Archive for Pre-Retirement Planning
Here is the latest information from the Senator Herb Kohl, Chairman on the Senate Special Committee on Aging.
~~ Anna D. Banks, GCDF
KOHL HEARING EXAMINES STEEP RISE IN 401(k) LOANS, PLAN POLICIES TO REDUCE LOSS OF SAVINGS
Schumer, Kohl Announce Joint Legislation
WASHINGTON – Today U.S. Senate Special Committee on Aging Chairman Herb Kohl (D-WI) held a hearing on reducing 401(k) leakage caused by loans and withdrawals, which can result in a substantial loss in retirement savings. At the hearing, the Center for American Progress released their report entitled, “Robbing Tomorrow to Pay for Today: Economically Squeezed Families are Turning to Their 401(k)s to Make Ends Meet,” which demonstrates that loans are not only increasing in number, but that the amounts taken out and the percentage of participants taking loans is growing substantially as well. Senator Charles E. Schumer (D-NY) Schumer joined the members of the Special Committee on Aging in questioning panelists, and announced that following the hearing, he and Chairman Kohl will introduce a bill later today that would prohibit the use of 401(k) debit cards and set a limit on the number of loans a participant can take.
“The bottom line of today’s hearing is that 401(k) and similar defined contribution plans were created to ensure that people would have adequate savings for retirement, not as a source of credit to use casually,” said Chairman Kohl. “When a participant can use his or her 401(k) to make everyday purchases like buying a cup of coffee, clearly that is a gross distortion of the plan’s intended use.”
“They were once in retreat, but companies looking to raid Americans’ 401(k) accounts are making a comeback. This legislation will protect people’s nest eggs from companies peddling debit cards that deplete their retirement savings with a simple swipe. A decade ago, the mere idea of this legislation was enough to get companies to abandon this reckless practice. This time, we want to push this bill all the way to becoming law,” Schumer said.
In his opening statement, Chairman Kohl shared his concern over recent advertising campaigns that encourage federal employees and retirees to move their retirement savings out of the Federal Thrift Savings Program and into higher-fee accounts. As TSP has the lowest administrative costs of any retirement program in the country, Kohl called the misleading ads “a disservice to hard-working public servants.” Yesterday, Kohl sent letters to companies running the advertisements, asking them to reexamine this practice.
At the hearing, Christian Weller, a senior fellow at the Center for American Progress, provided an overview of the recent increase in 401(k) loans, and outlined some of the primary reasons people tap into their retirement savings and the consequences for doing so. Mark Iwry and David John of the Retirement Security Project shared time, testifying on the overall lack of retirement savings and highlight areas where 401(k) leakage can most effectively be reduced. Gregory Long, Executive Director of the Federal Retirement Thrift Investment Board, talked about the federal government’s defined contribution plan, the Thrift Savings Plan, and discussed the policies it has implemented in order to reduce loan activity. He also shared his concerns about the aforementioned ad campaign targeting TSP participants. John Gannon, senior vice president at the Financial Industry Regulatory Authority (FINRA), discussed FINRA’s recent investor alerts on the dangers of withdrawing funds from 401(k)s, as well as their consumer education initiatives. Finally, Bruce Bent, chairman of The Reserve and Reserve Solutions, offered testimony on the 401(k) debit card product offered by his company.
This is the second in a series of hearings Senator Kohl has chaired to highlight the need to protect and strengthen 401(k) retirement savings: in October 2007, the Committee brought attention to the need for 401(k) fee disclosure to plan sponsors and participants. Following that hearing, Kohl and Senator Tom Harkin (D-IA) introduced the Defined Contribution Fee Disclosure Act to require 401(k) plan providers to disclose all fees so that workers saving for retirement can make a fully informed decision about which plan is best for them.
The 78 million-strong population of Baby Boomers currently represents as much as 40% of the American workforce. All, or most of these boomers are unlikely to look at complete retirement at the age of 65 and as many as seven in ten of the boomers who are eligible for retirement actually plan to work far past age of retirement or never retire at all. However, the Bureau of Labor Statistics says, that the total rate of growth of the workforce is on the decline. It will go from 12%, which is the current growth rate, to a mere 4% in the decade leading to 2020. In the very near future, employers will find that it has become crucial to hire, and keep mature workers happy within the organizations and the workforce.
However, it would astound the prospective employee to know that in spite of all this highly publicized research and the available statistics, 80% of companies have failed to make any changes in the organizational structure or work atmosphere to make special provisions available for older workers. This state of affairs needs to undergo a rapid sea change if these companies want to retain their competitive edge, minimize the impact of the declining workforce growth on their businesses, and if they wish to be seen as employers who are friendly to the increasing number of older workers.
By the same token, the over-50 candidate who is looking for a new job can improve his/her chances of landing the job they want by becoming more knowledgeable about the coming labor shortage, making sure they are the right choice, and demonstrating to prospective employers the fact that they can match and support the evolving needs of the company.
Now, the question is what the mature worker wants and how he/she can achieve these goals over the ten years or so. Some of the goals for a 50 plus worker may be:
1. Financial Stability: This is one of the main reasons that influence the decision of baby boomers to continue working after 60.
• The answer: Mature workers will have to look for jobs that will enable them to cover all their obligations. It is a good idea to speak to colleagues, various professional organizations, and recruiters, and research online about their current market value.
2. Different Employment Packages: Companies will find it necessary to recruit qualified candidates and create new strategies to retain baby boomers. Boomers want flexibility in their work arrangements, more meaningful and satisfying work, better and more comprehensive benefits, as well as opportunities for training and development.
• The answer: Boomers must find out about companies actively showing commitment to an older, more mature workforce through AARP surveys and magazines, newsletters, networking, especially in age-related discussion groups.
3. Age Bias: whether real or perceived, it is seen that hiring managers and even some decision makers have certain preconceptions about older workers.
• The answer: Older candidates ought to interact and work around changes, training, and relationships, and break the stereotypes.
4. Benefits and Pension Plans: Internal Revenue Code regulations prohibit any defined benefit pension plans from making payments or disbursements until employment ends
• The answer: If receiving a pension is important, working for an organization, including their old employer, as a consultant, may be a better idea so that the pension benefits are unaffected.
The labor situation is changing rapidly, and will continue to change in the near future. Keeping themselves informed about these changes and finding ways to better market their accomplishments will enable mature professionals to improve their future career paths.
Baby Boomers: Plan Ahead and Build Your Own Business after Retirement
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By Anna D. Banks, GCDF
Starting a Business after retirement requires you to plan ahead and build a good foundation. You need to face a number of issues and questions such as:
• What is a good business for you to undertake?
• How much time and effort are you willing to devote?
• Does this match with the time and effort demanded by the business you want to start?
• What are the key processes involved in starting a new business?
• What are the skills that are necessary for business success?
• How much should you invest in a new business?
• How do you go about developing an action plan for the business of your choice?
The process of starting a business can be a challenging, and an exciting experience. It can also be frightening, exhausting, and frustrating. The key to a minimum stress start-up is to plan ahead and build your own business after retirement, in a planned and rational way. Understanding, and planning out, the entire process of start-up makes a huge difference to the end result. There are, some basic steps that are common in planning and starting any business:
Assess your areas of strength. Are you a person who can easily take risks with money? If the idea is scary, it may be better to think twice before considering a business. No matter how you look at it, and how well you play it, being an entrepreneur involves risk. You must be willing to lose money if it comes to that. You must also have the ability and the will to work hard, be able to handle uncertainty well, and possess self-discipline.
Pick the right business. There are generally has two kinds of people. One kind consists of people who love something to the level of passion and are driven to make a career of it. If you belong in this category, make sure you conduct research to check that a market exists for the business. The other kind of person is one who is fascinated by the idea of being an entrepreneur, rather than a particular idea. In this case, pick a business that has instant demand and potential for future growth.
Come up with a solid business plan. Think of it as a map that tells you the direction you should be heading in and helps you to identify important markers you may see on the way. Before you open your doors to clients, think and plan out exactly what you want your business to be. Figure out what makes your product or service different or special, how you plan to attract customers, how you intend to beat competition, and other such essentials.
A major part of the business plan consists of a financial analysis, including:
• The amount of money needed
• How it should be spent
• Amount of profit expected etc.
Figure out where you will get the funding needed to start. Explore options like
• Your own savings
• Your credit cards
• Your retirement accounts
• Second mortgage
• Advance on inheritance
• Loans from friends or family members.
© Anna D. Banks, GCDF
ANNA D. BANKS, GCDF is an adjunct professor at Essex County College, career development and marketing coach, speaker, and author. Anna helps individuals design a game plan for an extraordinary career or business. Since 1996, Anna has helped hundreds of job-seekers, managers, business owners, and sales professionals achieve career success. For more information send an email to Anna@AnnaBanks.com.
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Author’s Note:
Do you have any questions about career development or lifestyle changes for Baby Boomers, which you think others, like you, would want to know the answers? Please place a post on www.AnnaBanks.com or email your questions to me at Anna@AnnaBanks.com.
Making Tax-friendly Investments for Stress-free Retirement
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By Anna D. Banks, GCDF
Nothing in life is permanent. Everything is transient. That is why we must be secured, especially in financial terms, in case things go out of control. We must be always prepared for the future and that is why good retirement financial planning is most practical for a safe and secured future. Financial planning is very crucial like life planning and it requires lot of calculative and methodical moves, like choosing a home involves lots of tax factors like state and local taxes. Retirees should carefully study the tax matters before formulating the retirement financial strategies.
Retirees who wish to continue with their work during their golden years should be aware that the state taxation income varies widely for them and some states support their earned income and provide them extra privileges. Some states consider the retirees income like everyone else’s and some impose tax on all the earned income. Sometimes the taxation amount varies a lot between states. Retirees shifting to new domicile should watch out for the municipal income taxes.
Income from military, government, private pension and other retirement plans are increasingly important sources of income for some retirees. Some states exempt incomes generated from such sources, while some exempt only selected ones. Some place taxable limits on such sources. Some states even tax former residents on retirement plan withdrawals and create a possibility of tax in two states. Some states strictly adhere to the federal tax formulas under the social security benefits and others follow their own specified formulas, while some don’t provide any reimbursements at all.
Retirees should also consider the sales and property taxes, as some states offer tax deductions on properties purchased by retired seniors while others provide homestead benefits. Retired seniors should also study the tax exemptions provided on clothing, food, drugs and household goods. US tax code generally deems the retirement age and sometimes you might face the ugly tax brunt while tapping tax favored retirement benefits. It is very complex to avoid federal income tax, but it is possible to avoid the 10% penalty provided you plan way ahead.
Opt for the IRA withdrawals
If you use the Roth IRA withdrawals then when you withdraw your contributions, they are federal income tax free and penalty free, but sometimes this could be tricky if the source of income is from the following three sources:
• Money from annual tax contribution
• Money generated by converting tradition IRA into Roth IRA
• Earnings accumulated from your contribution
Tax deductions apply to only the first two sources and withdrawal before the retirement age from the third source is usually subjected to income tax.
Advantage of penalty free exemptions
If you have not opted for Roth IRA than the best option would be to opt for income tax withdrawal. Whenever you withdraw, you would owe some amount to the income tax. If you wish to break the rules, then switch to qualified retirement exemptions like 401(k).
Annuitize the Account
This is normally the surest and safest technique to legitimize for a penalty-free retirement account withdrawal, before the retirement age of 59 years and 6 months.
© 2008 Anna D. Banks, GCDF
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Author’s Note:
Do you have any questions about career development or lifestyle changes for Baby Boomers, which you think others, like you, would want to know the answers? Email your questions to me at Anna@AnnaBanks.com.
Getting Ready For the Transition from an Employee to a Business Owner
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By Anna D. Banks, GCDF
Most people nearing retirement age begin to think about what they can do next. Even though you may want to start a small home based business, but you could be stuck wondering if you are too old for entrepreneurship after retirement. You may even think that over 60 is an age that is too old for getting into entrepreneurship.
However, recent studies have shown that older entrepreneurs actually have the odds in their favor. As many as 22% men over 65 and 14% of the women over retirement age are self-employed, and entrepreneurs in the age group of 45 to 64 are a group expected to grow rapidly in the near future. Older entrepreneurs clearly have an edge because of their experience gained over many years of working life. They have also generally earned more financial stability, and assets that can finance a startup. Today, entrepreneurs over 50 are quite willing to devote the time and energy to build their small businesses.
There are more than 10 million businesses in the US alone that are women-owned, and employ 18 million people! Women-owned businesses are actually a good 28% of the total business world and total over 700,000 new startups a year! These statistics are a good reason to get ready for the transition from an employee to a business owner. As the Baby Boomer generation hits retirement age, people are living longer and healthier lives, making many of them want to continue an active and productive work life.
By the time you are 50, you have gained a number of skills and accumulated experience that really makes the difference in entrepreneurship. However, prepare well before you make the transition from an employee to a business owner. It requires some precautions that may not apply to young entrepreneur. Starting a new business at this stage can be more risky and you can afford fewer mistakes. There is simply less time to bounce back and the money you are investing might just be your retirement assets. So if you are an older entrepreneur, you need to plan and prepare, getting ready for the transition from an employee to a business owner, with caution.
Don’t stake all your reserves on this one venture. Borrow only as much as you need to start the business and try to avoid a personal guarantee or second mortgages. Pick a business that you have experience in, in a field that you know well. Failing that, pick an industry where your current skills transfer and translate easily. A totally different industry, based on a hobby or an interest, can work quite well if you spend enough time in learning the ins and outs of the industry and familiarizing yourself with the business.
Consider buying up an already established business. Starting a new business from scratch is risky. If you buy an established business, you get processes already in place, and a ready client or buyer base. A running business has a track record, and financial statements; check these out before you buy, with your lawyer and accountant. Also, another good idea might be to consider a franchise.
© 2008 Anna D. Banks, GCDF
ANNA D. BANKS, GCDF is an adjunct professor at Essex County College, career development and marketing coach, speaker, and author. Anna helps individuals design a game plan for an extraordinary career or business. Since 1996, Anna has helped hundreds of job-seekers, managers, business owners, and sales professionals achieve career success. For more information send an email to Anna@AnnaBanks.com.
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Author’s Note:
Do you have any questions about career development or lifestyle changes for Baby Boomers, which you think others, like you, would want to know the answers? Post your questions on this website or email your questions to me at Anna@AnnaBanks.com.
Baby Boomers: Know the Basics before Starting Your Own Business in the Golden Years
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By Anna D. Banks, GCDF
So, here at last are your golden years! After enjoying the honeymoon period of holidaying and chilling out, you could be wondering what to do next. Maybe you are toying with the idea of starting your own business, not only to keep yourself occupied, but also to bring in some extra income. If that is so, then here are some basics you need to take into consideration in order to make it a success.
All successful businesses are based on a single factor – a good business idea. A good idea is the best launching pad for any kind of business. Once you have that idea, and you are eager to get started, you will have to channel that energy in order to get started with the business. Getting a business started is not complicated if you know the basics.
One of the first considerations you will have to take into account is the marketability of your business idea. Will people buy the product or service you want to sell? Examine the market closely and find out what kind of competition there is. If you think there is too much competition out there, then you could think about narrowing your idea to fit a particular niche. Determine which area requires your product or service the most, and make it your target to promote and sell your idea.
The next thing you need to do is find out about your state’s laws. You will need to ensure that you have the correct certification and licenses to sell your product or service. For example, if it is a day care center you are opening in your house, it may need to be inspected by the state. Special papers may need to be filled out. Obtaining a license to start your business will be required in many areas. Find out from your municipality about what you will require. Business licenses are generally not expensive.
Creating a business plan is another thing that is advisable to do. It lets you set values and goals for your business. Concepts that may be useful later can also be written down on paper. It lets you see how your business will be run and what you will do for it to grow. A business plan doesn’t take a lot of time to write, and yet it is one of the best tools to bring your business into fruition.
Assessing your financial requirements is the next thing you need to do. You need to find out what the costs of operating your business will be, and whether you will need to get a business loan to get it started. If you need investors or require loans, you will certainly require a business plan.
Another important aspect of getting your business running is advertising. This is about the only way your customers will get to know that you exist. Creating a website is one of the easiest and cheapest ways of advertising your business. The Internet these days has become the primary source for people to get information about products and services, hence having a website has become essential and is not an option any longer. You can create a rudimentary website that does not cost much if you are on a budget. But if it is a high quality website that you want for your business, it is best to hire a website designer.
By advertising, you also put yourself out in the market, promoting your business constantly. Become a member of networking groups and mail out flyers. If you can afford it, place ads in magazines and newspapers. Although it is not required to do everything all at once, however, always look for chances to promote and expand your business.
Take enough time for building your business in the right way. It is most probable that you are excited about your business scheme; however, you need to turn this excitement into productivity in order to get your business up and running.
© 2008 Anna D. Banks, GCDF
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Author’s Note:
Do you have any questions about career development or lifestyle changes for Baby Boomers, which you think others, like you, would want to know the answers? Please email your questions to me at Anna@AnnaBanks.com.
Baby Boomers – Can Pre-Retirement Planning Online Seminars Help You?
Posted by: | CommentsBy Anna D. Banks, GCDG
Retirement is a subject that you cannot afford to postpone for long. It is an issue that needs to be dealt with sooner, rather than left for later. Pre-retirement planning on-line seminars can prove to be beneficial to not only those who are nearing the age of retirement, but also in the case of those who would like to start early preparations in order to secure their future. Read More→
Most Common Pre-Retirement Planning Mistakes Baby Boomers Make
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by Anna D. Banks, GCDF
Just investing in a retirement plan does not guarantee that you will be financially secure at your retirement. One mistake in planning for your retirement could land a baby boomer in a heap of trouble and push your retirement back by years. To make sure that you are in the perfect position to retire when you want to, and on your own terms, diligent planning is as essential as is avoiding the most common pre-retirement planning mistakes that baby boomers make. Read More→