life filled with responsibilities and burdened with the costs of raising the children to the peaceful financial and physical freedom of retirement; how wonderful :)

The reality is that retirement has become for many a nightmare. We are living longer, many times outliving our savings, social security does not cover our retirement expenses, the cost of health care continues to increase at paces that were never imagined. Conclusion: The rules of the game has changed; retirement is not what it was for your parents.

Unfortunately, hope is not a viable strategy. The only solution is to properly plan for your retirement years. Currently with the new events in our economy many feel confused, even scared. However, "doing nothing" about it is the worse strategy you can take. Now more than ever your must plan for your elderly years. Once again the decision is yours on how you want to live those years.

Planning for your retirement doesn’t have to be hard, but there are a number of bases that you must have covered to accomplish success. To make sure that you are on the right track to seeing the retirement future you always dreamed of, there are a number of important questions that you will first want to ask yourself. The answers to these questions are important when developing a retirement savings plan.

1. What does retirement mean to you? Each person has their own definition of retirement. Some would slow down the amount of hours they are working right now. Some people may consider starting their own business, write a book, or become consultants. For others, retirement is taking over a new hobby, travel, and volunteering their time and resources to the mission(s) that are close to their heart. This question will define the amount of resources you need to sustain the lifestyle you want during retirement.

2. When do you want to retire? Your expected retirement date is critical since it represents your goal date. Based on your goal date your retirement savings plan will be determined. When setting this date, it is important to be realistic. The sooner you want to retire the sooner you must start building your funds to meet the lifestyle you defined in question number 1. Also, the earlier you want to retire (even if you plan to work part-time) the harder your retirement funds must work to ensure that they last for the duration of your retirement.

3. Am I making use of my company’s 401(k)? Are you employed? If so, do you have a 401(k) through your workplace? If you are employed full-time, you should. Are you contributing to your account? If not, this is a step that you must start taking now. It doesn’t matter whether you want to retire in 20 years or in 5 years, any bit of money that you can put aside will help. This is because your funds in your retirement funds are tax deferred. Also, if you are one of the lucky ones that still have a 401(k) with company matching (regardless of the amount) it will help you build up retirement funds on a tax deferred  basis. Company matching is "free money" being deposited in your account; you should consider maximizing this benefit.

4. Do you foresee any potential health problems? This is difficult question for many to address. I think we need to be honest with ourselves so our retirement planning be successful. Are you aware of family health problems?

5. Am I in debt? Once again, another difficult question but extremely important. If you are in debt, now is the time to start taking action. Debt can have a negative impact on your retirement goals and dreams. If the answer to this question is "Yes", now is the time to create a budget for yourself. The money that you are able to save can be spilt to repay your old debts, as well as add more money into your retirement savings.

These are not all of the possible questions to ask as part of your retirement planning. My goal here is to motivate you to take action. Now is the time to meet with you trusted financial advisor (whomever that person is; CPA, attorney, life insurance agent, etc) and develop a retirement savings plan. Your financial advisor can help you with tax aspects , financial projections, help you with the preparation of a budget, etc.

I hope you find this information help you. I welcome any ideas and questions you may have about this subject.

Beware of Hurricane Irene Scams

Beware of Hurricane Irene Scams

The FBI and other state and federal agencies have issued warnings about con artists seeking to profit from the tragedies caused by hurricane Irene. Beware of bogus charities and contractors, phony links and emails which try to trick you into giving personal information and/or contain viruses. For more information visit the FBI guidance on charity scams.

Who Wants Free Advertisement?

I have decided to promote small businesses in my blog. It is my way to help entrepreneurs who have a creative service or product that can be offered to the readers of our blog. Our readership continues to grow daily and it will provide the chosen business exposure to the visitors of our blog free of charge.

The only requirements are:

* it must be a legal product or service
* it must help (solve a need) of the readers of this blog
* provide a discount for the readers of this blog

It is simple and free of charge advertisement for your business for a month. If you are interested please email me at gonzalezconsultingintl@gmail.com

Why Is Financial Planning Important?

Recently I was asked this question, Why is financial planning important?. I am of the opinion that financial planning is critical to achieve your financial success. However, with the increase of distress of many families in the United States many are going by without a financial plan and many even question the importance of having one.

It is understandable that if you are currently in financial distress you may not see the point of financial planning. You may be living paycheck-to-paycheck, thus why bother with financial planning. It is understandable and if you are doing so, you are making a huge mistake. Let me tell you why; It doesn’t matter if you’re well off or work for every cent; knowing the importance of financial planning is critical for your future. In fact, it’s never too early or too late to prepare for it.

The problem I see today with the attitudes of the families that have been affected by the recent recession is that by not developing a plan of action, how will you get out of the current situation? In essence, they have accepted the current situation (living paycheck-to-paycheck) as the "new normal". The "new normal" becomes their current reality and accepted as the truth. These families become comfortable with this "new normal" to the point that it is the only way to live. They do not see any other way, therefore when other people like myself approach them with the idea of financial planning they look at me like I am from another planet. "What do you mean "financial planning"? I can hardly pay for my rent".

Financial planning is not for the rich. Great wealth has been built one dollar at a time. All it takes is financial planning; a financial road-map to get you out of the current storm. The fact that you may currently be in a financial distress situation does not mean that you belong there. Furthermore, the fact that you may be in a financial distress situation today does not define you. Accept responsibility for your past actions that lead you to the current situation and develop a financial road-map towards financial success and freedom.

If you are currently in financial distress, let me offer you some tips that may help you:

1. Put together a budget, the method does not matter (use a pencil and paper, excel worksheet, Quicken, etc.)

2. Do not overlook your insurance coverage in these difficult moments. This is not the time to be driving without car insurance. However, do not fall prey to predators insurance coverage. Assess the risks that are truly needed to be covered to protect the financial future of your family.

3. Develop a plan to reduce/eliminate your debt. With a national average of 14.6% effective annual interest rate of this debt is too expensive to bring to our families.

4. Track your monthly expenses. This is where many families fail. Most of the times families develop budgets but they do not track the actual expenses. A budget without a monitoring system is not adequate. Compare your actual expenses to your budget to be able to make the necessary corrections.

5. Watch for the small expenses. This is where a lot of the damage happens. We notice the big ticket items. Big corporations have been bankrupted $5 at a time. It does not take long until those trips to your Java Shop for the super-duper high calorie with whip cream on top coffee for $5 will become a hole in your finances. You do not notice it on a daily basis. However, when you track it and realize that you spent $1,250 a year in those daily trips to your Java shop, you may get an upset stomach.

* Tip: Use the $100 monthly and apply towards a high interest debt. For example, if Mary is spending $100 per month in her daily Java trips and she has a credit card debt of $10,000 with interest rate of 12% and she is currently making monthly payments of $300, it will take her 14 years to payoff that balance and she will pay approximately $4,000 in interest. If she applies the $100 per month extra towards her credit card debt, she will payoff her credit card in 30 months and her interest payment will be decreased to approximately $1,400.

* Opportunity: Did you know that if were to invest the $100 per month in a mutual fund that gives a 8% annual return for 10 years you would accumulate approximately $19,400?

“Money makes money. And the money that money makes makes more money.”
- Benjamin Franklin

6. Create an emergency fund. The amount depends on each family situation. In todays environment you should strive to have 9 months of living expenses in reserve. These funds should not be in high risk/volatile investments, consider placing this funds in a money market account/savings where you have access to them. Remember the idea is to have liquidity in the event of an emergency.

Protect Your Family with Estate Planning

What would happen if you were to die five years from now? Would you be ready for such an event? Most people are not ready to face such an end, but we can at least have our financial situation protected for our family and for our loved ones.

You can't tell if your estate plan works until after the fact. There are so many variables in life that makes estate planning complicated. Where I see many of the mistakes is when people cut corners in estate planning with their "simple/cheap" mentality. A good estate plan must articulate the personal and family goals, anticipates problems and a good maintenance plan which adapts to the changes in the family, finances, and law.

However, some people just do not want to talk about their death. Its morbid. While others just do not know how many expenses can result from a death, nor may not know the true total value of their assets. This mentality will also cause unpleasant surprises when your assets are left to the hands of the government to determine how to divide your assets.

I suggest that you form a professional team to help you properly develop your estate plan. Please keep in mind that a financial planner may know all the blocks to a estate plan, but a financial planner may not be licensed to create all of those blocks. Therefore, you may need other members in your professional team:

• Attorney - Needed for drafting legal documents
• Certified Public Accountant (CPA) - Needed for identification of assets, calculation of the adjusted basis of assets, and tax considerations.
• Licensed Insurance Specialist - Needed to verify assets are protected and that those assets are liquid at death.
• Any Trust Officers That Manage The Assets of Any Trust

Your financial planner should be the person who ties these professionals together in to the estate plan for the client.

When preparing your estate plan you should avoid the following:

* Ridiculously restrictive trusts
* Well-intentioned but unworkable asset divisions
* Do-it-yourself documents that mess things up beyond belief
* Not providing for incapacity, with the amazing statistics for Alzheimer and other dementia, incapacity should not be ignored.
* Young children without a guardian - if you develop your estate plan while your children are young, you should name a guardian for them in case both you and your spouse were to die prematurely.
* Not having the right type and amount of life insurance for survivor income, tax payments, loan repayments, etc.
* Copying the estate plan from your neighbor or relative. Each family have their unique needs and goals.
* Getting estate planning advice from the guy who serve the coffee at Starbucks. Estate planning is a serious matter. The wrong approach can be costly.

Estate planning is not easy, but it should not avoided. The cost of avoidance will be greater than the benefits gained by it. Do not take this aspect of your family lightly, and do not postpone it any longer. Estate planning is not just for the rich, it is for all of us. If you have not done your estate planning yet, I encourage to do it now.

Simple Steps in Planning for Your Retirement

Retirement planning is an important aspect of our lives. As good stewards and responsible members of a family we must include retirement within our overall family financial planning. If you are married, you naturally should do this planning together with your spouse.

One of the areas that needs to be address in any financial planning is the behavior of the family members towards money. This most be handled with care to avoid unnecessary conflicts. In the end the family goal should be towards the preservation of wealth and being good stewards of the wealth. After all, what is the point of saving and investing really hard if your partner is a secret spendthrift running up huge debts. Ultimately they’re going to drag your finances down to their level.

You need to sit down with your loved ones and talk about what you’d like retirement to hold. Perhaps your ideas about retirement differ. Your spouse may want nothing more than to give up work while you want to work until you drop because you just love it. Whatever the scenario may be, it helps talking things through.

Here’s an action plan for how to effectively join forces with your spouse to drive for that retiring wealthy finishing post:

ߜ Establish when you both want to stop work. One of you may be younger and therefore have longer to go to build up a full state pension entitlement. If there is an age gap, perhaps the older person in the marriage can carry on working for a little while to build up a big enough cash pot to allow the younger person to retire earlier than would otherwise be the case.

ߜ Decide between you how much you need. You need money to take care of life’s basics plus cover emergencies. You may have very different ideas of how much money you both need in old age.
* Warning: Don’t underestimate your financial needs. Certain outgoings cease after your retirement but you have more free time on your hands. Filling this costs money: You may want to travel several months of the year, take up golf, dine at fancy restaurants twice a month, serve on a ministry at church or planned giving to a special church project. A retirement spent watching television all day is no fun: Plan carefully so that you’ve got enough cash to enjoy yourself.

ߜ Examine how much you’re on course to receive. Do not wait until retirement to determine how much to expect over your retirement. This may not be a pleasant surprise. Now is the time to meet with your financial advisors to estimate your retirement funds and make the necessary corrections to meet your retirement goals.

ߜ Calculate how much you need to reach your joint goals. In order to buy retirement income for you both to live on – normally through an annuity – you need a big pot of cash.

* Tip: One way to protect your retirement savings and extend it through your expected life after retirement is through the purchase of an annuity. The concept behind an annuity is very simple. You hand over your savings to an insurance company and it pays you an income until your death. The amount of income you get depends on how much money you hand over and the annuity rate when you purchase the annuity.

ߜ Agree on what you’re willing to sacrifice to reach your dreams. It stands to reason that in order to build up a big enough cash pot to enjoy a comfortable retirement you have to save, invest, and work really hard. You can’t do any of this without making sacrifices whether that is curbing your spending, paying a portion of your income into a pension or simply setting time aside to monitor your savings and investments.

ߜ Determine what you want to leave behind for loved ones. If you have children it’s likely you’d like them to benefit financially on your death. If that’s the case you want to ensure you’ve enough money to take care of your combined needs in retirement and leave a tidy legacy for your children, perhaps taking out a life insurance policy to benefit them as well.

Gold is Not an Investment

Today let's talk about a subject that seems to be touchy to some people specially those that are "investing in gold". Gold is not an investment. Now before you close the window and start sending hate mail, I suggest that you read the rest of the post. The basis of my statement is founded on the definition of an investment. An "investment” is defined as the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income or appreciation of the value of the investment. Through this transfer of capital, in the expectation of a profit, an investor gives up capital and puts it at risk. The investor receives a return in dividends or interest as compensation because capital is at risk; investors may get back less than they invested, or they may get back nothing at all.

Gold does not qualify as an investment since it does not generate income by itself when we put our money and capital at risk to acquire it. Gold has no real intrinsic value, its value is the one assigned to it. I understand there is a market for gold, just like there is a market for real estate and stocks. Gold is raw material, it does not produce income, no dividends, no cash flow. Gold is a chunk of metal while a stock is ownership in a income generating company. The performance of a company can be tracked and projected, you cannot do so with gold. The price of gold is speculative. Commodities are regulated by offer and demand, the challenge for gold is that we do not know how much gold really exist therefore the price assigned is speculative, thus it is not an investment.

The problem I see is when people are putting assets at risk in the gold rush of 2010 thinking that they are investing. Investments are made by evaluating underlying value. Speculative bets are made by looking at the price of something and simply hoping the price goes up. Investing is about value; gambling is about price. In reality they are speculating. They are betting on how high the price of gold will go. There is no financial analysis to project the future income that gold will generate for you.

However, I do consider gold to be an important component of a financial portfolio. It can be used as hedge against inflation and a monetary collateral to sustain the value of currency. If you want hold some gold for diversification. In the unlikely event that paper currency becomes worthless some day gold and possibly silver would resume a role as a medium of exchange. Gold is money. Unlike investments, gold does not generate wealth, gold preserves wealth.

Right now, too many people are jumping on the gold bandwagon and really not asking why the price of gold is increasing. Gold’s main use has almost always been as money. However, gold’s secondary uses are growing in importance. Due to its physical characteristics, it’s a high-tech metal. So in todays technology driven society we are looking at gold beyond it main role of currency (gold is the most resistant to chemical reaction, the most ductile and the most malleable of all the elements, and it’s an exceptional electrical conductor), which in turn has increased its demand. Conclusion, increased demand drives the price of the commodity up. However, that does not change the fact that gold is raw material and by itself does not generate income. There is no certainty of the amount of gold reserves, which makes it hard (if not impossible) to determine how to properly price the commodity. Contrary to other commodities that gets consumed, gold does not get consumed therefore the more we extract the less valuable it becomes.

I would like to add a note here about real estate investing. Yes real estate is an investment. Real estate is worth what you can make from it, period. Rent it out and it brings income, live in it and it enables you to earn a living, grow food on it. The real estate debacle does not change the fact that it is an investment. The real estate bubble was caused by market distortions caused by idiots over the last ten years. But, the fact remains real estate is an investment and gold is not. Also, physical gold bullion locked in a vault, are not being invested; they are simply being stored. Therefore, while it is being stored they don’t earn interest or dividends, thus not an investment.

The reason of this posting is a warning to all of you that are considering "investing in gold". "Investing in gold" is a very dangerous game right now. Whenever the price of something rises as much, and as quickly, as gold has, we need to stop and consider the end game. As I drive through the streets of Florida, I notice the increase of guys standing on the streets waving “We Buy Gold” signs. They looked exactly like the guys I used to see all over Florida with the signs announcing open houses and selling real estate as a sure bet. The danger is how gold is being presented to the public as a sure bet investment. Due to the current conditions of the various financial markets locally and internationally, investors are looking where to place their liquidity to generate income. The problem is that there are a great amount of scammers wanting to take advantage of this opportunity to gain access to the available liquidity. Now please understand that I am not saying that you should not own gold, or that gold is a scam. What I am saying is that the people buying gold have no true way to value it, and therefore are speculating, not investing.

Finally, keep in mind that there are huge institutional players in the gold market right now. When they decide that the run is over, there won’t be time for you to run to your safe in the basement, pack up all your gold coins and bars, run to the local pawn shop and get rid of it. I do not know where the price of gold is going, but for me it doesn’t matter.