5 Great ways to ensure debt free retirement…..

Wipe our Debt (Photo credit: Images_of_Money)

Filed under:  When the experts speak...

2008 will cement its place in history as the birth of a global financial crisis as the rise in consumer living costs stirred with heavy cuts in employment and income reductions for the average hardworking family.  The traditional model of family finance peaks at retirement when there is the beautiful moment of the release from work and life’s pressures, providing a harmonious time to enjoy the easy life with your pool of sustainable assets and trust fund savings.

Although this has been the real dream for many, the level of family debt has risen steadily over the past decade leading to deeper questions surrounding financial management and living within your means. Many have now retired with debts that have blunted the thrill of retirement, whilst in contrast; good financial planning will invaluably aid your goal to retire debt free. 

Here are five methods to consider within contemporary financial management. 

1. 1. Preparation andContingency Planning.  Living within the means of your income should include providing 10% of shared gross income into a contingency fund; this can then be used for the unexpected scenarios of divorce, illness or business failure. If a tough situation like this arises then acquiring swift finance is both challenging and costly in the longer term. This contingency fund further provides you with a useful savings trust if it is not required in your hour of need. 
2. Tax Efficiency and Re-balancing debts. The levels of debt can be reduced by meticulous planning and monitoring of tax payments to ensure only obligatory payments are made on your income and assets.  Business debt and rental property for those on the higher tax bracket can be removed from taxable income and should be a slimmer priority for those in the higher tax bracket.
3. Constructing a Budget. The budget construction should be methodically planned on an annual basis considering all incoming and outgoings and representing the disposable income available on all monetary investments. A budget plan can also shine a light on your largest outgoings and identify where changes in cash flow could be made. Tracking your spending can also be highly valuable when identifying the cash flow changes over a significant period of time. 
4.  Prioritizing Debt and Earning. All debt is bad debt, but categorizing the importance of each debt based on interest is one way to prioritize payments. Paying of the smallest bills first can allow you to avoid future interest, and is a useful debt reduction strategy as you will also accomplish removing a bill from the list of outgoings.
5. Prioritize Importance and Monetary Philosophy. Capital investment after covering the necessary areas of education, food and maintenance should consider a philosophical approach to spending.  Whilst there is the pressing urge to acquire that new wide screen TV, a weekend away with your partner could become a far more valuable investment for the relationship strength it provides and an ability to make tough decisions as a team.

Author Bio – James Barnett is a writer on behalf of Cooper Matthews analysing contemporary wealth management for families across the UK.

This is a sponsored informational post.

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Permission Granted: You Are Allowed to Guard Retirement Money

You are hereby granted permission to guard your financial wealth...even from your family. While generosity is wonderful, be sure that your family, both old and young, understand the consequences of giving more to them than you can afford. It is possible that bailing out a family member would actually ruin your retirement. Sobering thought isn't it?

My journey around the web today took me from Boomer Girl's Guide to Buck$ome Boomer and an article called The Power of Saying "NO" to Preserve Your Retirement. The author, Kay Lynn Akers, is a boomer sharing her thoughts on the financial side of getting ready for retirement. Her post today revolved around the problem that parents have in saying no to their children when they are in need or even just want more than they can afford. I could relate to what she had to say...we all want our family to be happy. But.....

The fact is, we need to guard that part of our financial wealth that takes care of us in our retirement years. If we don't do that, our children will be left with the responsibility of helping us at that time. Will your children be able to do that? One of the comments left on The Power of Saying "NO"...suggested one guideline we might be able to use:

I think the key is to never raid one’s retirement funds.... But I do help out (and sometimes bail out) my children from time to time....(Grace from Graceful Retirement)

There is no one size fits all answer for this dilemma. But when it comes to our retirement funds, the funds that will pay our bills when we retire, the answer is alway "no". That money should be kept separate from other money...untouchable probably. It may be easier to say that you don't have it than to give a flat out NO!

This is another one of those conversation I think you need to have with your children and probably when they are very young. Like you, they need to realize that all the money you make is not for spending now. Part of that money will be needed to buy groceries and medical care somewhere on down the road. Wouldn't it be wonderful if we never started to raise their expectation to begin with?

I invite you to visit Boomer Girl's Guide and Buck$some Boomer. They are both very popular blogs.

Just a thought.

b

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Simple Graphs: Not Ready for Retirement? Inforgraphic from Mercer Insights

While I talk a lot about how a happy retirement happens in the 6 inches between your ears, I do know that a financial reality check is in order before you retire.  Being satisfied with what you have is one thing but making foolish decisions based on cluelessness is another.  People are paying closer attention these days it appears and the financial outlook has them worried.

When future retirees were surveyed about their retirement savings by a consulting firm called Mercer, their answers were very telling. The graph below was created as a result of a survey called What's Working.  The results of the survey painted a picture of uncertainty for retirement possibilities.  Why the uncertainty?   I think Arthur Noonan, partner in Mercer put it perfectly:

“We have seen defined benefit plan freezes and terminations in recent years, combined with the worst decade of S&P performance,” he says. “Add to this the large bubble of workers – the boomers – reaching retirement age, increased media attention on retirement issues and talk of possible Social Security cuts. People’s sense of security has been shaken.”  Arthur Noonan, a partner in Mercer’s Retirement, Risk & Finance from Mercer 

Here is the information we were invited to use by the Mercer group.

Infographic by Mercer Insights

It seems that while employees rate retirement benefits at the top of their list of desired perks, the type of plan influences their confidence.  A 401(k) is is the most desirable.  It could be that workers need to be  looking a little harder at types of retirement plans when they change employers. A 401(k) allows employees to transfer the money to another qualified plan.  If that new employer does not have a qualified plan, the employees could be looking at a large tax fee for withdrawing funds.  Remember, 401(k) is from pre-taxed money.

The survey tells us that if you are a woman, you don't think you are doing enough to insure your retirement.  Less that 45% of all employees feel that they are saving enough to insure retirement.  But if you are a woman, that number drops to less that 39%.

Younger employees are feeling more positive.  In the 25-34 age bracket, 50% or more feel they and their current employer are doing a good job with their retirement plan.  But in the aging population the confidence levels fall significantly.

Retiring in style is not easy these days but picking the right retirement plan (one that can be moved from one employer to another or one that is not taken from pre-taxed income?) may be the key if you are young.  If you are over 50 it becomes more difficult.  Living on less NOW may save your retirement from disappearing all together.  Remember, even though you are living as though tomorrow will never come, it probably will anyway!

It is just a thought.

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