Tag Archives: retirement

Protect Your Retirement: Don’t Make These Tax Mistakes

Saving money for retirement is important and can be done more easily with the help of tax-advantaged accounts such as an IRA or an ISA.

However, when you have worked hard, put your money into an IRA or ISA and done everything right, you can still jeopardize your successful retirement by making some simple money mistakes. To help make sure you do not lose what you have worked so hard to save and earn, here are some tax mistakes to watch out for.

1) Rolling over your IRA too often or improperly

When you move money from a 401K to an IRA or from one IRA to another, there are special rules in place in order to avoid tax consequences. If you fail to follow these rules, your money move can be considered a distribution rather than a roll-over.
This can have serious tax consequences as you may have to pay taxes and penalties for taking the money out of the IRA. Before you move your money, check with an experienced financial advisor to make sure you do it right. You also need to avoid moving your money too much as you are allowed only one IRA to IRA roll-over per year before you are considered to have taken a distribution.

2) Failing to consider your retirement account when you are planning your estate

You must remember to name a beneficiary for an IRA or an ISA account in order to make sure that the money goes to the person you want it to go to.

If you are going to leave your money to more than one beneficiary, you will also want to spell out exactly who is to receive what. This is so there is no money wasted as your beneficiaries squabble over who is supposed to receive funds from the IRA or ISA.
In some cases, you may wish to use tools like an IRA trust when you name a beneficiary. This would prevent your beneficiary from spending the money all at once and taking it in one lump sum.

When setting up the trust, it again needs to be done carefully and in accordance with your financial advisor in order to make sure that you are doing everything right and following all guidelines. Otherwise, your efforts could be ineffective.

3) Not understanding the tax rules of your retirement account

When you invest in an IRA or an ISA, there are rules associated with maintaining the tax-advantaged nature of the money. For instance, with traditional IRAs, you must begin to take distributions when you reach a designated age.

It is also very important to not withdraw money before you have reached an age where you are allowed to do so, or unless the reason for your withdrawal falls into an exception and is permitted.

When you take money out of an IRA prematurely, you may have to not only pay taxes on the IRA distribution, but also pay penalties associated with early withdrawal as well. These penalties can be significant.

Cashing in your IRA or ISA can thus deplete the money you have tried to save, leaving you with far less than you would have had if you had followed the rules and waited to take the money out. Not only that, but cashing it in too often at improper times can trigger multiple penalties and tax consequences that could dwindle your investment down to nothing.

Whether you have an IRA, an ISA, a 401K or any other type of special retirement account, do not take action without knowing the implications.

Achieving Early Retirement Through Personal Finance

forced retirement

Retirement is something that most of us dream about. The days when you no longer have to work hard to provide for yourself and your family are to be savoured and enjoyed. You’ve spent a lifetime working and looking after everybody else, now it’s your time to relax and enjoy the time that you have left.

As much as you’d love to be able to plan when you are going to retire, unfortunately it doesn’t always work like that. There can be circumstances when you have to retire long before you have planned. It could be that your health prevents you from working and you need to retire early. Whatever the reasons, there are a number of ways to prepare for your retirement; no matter how early it ends up being.

Health Insurance – Your Early Retirement Protection

If you are ever forced into early retirement because of ill health, insurance could help you to get through it. Suddenly losing your wage with no sufficient savings can really cause you to worry. Even if you have retirement funds saved up, it’s likely that they won’t last as long as you planned. This means that your level of living with be strained.

The right health insurance can really put your mind at ease. The costs of treatment these days can be quite high. Could you afford the treatments as well as the cost of general living? If not then insurance is a must. Another type of insurance that you may want to consider is life insurance.

Why Life Insurance Could Be Important

If you do become ill and it turns out to be life threatening, life insurance will help to ensure that your loved ones are protected. Often even in retirement you will have financial obligations. Perhaps you are still supporting your children or grandchildren? If you have dependents then life insurance will ensure that they are looked after once you are gone.

Whether you opt for health insurance, life insurance or both, it’s important to shop around. Compare as many different policies as you can. They are all different and some policies will be more expensive than others. By comparing your different options you’ll also get to see the different types of cover available.

Optional Early Retirement – Is It Achievable?

Through careful financial planning you could choose to take early retirement even if you’re perfectly healthy. Most people would assume that early retirement is impossible; especially after the recent financial crisis. By following the tips below you could increase the likelihood of retiring early.

Tip #1: Cut Back Now

In order to save for an early retirement, you’ll need to cut back on various expenses now. Do you spend a lot of money going out and enjoying life? For most people they work to live and meals out, trips to the cinema and holidays a couple of times a year are how they get through the slog of everyday life.

However, if you constantly spend most of the money that you earn then how can you expect to retire early? In fact, how could you expect to retire at all if you have no real savings? If you want to be able to enjoy early retirement then now is the time to cut back.

Start by eliminating the larger things. If you eat out once a week then change it to once a fortnight and put the money you would have spent into savings. Once you start getting into a routine of saving money, it will become easier and you can start to cut back on little things. Cutting back doesn’t have to mean that you can’t enjoy life. Just start saving more than you currently do and that is a great start to early retirement.

Tip #2: Understand the Kind of Lifestyle You Want

When you retire what can you see yourself doing? Are you planning on becoming lazy? Would you prefer to stay as active as possible? What standard of living are you expecting? These are just some of the questions that you need to answer. Understanding what type of retirement you want will help you to see exactly how much money you would realistically need.

It may be that you need to become a little more realistic. Sure everybody would love to go on endless holidays and be waited on hand and foot for the rest of their days, but is it realistic? By being a little more honest about what you can realistically afford, it will help you to enjoy early retirement a little more.

The basic things that you need to account for in your retirement include:

  • Clothes
  • Food
  • Heating/Utility Bills
  • Accommodation (Rent, Mortgage, Care Home)

As long as you leave enough money to take care of the above, anything else that you earn is a bonus. Many people don’t bother to plan their retirement. This means that they have no idea what they have to save towards. By being prepared it will help you to enjoy life a lot more once your retirement days arrive.

Tip #3: Pay Off Debts and Avoid Further Debt

These days it’s so easy to get into debt. Most families have at least one debt that they haven’t paid off. If you are struggling with debts then now is the time to start paying them off. The last thing you need is to start your retirement in debt. You have no real income and it will just eat away at your retirement savings.

Always pay off more than the minimum monthly repayments when you can. The more that you pay off, the less time you’ll be in debt.

These are just three tips to help you to plan for early retirement. It may not be as far away as you imagine. Providing you save as much as you can and cut back, you should be able to save up a nice little amount. Follow this advice and set up a savings account today to plan for your future.

This article was written by Timothy Ng.

10 Reasons Why Retiring Abroad May Not be for You

vacation travel

Do you plan to be that person sitting in that beach chair? If you are thinking of retiring abroad you must be aware of the pros and cons and seriously them both into consideration. As such I came across an article in the latest edition of Escape from America Magazine that I think deserves your attention. It talks about the downsides to retiring abroad – specifically the article’s author gives 10 reasons why retiring abroad may not be for you.

Here is a list of the 10 reasons given by the author:

1.  Homesickness

2. Loneliness

3. Healthcare

4. Affordability

5. Integration Issues

6. Cultural Differences

7. Accessibility

8.  Language Barriers

9. Alienation

10. You Like Your Current Life…

I think I don’t speak foolishly when I say that you owe it to yourself and your family to seriously consider all these reasons. Have a look at the full article for the details of each reason given above.

I hope you found this post useful.

Best of luck with your retirement plans!

Cheers,
Alan