Retirement Archives - Page 2 of 5

Online Retirement Planning [Top 5 Tools]

08.12.2011 by Guest Author //

Planning for retirement is an often confusing and overwhelming task. With all the various numbers and information that has to be figured, it is easy to see why anyone would get confused. However, if you want to have a comfortable retirement, you need to begin saving and planning for retirement as soon as possible, and the sooner you begin saving, the better.

Hiring a financial planner is a solid option for those wanting to plan for the most secure retirement possible; however, affording a planner isn’t a viable option for many folks. If you don’t want to or can’t afford to hire a financial planner you’ll benefit greatly from using the many online retirement planning tools available to help you plan things yourself.

A few of the best online tools available now include:

Quicken’s Retirement Planner

Costing users only $59, Quicken’s Retirement Planner is a great resource for any retirement planner on a strict budget. Although the program doesn’t produce reports as detailed as some of the more expensive programs, it does provide users with a rough number of how much will need to be saved. The program also allows users to roughly track monthly payments into their retirement accounts so that they can make sure they are keeping on track.

RetirementCalculator.com

For those planning their retirement who simply need to plug in some numbers, retirementcalculator.com is a free and easy resource to use. Simply by typing in a few figures, users are able to figure out how much they need to be saving each and every month to meet their goals. The only downside to this tool is that it only gives you a basic figure and doesn’t factor in medical costs or any future unforeseen expenses that may happen along the way. It truly is the most basic of all online retirement planning tools.

ESPlannerPlus

The ESPlannerPlus provides users with highly detailed projections of all their future investments returns. Users are also able to calculate accurate projections of their retirement spending and future insurance needs. Although it can be mildly complicated to use, it is still a great planning service as it gives such highly detailed reports, was created by 2 leading economists, and comes at an affordable price of only $199.

The Vanguard Retirement Center

The Vanguard Retirement Center is a free online resource that allows you to create an online portfolio to better manage your retirement. The online site offers plenty of free tips, reviews of stocks, and even help with taxes. This resource is great for anyone unable to afford a financial planner or not wishing to purchase a expensive online service. However, the Vanguard Retirement Center isn’t as thorough as other programs and won’t provide specific reports like other retirement services will.

WealthRuler

WealthRuler is TD AmeriTrade’s free online resource which allows users to calculate how much they need to start saving each month in order to reach their goals. For a free online resource, WealthRuler is actually quite detailed, and can provide users with a fairly accurate estimate of their monthly savings needs.

Adequately planning for retirement is important for anyone wishing to have the type of retirement they have always longed for. Extravagant trips and comfortable living don’t happen in your Golden years without proper planning. Even with the above tools it is still wise to have a financial adviser review your information just to make sure that you didn’t miss any important equations. The last thing you want to do at 65 is find out that you were improperly saving and now must put off retirement for an additional 5 years.

How to Find the Best Financial Planner

09.02.2010 by Guest Author //

Are you using the best financial planner?

The answer to this question is simple. If your financial adviser’s name is Neal Frankle, you’ve hired the right one. If not, you haven’t. 😉

All kidding aside, adjacent many highly qualified financial advisers will always be a fair number of numskulls – which is why you need to arm yourself with the proper tools and skills to ensure you hire the best financial planner – if you need to hire one at all.

The first thing to understand is that financial planners and advisers don’t get much formal training on how to serve you. Insurance agents learn how to sell insurance. Stock brokers learn how to sell whatever it is they think you’ll buy. Financial planners learn how to sell financial plans – but nobody teaches us how to serve you – we are left to learn that on our own… sad but true.

Learning how to become a financial planner is easy, but learning how to help people plan their finances is an entirely different can of peas!

So how do you hire the right financial adviser?

In my opinion, there are 3 steps:

1. Know what you want.

If you need insurance, make sure you understand what you need. Get quotes and talk to agents – they’ll educate you for free, and you don’t need a planner for that. You can also find out how much life insurance you need by doing a little leg work on the good ole Internet.

If, however, you want an overall plan or want to know how to invest for retirement, a financial planner might be just the ticket.

2. Understand the game.

Without going into a long-winded post chocked full of technical jargon, suffice it to say that you should seek out independent advice. Which you will not get from an insurance agent or stock broker. Sure, everyone wants your money, but if you get yourself an independent adviser, at least you have fewer people trying to get into your pockets.

To better understand, consider the following.

Advisers who work for huge firms have lots of layers of managers who also need to get paid. Who pays them? You do. They often strong-arm their salespeople to sell the highest commission product they can in order to create the greatest profit for their firm. That’s big business.

As a disclaimer, I am an independent planner. I don’t like the big firms because I used to work for a few of them and I know what goes on. That said, there are also a number of wonderful people working in these large firms who really do care about their clients and strive to take good care of them, but they are still under the thumb of the company structure.

But as a rule, I advise people to stay away from the large firms.

3. Ask the right questions.

Even if you get the first steps wrong, if you get this step right you’ll be fine… so pay careful attention.

It’s critical that you ask your candidates the right questions.

Here are 24 questions I highly suggest you ask:

How long have you been an adviser? (Hint – you don’t want to be this person’s first client)
Do you work on commissions? (Hint – you’re looking for a “NO” here)
How do you make your investment decisions?
Do any companies pay you a larger commission or fee to represent their products?
Do you have any complaints against you or your firm?
Who would I check this out with?
What kind of clients do you specialize in? Why?
Why do you think it makes most sense for me to work with you rather than someone else?
Describe your best client?
Describe your worst client?
Have you ever been sued?
How is your credit rating?
Are you willing to show me your investment statements?
What’s most important to you about your work?
Why did you get into this business?
Where do you see yourself in 10 or 20 years?
What happens to my account if something happens to you?
Do you have access to my money?
How am I safeguarded?
Do I have any say as to how the money will be invested?
Besides investment services, what else will you do for me?
How often will we meet?
What will we talk about besides investments?
What is your investment strategy? Why?

Going into a meeting prepared with a list of questions like these, will you determine if the financial planner is qualified to handle your finances.

If you are knowledgeable… get involved and comment

What are some other questions someone should ask a potential adviser? How would you hire an adviser if you were looking for one? What else would you do?

Along with being a great friend of mine, Neal Frankle is also a Certified Financial Planner who loves helping people improve their financial situation and increase overall contentment. Find more from Neal on Wealth Pilgrim.

401(k) Contributions With Outstanding Debt

05.21.2010 by Robert Espe //

Have a question of your own? Ask DFA writers for free! 🙂

Stop 401(k) contributions to speed debt reduction?

DFA Reader James P. asked:

Should I stop 401(k) contributions of $546 a month to pay off the car loan faster??? This will bring my monthly excess for debt payments to $1100. I use the 50/50 plan (50% of excess income goes to pay down debt, 50% is saved).

Matt, I would like to say your blog is one of the first websites I check in the morning for inspiration and knowledge. My family of six embarked on the Dave Ramsey journey in June 2008. Since then, we’ve paid off $47,000. $34k of that was credit card debt (ALL GONE!!!!) My wife and I are 34 and our sons are 14, 13, 10, and 10 so we are very proud of ourselves and the amount we’ve paid off considering the responsibilities we have.

I am currently putting 7% in my 401(k) (receiving a 2.5% match). My wife is currently putting 4% (receiving a 1% match). Our remaining debts include a mortgage, a car loan ($32,000 @ 6.9%) on an ‘08 Toyota Sienna (worth $26,000) and two student loans (totaling $23,000 @ 6%). The Dave Ramsey plan would pay the smallest debt (a student loan) first, but I’m conflicted as to what to do next. My thought is pay off the car next because it is my biggest payment, but I would have to stop my (not my wife’s) 401(k) contributions to make it happen in 1 year. My fear is, if I stop the 401(k) contributions I will miss out on a significant rise in 2010. I will keep the student loans for now because they are tax deductible. Getting the car payment off me would lift an emotional burden but my 401(k) contributions are making me have second thoughts.

Congratulations!

Anyone who has paid off nearly $50,000 in debt in two years deserves a pat on the back. You have been doing a great job, let’s have a look at your situation and see if we can help speed you toward debt free living.

Your Plan or Dave’s Plan?

You want to pay off your car because it carries a higher interest loan, but Dave says you should pay off a student loan, because it is smaller and he wants you to have fewer debts regardless of the numbers. Well, I agree with you. Dave’s debt snowball makes sense for people who lack motivation, have a multitude of smaller debts (3 credit cards, 4 store charge cards, and a couple major appliances) and can benefit from the visible progress of paying off individual debts. However, the amount you paid off this past year shows you are VERY motivated, and down to three big debts. The other reason I agree with you, is that the student loans are unsecured, your education cannot be repossessed, and while the tax deduction isn’t a great reason for keeping the loan around, when combined with the lower interest rate, it isn’t costing anywhere near as much as the car loan. You already owe more on the van than it’s worth, which is not a desirable situation.

A Better Rate of Return

Having established that your plan to pay off your vehicle before the student loans is sound, we will now look at how to do it. A 1-year timetable is a good goal; dragging debts out is never good and the amount is only slightly higher that what you paid off the last two years. You tell us the money you need to pay off your car in one year is currently being contributed to your 401(k). The way to do it then is obvious, your 401(k) contributions must be adjusted, and I am going to address how and why.

You are currently contributing 7% of your salary, and 4% of your wife’s into 401(k)’s although you are only being matched for 3.5% of those contributions. That means you have 7.5% of your salaries that I would consider “extra” contributions. I always recommend that people in debt (including a mortgage) not contribute any more to a retirement plan than is matched by an employer. When contributions are matched, you get a 100% return on investment with zero risk. There is no better investment than that, but for unmatched contributions to net a profit, they must produce returns in excess of what you pay in debt interest. On average, the stock market returns 8% over 30 years. While that is higher than the interest you pay on your debts, ask your self if a volatile investment with a 20-30 year timetable is worth 1%-2%. Paying off your debts offers an immediate guaranteed return of 6%-7% in your case. That is a much better deal.

Planning For an Uncertain Future

You mention your concern that next year may be a good year for the market, and you want to get in on it. Since none of us can know the future and because different “experts” are all just guessing anyway… I would counsel that your investment decisions should be based on where you are financially, not what the markets are doing. Get out of debt, save money, avoid future debt, then invest your surplus.

I would recommend reducing your and your wife’s 401(k) contributions to the amount that will be matched. You will then have the necessary money to pay off your car, then shift your attention to the student loans. Once they are gone, bring your emergency fund up to at least $10,000 if you have not already, and then turn the hoses on the mortgage. Once you are completely debt free, you will have the excess income necessary to max out your 401(k) contributions (as well as a Roth IRA if you are eligible) and your retirement savings can grow steadily without interference from debt.

Do You Have Any Other Advice for James?

Something you think I missed? Drop a line in the comments below.

Have a question of your own? Ask DFA writers for free! 🙂

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