Recession Proof Retirement

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Would you like to recession proof your retirement?

Today is a special day as I’m participating in the Retiree Next Door movement where you can get the free ebook until Sept 30th! As part of the #RetireeNextDoor movement, the results of an amazing survey are being released today. The stats are scary: in a recent survey of Baby Boomers by MoneyTips.com, it was revealed that many are heading for a financial train wreck. Thirty two percent of Boomers have NO financial plan whatsoever, while forty percent saving enough to meet their retirement goals. Let’s look at some of the other findings:

Successful Retirees Are… Comfortable with their current standard of living

81% fully retired

19% semiretired

58% male 42% female

2% 40-49 years old

6% 50-59 years old

38% 60-69 years old

48% 70-79 years old

6% 80+ years old

It is important to be comfortable with your standard of living, but according to the survey, you don’t have to deprive yourself now in order to achieve a successful retirement.

Are Successful Retirees Lavish Spenders?

  • 65% spend enough to live comfortably

•    35% live frugally

•    Less than 1% said they spend lavishly

Many consumers are concerned about stock market fluctuations, having a steady income in retirement, leaving an inheritance to their children, and they are especially concerned rising healthcare costs.

Financial Concerns Keep Nearly Half (49%) Of Successful Retirees Up At Night. But there is hope for those who are willing to take steps to successfully plan for their future. If there’s one thing that the recession of 2008 is that we need to be careful when it comes to providing for our retirement years because there are no guarantees we won’t see another recession before we reach our retirement years. Here are some basic tips to help recession proof your retirement:

1. Be Diligent: FICOS (Fair Isaac Credit Scores) – Now is the time to improve your FICO as these scores can determine auto insurance premiums, whether you’ll get the promotion or the job, the percentage you pay for a mortgage or car, and whether you pay a security deposit for utilities. If you downsize a home or a vehicle in preparation for retirement, you’re also going to need to have an excellent FICO to get the best APR rates in the financing of another house or car. It’s possible to improve your FICO in three easy steps:

  • Pay On Time – It’s better to pay your bills a day early (rather than a day late) by setting up automatic payments online for your credit cards, mortgage and vehicles.
  • Pay More – Even a payment of $5 to $10 more than the minimum balance on your credit cards will be viewed as you paying down debt, which makes your FICO go up.
  • Pay Proportionality – Make sure that you don’t have more than 50% of the available credit charged on any one card. For example, a card with a $6000 limit should never have more than $3000 charged on it, even if you pay off the balance each month.

2. Be Smart: Save Money – I get loads of emails every week from consumers who are cutting hundreds from their household budget by following simple savings tips. From insurance to groceries, there are savvy ways to save at your fingertips. Start to implement these savings and it will create good discipline that will prepare you for the inevitable highs and lows of the economy as well as what it will take to live on a fixed income in retirement. Use the money you save to pay down debt, fund a fixed indexed annuity (see step 5 below) and build short-term savings. This prepares you and solidifies your financial picture in preparation for retirement. Here are some ways our survey indicated that successful retirees prepare.

Since Retiring, How Do They Minimize the Risk of Running Out of Money?*

  • 73% Carry Medicare
  • 55% Drive a car that’s at least two years old
  • 44% Spend less than their monthly income
  • 43% Own their home outright
  • 41% Manage their own personal finance and investment decisions
  • 36% Reduced their living expenses
  • 35% Cut back on extras (eg. travel, luxury items, memberships)
  • 34% Collect passive income (stock dividends or interest)
  • 30% Drive a car that is fuel efficient and/or inexpensive to maintain
  • 24% Carry long-term care insurance
  • 20% Follow a carefully planned budget
  • 18% Moved into a smaller home, a less expensive neighborhood and/or a retirement community
  • 17% Continue to work or spouse is continuing to work
  • 10% Collect income from rental properties

*Multi-select

3. Beware: Debt Consolidation Companies – With rumors of a possible double dip recession and more economic challenge comes an influx of those who want to help you prepare for the worse by consolidating your debt. However, some of the for profit debt counseling companies charge a hefty fee for their services, which is usually tacked onto your debt load. Instead of using a for profit company, consider going to the nonprofit, National Consumer Credit Counseling Service. They can help you pay off debt, get on a budget and they can even negotiate with your lenders on your behalf.

4. Be Fully Funded – One of the best investments for retirement among our survey continues to be the Traitional IRA. Also, the 401(k) is of prime important as it has long been known as the ticket to retirement for millions of Americans. Many retirement savings options have taken a hit in recent years due to market volatility and fluctuations. For example, when companies lowered the matching portion of 401(k) plans, workers got disgruntled and stopped contributing. It is important to take steps to take care of your retirement account whether you are investing in a 401(k) or a Thrift Savings Plan (TSP—for military and civilian government employees), or whether you are a small business owner and fund your own SEP (Simplified Employee Pension). As an author/speaker I fund a SEP for myself, while my husband has a 401(k) at work, and my military sons contribute to TSPs while serving in the military.

Top 10 Retirement Savings Instruments*

Traditional IRA 66%

401K 53%

Defined Benefit Plan 30%

Roth IRA 27%

Tax sheltered annualties 25%

SEP IRA 18%

Rental Properties 17%

403b 17%

Other 14%

Health Savings Account 12%

* Multi-select

5. Be a Savvy Investor – Savvy and conscientious consumers who are looking for smart retirement solutions and more control of their long term finances during uncertain times will recognize the important role that fixed indexed annuities can play in any balanced financial plan. I believe that fixed indexed annuities provide protection from stock market volatility, they offer guaranteed interest and income, and they also provide the opportunity for additional interest when markets are up. Understand that FIAs are in addition to other retirement vehicles (such as a 401(k) or IRAs) in order to provide a key component that consumers need in order to have a balanced retirement plan. They also help to moderate risk. In my partnership with the IALC (Indexed Annuity Leadership Council), I have found a great option to recommend to my readers and viewers.

I believe that it is possible to recession proof your retirement by taking the steps necessary to secure success in this very important aspect of our lives.

Which first step will you take today in order to recession proof your retirement for tomorrow?

 

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