How to Plan your Retirement in San Diego – Investing Tips from Patrick Belhon
When FDR signed the 1935 Social Security Act into law, the age at which you could start receiving benefits was 65. The chance of your being alive to collect benefits was about 50 percent. Today, thanks to advances in medicine, better availability of health care, and more awareness of proper nutrition, people are remaining active and living much longer lives.
Your chance of living into your 80’s and 90’s today is much greater than it was back 100 years ago. According to life insurance actuarial tables, life expectancy in the United States for a man born in 1930 was 58, and for a woman, 62. A male born in 2010 has a life expectancy of 81 and a female will live, on average, to 84.
If you want to have enough money and income to live a comfortable retirement, you have to plan your retirement today. While there are many different approaches you could take in planning for your retirement, most experts would agree on some basic principals.
• Start early – Time is your best friend when you are trying to accumulate money for your retirement. If you start saving when you are age twenty, as opposed to age fifty, you will gain the full benefit of compounding. Money that compounds at an annual rate of even 5 percent for 40 years will be worth a whole lot more than money that compounds at 5 percent for only 10 years.
• Fully fund your retirement plan – Whether you have a 401-K at work, a Roth IRA, or some other type of retirement account, you should put the maximum allowable amount into your retirement plan each year. Tax advantaged accounts make these types of accounts grow faster over time. Depending upon the particular plan, you can enjoy tax-deferred growth and, in the case of a Roth IRA, pay no taxes on distributions when you retire.
• Use age appropriate investments – The blend of investments in your retirement portfolio is just as important as the particular stocks, bonds or other investments in your portfolio. If you have a long time horizon before you reach retirement age, you can afford to take more risk in return for greater growth potential. As you get older, you should become more conservative and aim for capital preservation rather than growth.
• Don’t borrow from your retirement account – while it might be tempting to take out $50,000 from your IRA to buy a brand new car, avoid the temptation! Unless you have a true emergency (need to pay for an operation or your house is going to be foreclosed), the consequences of taking money out of a retirement can be severe. While there may be a grace period where you can return the money you borrowed, if you don’t, you will owe ordinary income taxes and also face a penalty. Besides that, when you reduce the balance in your retirement account, it can make it impossible to achieve your financial goals for retirement.
Stocks and bonds are not the only ways to plan for your retirement
Although the majority of people invest their retirement money into mutual funds, individual stocks and bonds, there are many other ways to plan your retirement. Some people fund their retirement through:
• Precious metals
• Invest in a business
• Real estate investments
You should remember that diversifying your investments for your retirement is always a good idea. You can have a retirement plan that includes all of the above-mentioned sources as well as others that are not on the abbreviated list. There are financial advisors and retirement planning experts out there who can guide you, but ultimately, you need to be comfortable with your retirement plan. Knowing something about the different ways you can meet your goals for growth before retirement and your need for income after you retire, will allow you to make the best decision so you can live a happy and comfortable life when you retire.
An annuity can be used to provide a guaranteed stream of income when you retire. Insurance companies offer a variety of different types of products that can generally be classified as either an immediate or a deferred annuity.
With an immediate annuity, you pay the insurance company a lump sum of money, and in return, you receive periodic payments starting on a contractually agreed upon date. There is no accumulation period and you can usually start receiving a regular stream of income within 30 days from the date you purchase the annuity. Immediate annuities can be for a term-certain or designed to provide income for the rest of your life.
With a deferred annuity, you pay a lump sum today and start collecting regular payments beginning at some time in the future. The time between the date you purchase the annuity and the date you receive your first payment is called the accumulation period. The accumulation period could be a few years, 10 years, or even longer. During the accumulation period, the money you invested earns a rate of return based on the type of deferred annuity you choose.
The longer you defer the date before you start your stream of payments, the greater the amount each payment will be. A deferred annuity allows any gains you have to grow tax-free, and usually, you do not have any tax liability when you start receiving payments.
Annuities are sometimes difficult to understand, but they can be a good solution for people who do not want to run out of money during their life and want a guaranteed income every month. Certain products, like a deferred indexed annuity with a lifetime income rider, guarantee a certain annual interest rate and also allow you to participate in a bullish stock market. Your return, during the accumulation period is the total of the guaranteed annual interest rate plus a percentage of the index (such as the S&P 500). In return for a guarantee that you will never lose any principal in a down market-year, you forfeit some of the total index gains in any positive year.
While an annuity is not right for everyone, if you are interested in exploring the possibility, it is best to find an independent company that specializes in annuities. An expert, who is not an employee of the insurance company selling annuities, can help you find the best annuity available by comparing annuities from all of the leading insurance companies.
No one can predict with certainty what the price of gold or silver will be in 10 years or whenever you may be ready to retire. However, for many investors who are worried about the value of the dollar, inflation and economic turmoil, there can be some comfort in buying precious metals as part of an overall retirement plan. Precious metal investments should be long-term investments. If you are going to buy and hold gold for 20 years before you sell it when you are retired, be cautious and only put 10-20 percent of your total retirement funds into precious metals.
Investing in a business in 2014
You don’t have to buy shares on the New York Stock Exchange to invest in a business. You could own a business or be a partner in a small business that grows in value over time. Selling your share of the business when you decide to retire can provide you with the money you need for retirement. You can also allow someone else to run the business while you still own the business. Arrangements can be made where your business can generate the income you need without having to give up a company that you love.
Real estate investments in 2014
While individual real estate holdings are not permitted in a regular IRA account, you can open a Self-Directed IRA where it is perfectly legal to invest in both private homes and properties used for commercial purposes. The ability to select the property on your own without having to buy into a REIT, can lead to excellent returns on your retirement investments.
You can buy properties within a Self-Directed IRA or you can buy them outside of a tax-sheltered account. Either way, your rate of return can be enhanced from two sources. First, your home or other property can appreciate in value over the purchase price. Second, you can generate income while you own the property by renting it out to tenants.
Buying prime property in a prime location is a proven strategy for accumulating wealth for your retirement. In California, coastal San Diego communities in La Jolla and Del Mar are in high demand and are expected to continue to be among the most desirable addresses in all of California. Realtor, Patrick Belhon, has a keen understanding of the housing trends in San Diego and the entire Southern California area. He can help you find the perfect house for you to live in when you retire and he can also help you find investment property.
If you want your dream of retiring in Del Mar or La Jolla to come true, you should start planning for your retirement today. Whether you are planning to retire next month or in five years, don’t hesitate to call and let Patrick Belhon show you the best places all along the San Diego coast.
Article Copyright ©2013/2014 – All Rights Reserved Patrick Belhon