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3 Shocking Truths About Early Retirement All Millennials Should Know

A lot of millennials seem to take their work for granted, failing to save and prepare for an inevitable future beyond work. But, as Aristotle said, “Good habits formed at youth make all the difference.” By being prepared for retirement, you’ll be able to enjoy life when older. Early retirement is a privilege. It is a sign of life lived with careful consideration and planning. It is only when you have put aside a sizable nest egg that you can afford to stop work and enjoy your independence. The following truths about early retirement will shock you. Pension isn’t guaranteed Unlike the time of Generation X when the government pensions were a reliable certainty, it will be different in the future. With economic instability and financial devaluations, you will be forced to rely more on your own savings than your employer’s or the government’s. It is better to start making plans early so you won’t have to keep working when you are supposed to be resting. A percentage of your earnings should be kept in a separate account each month. Consider alternative investments such as stocks and bonds to diversify and multiply your income sources. Your health is at risk ...

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How Job Hopping is Harmful to Your Retirement Savings

Job Hopping

While some people choose to stay at the same job for their entire career, others have a habit of changing jobs every year or two. This habit is known as job hopping. Job hopping may not be a bad thing if you are young and the positions you hop to are higher paying or with better benefits. However, there are times when job hopping can be harmful to your retirement savings. Cashing Out Should you choose to leave your job after only a year or two, you may think you should simply cash out your 401(k) when you leave. Think again. Cashing out your retirement plan early means you may only be able to receive a portion of it. The reason for this is because early withdrawal usually causes you to incur penalties and fees. A couple of better options would be to move it with you to your new employer, if they allow it, or to roll it into an IRA. Not Being Fully Vested When you are investing in a 401(k) plan, it usually takes three to five years before you are fully vested. If you choose to leave your current employer and go to work for a different company ...

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The Financial Reality of Retirement

A great deal has been written about the problems of retirement. After working for anything up to and beyond four decades everyone deserves a comfortable retirement. As life expectancy increases that may be another couple of decades, even more. The question arises about how to finance those years of retirement. Much of what is written today focuses on the lack of provision Americans are making for retirement. There is a Social Security System paying monthly benefits from as early as 62 year old yet these benefits were never designed to fully finance retirement. They are totally inadequate for doing so and too few are saving sufficient money to live the lives they hoped for after retirement. Debt Is an Issue It is difficult for anyone to predict how much they will need to live comfortably in retirement. Although people are living longer the cost of medical care increases by the year and inevitably as people age they are likely to face more bills. One thing that everyone should avoid is going into retirement with high interest debt. The obvious example of this is the credit card. Too many Americans have balances that attract high interest at each month end. Card ...

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How to Fully Fund an IRA When You Have No Extra Money

saving for retirement

Everyone knows how important it is to save for the future but sadly, about half of families in the U.S. have nothing set aside for retirement. Whether it’s lack of access to an employer sponsored retirement plan, stagnant wages, or the lure of instant gratification that makes paychecks disappear, it’s clear that Americans are not saving enough. No one can make companies offer 401(k) plans, and it isn’t always possible to control what a job pays, but there are other ways to fund retirement, even when you seem to have no extra money. Set up an IRA If you’re job does not offer a retirement plan, it’s very easy to set up an IRA. I personally like Betterment for beginners because you won’t have to choose funds or rebalance, but there are many low cost brokerages that will allow you to open an account with no minimum. For 2016, IRA contribution limits are $5,500 with an extra $1,000 catch up contribution allowed if you are over age 50. A Roth IRA offers no tax benefits upfront, but any money deposited can grow and be withdrawn tax free after age 59 and a half. Singles earning less than $117,000 and married ...

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It’s Never Too Late to Invest for Retirement

get started on investing for retirement

While we’ve made our share of financial mistakes, I’m always amazed when I run across someone my age or older who has nothing saved for retirement. Considering that a third of workers have less than $1,000 saved for the future, I guess it shouldn’t be that surprising. The good news is that it’s never too late to invest for retirement. Even if you might never be a millionaire, that doesn’t mean all hope of a decent retirement is out of reach. Figure Our How Much You Need to Live On Determining how much money you need to retire is certainly a million dollar question. Most retirement calculators assume  you’ll need 70-80 percent of your current income and won’t let you add savings rates greater than 20-25 percent. My favorite retirement calculator is the one from Personal Capital. At least it lets you add and subtract variables more easily than the rest I’ve tried. You can actually get a ballpark on your own by determining how much you spend per year now and apply that to retirement years. Some costs like health care will likely increase while others, like clothing and transportation, should decrease. If you have kids, hopefully those expenses ...

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