Making Your Retirement Investments Last

Most senior citizens have a morbid fear of retirement and the loss of income that comes with this life-changing situation. This is quite easy to understand because retirement comes with several unanswered questions. In most cases, the most significant question is; “how long will the retirement savings last?” Other questions which bother retired people are the inflation rate and the long term value of money. The point here is that a lump of money which has been set aside for retirement may not last the retired person as much as he or she will like it to last. This is why it makes a lot of sense for retired people to have a plan on drawing down retirement assets.

One of the best plans for spending retirement savings is the “4% rule”. This is a great plan because it really works. More to the point, this rule takes care of inflation rates to a certain extent. A retired individual who has, say $1,000,000, can simply aim to live on just 4% of that sum per year. This works out at $40,000 per year and it is a reasonable sum for a senior citizen who has to really cut down on unnecessary expenses. The beauty of this plan is that the person in question can add just 3% per year to this figure annually. This will take care of inflation and ensure that the retiree is still on the right track.

Another great idea is to delay withdrawals from the pension fund for as long as is reasonably possible. This is a perfect option for people who can afford to wait because delaying withdrawal will substantially increase the retirement cash. For people who are married one great idea will be to maximize the years of tax deferral by living on the income of the younger spouse for a while.

As stated already, retirement can be a frightening prospect for some people. For all that, there is one way to make retirement pleasant experience. This can be done by careful planning of prudent spending of retirement savings.

Get Started Investing When You Don’t Have a Lot to Invest

If you want to get started investing, but don’t have a lot of money to invest it can be difficult to get started investing because many mutual funds have large minimum investment requirements. Fidelity requires a minimum $2500 investment for most of their taxable accounts and many large fund companies require a minimum investment of $2500 to $5000 to invest with them. That can be a lot of money for a small investor to come up with.

One way to get started investing with a little money is to open an IRA. Many companies have lower minimum investment requirements for their IRAs. You can get started with as little as $1000 at Vanguard for several of their target date retirement funds. I have one of my IRAs at T. Rowe Price and they also allow investors to open an IRA for just $1000 for many of their mutual funds.

Opening an account with a discount brokerage is another way to get started with a small amount of money. I have my other IRA with TradeKing.com which has no minimum investment amount. You can also open an E*TRADE IRA with no fees and no minimums. An IRA with optionsXpress requires just a $200 minimum equity balance. Although, you can open these accounts with a low balance you would want to build up your balance before making trades in order to keep your trading fees reasonable.

You can also open an account with a different type of investment company such as Betterment.com which has no minimum investment and no minimum balance requirement. Money you invest with Betterment is invested in ETFs. When you don’t have much money to invest ETFs can be a good option because many of them have very low expense ratios. When yo don’t have much money to invest you can’t afford to spend much of it on expenses.

One last way to get started investing is with an automatic investing program (AIP). I actually started my IRA with T. Rowe Price by making $50 monthly investments through their AIP. Unfortunately, they no longer offer their AIP. Janus funds allows you to use their AIP with monthly investment amounts of $100 and Buffalo funds also allow you to use their AIP for a monthly investment of $100. If that is still too much, the AIP at Ariel funds and Artisan funds let you make a monthly investment of just $50.

These small investments may not seem like much but they are a start. Getting in the habit of investing now can lead to bigger investments as you make more money. If you wait until you have enough money to invest you might not ever get started investing.

Reasons for Selling a Stock

It can be difficult to know when to sell a stock. Many investors do not like to sell a stock because they view that as admitting they made a mistake when they bought the stock. There are several reasons for selling a stock. I sold my position in several different stocks this year and I will share my reasons for doing so.

One reason to sell a stock is because the reason you bought the stock has changed. I bought a couple of stocks last year based on the fact that I though natural gas prices would rise. That proved to not be the case as natural gas got even cheaper. I sold the stocks because they were going down in value rapidly and it would take a major increase in the price of natural gas for them to have a chance to recover. If you have a 30% loss in a stock, it take a 42.9% gain to recover that loss. You don’t want to have to hope for a 42.9% gain just to get back to even, so it makes sense to sell a stock before it has such a big loss in value.

Another reason to sell a stock is because it has gotten too overvalued. If a stock has made you a lot of money, but now sports an extremely high P/E ratio it might be time to sell. If a stock has a much higher P/E ratio than comparable stocks you need to make sure there is a good reason for it being so highly valued.

One more reason to sell a stock is because it represents too much of your portfolio. If you try to keep a diverse portfolio of stocks you might want to sell a stock when it starts to represent too large a portion of your portfolio. I did sell part of my position in one of my stocks because it grown to be a much larger position than the other stocks in my portfolio.

Since I invest in dividend stocks for dividend income I will also sell a stock when it announces a dividend cut. Usually, when a company cuts its dividend it is having financial problems. Even if the company is cutting its dividend what might be considered a good reason, such as increasing its investment in research, the dividend cut means the stock no longer fits my portfolio. For my portfolio, I want stocks that have a history of consistently increasing their dividends.

A common rule of thumb is to sell a stock when it loses 10% of its value. This rule is ok, but it does have some drawbacks. One drawback is that the loss is sometimes for a temporary reason and you can see that the stock should quickly recover from the loss. Another drawback is that the only selling stocks when they lose 10% doesn’t get rid of stocks that don’t appreciate or lose just a small amount of their value. If the stock has rising dividends I might hold onto it even if the price doesn’t appreciate, but otherwise I don’t usually want to hold onto a stock that doesn’t appreciate in price.

Switch to TradeKing and get up to $150 in transfer fees reimbursed.

Tax Gain Harvesting

You may not have heard of tax gain harvesting but you probably are already be familiar with tax loss harvesting. The process of tax loss harvesting is to sell a stock that is currently worth less than your cost basis in order to claim the loss on your taxes. When you do this you have to watch out for the wash sale rule which states that you can’t replace the stock you sold with the same or a substantially similar investment in the next 30 days or your loss will be disallowed.

The idea of tax gain harvesting is to sell a stock that is currently worth more than your cost basis in order to claim the gain on your current year’s taxes. The reason you would do this is because you expect your tax rate for capital gains to be higher in the future. The current 0% and 15% rates on capital gains are scheduled to go up to 10% and 20% next year. This may change due to the fiscal cliff negotiations, but it seems likely that there will be some sort of increase in the near future. Also, there is a 3.8% Medicare tax on unearned income that starts in 2013 for high income filers, which is defined as those with an AGI over $200,000 or $250,000 for married filing jointly. This means that even if the current capital gain rates hold, higher income filers will have an extra 3.8% tax on capital gains. It makes sense for higher income filers to do their tax gain harvesting this year.

One thing that confuses many people in regard to tax gain harvesting is the wash sale rule. The wash sale rule is only for capital losses. If you are doing tax gain harvesting you do not need to worry about the wash sale rule. You could sell your stocks and buy them back the next day. You would have a capital gain to claim and you would have a new basis.

If you have capital gains in your portfolio, now is a good time to look at whether tax gain harvesting is a good move for you. If you wait until January, you might be stuck with higher capital gain rates.

Retirement Investing Strategies for Late Starters

If you’re getting close to retirement and are a little slim on the retirement funds, do not try to compensate by ratcheting up your risk in an attempt to catch an up-swing as a means of catching up. It is possible to catch up on your retirement savings.  First, don’t worry, you are hardly alone if you’re a little behind in your latter years. Second, the emphasis of your retirement plan should be on saving more. By creating a larger balance, you allow more reasonable rates of return, coupled with reasonable risk, to take over and get you where you need to be. Risk has a funny way of burning you when you least expect or can afford it, so avoid taking too much risk so close to retirement.

There are several ways you can go about saving more. If you cut your expenses you will have more money available to save.  You can use a budget calculator to help determine where you can cut expenses.  Once you have cut your expenses make sure you put all of the extra money into your retirement savings.

Now, if you’re a few years away from retirement, one alternative is to work a few more years so that your retirement savings can grow to where they need to be. A few more years of work means a few more contributions to your retirement savings, a few more years of the balance growing because of your investment choices, and a few more years for you to figure out what it is you want to do with your new free time.

Lastly, after you take advantage of the catch-up provisions in accounts like a Roth IRA, you might want to push the envelope on your investments and maybe put a little more in stocks than the general consensus. Don’t pick a hot new biotech to plow all your money into, that’s just straight stupid, you can’t afford to lose that money; but you can put a couple more percent into that index fund and maybe catch up that way. Don’t go crazy though.

Super Storm Sandy Investing Idea

Super Storm Sandy has caused damages that are estimated to total between $50 to $100 billion.  Even if those estimates are high it is clear that a humongous amount of money will be invested in the areas damaged by Sandy.  Many investors see this as an opportunity and are looking for ways to make money from the Super Storm Sandy rebuilding process.  Here is one Super Storm Sandy investing idea that is easy to implement.

If you go to you can invest in their “rebuilding after Sandy” motif. The Sandy motif is a collection of 14 stocks in sectors like building supplies and generators, which may all see a lift due to the post-Sandy recovery. If you don’t like the stocks they have chosen for their Super Storm Sandy investing you can customize the rebuilding after Sandy motif. You can customize it by adding and removing stocks or changing stock weights. This allows you to basically create your own Super Storm Sandy ETF.

Super Storm Sandy Investing

One of the best thing about using a motif is the low cost. If you do your Super Storm Sandy investing by buying the rebuilding after Sandy motif your commission is only $9.95. If there is an investing idea you like this allows you to save a lot of money compared to buying all the stocks individually.

In addition to allowing you to invest in Super Storm Sandy rebuilding Motif Investing is also offering an up to $150 bonus for new Motif accounts that are opened with at least $2,000. You can earn a $50 bonus up to a $150 bonus depending on how many motifs you invest in. You can visit their promo page for the full terms and conditions. You can also check out all the different motifs they have for you to invest in based on different investing ideas. You will probably find one you like and if not you can customize a motif to make it to your liking.

Get up to $150 when you start trading at Motif Investing. Learn more.

How the Federal Stimulus Will Affect Investors

The federal government has always respected the division between private business policy, and fiscal policy. However, in late 2008, the government felt that they could lighten the debt load, and give some federal stimulus to investors who had fallen into debt. This had the effect of lowering the debt obligations of most borrowers, but little is understood about the effects of this program. Although the government thought that they would provide this bail-out, and people would restructure their private lending habits, to avoid a similar collapse, the bail-out still continues today, and many investors have not as yet changed their strategy, to avoid relying on this bail-out money.

The federal stimulus program was structured with certain goals in mind. The initial stimulus package of 500 billion dollars, would lower mortgage rates, and force banks to lend out more money, brought about by the excess liquidity. Consumers and businesses would benefit greatly from these lowered lending rates, and the strict lending policies of banks would be made somewhat lax. The optimism generated by these predictions would also uplift the economy and create investor confidence.

The federal stimulus, as mentioned above, would lower mortgage interest rates, and there would be a surge in the number of homes bought. Any investor in the real estate industry would be looking at making increased profits from the sale of more homes. The inflation of the confidence in the housing industry would dispel fears, causing more people to invest in real estate.

However, financial consultants are advising investors not to look at the industries that are nearly collapsing from financial liabilities. Although the stimulus package is aimed at these industries, they may not respond as expected. They are advising investors to think about companies that are already capitalized, prior to the federal stimulus being released. The response of the crippled companies, to the stimulus package, may not be as quick as anticipated, meaning that investors would have to wait a long while, before getting any returns on their investments.

The federal stimulus package requires you to research investment opportunities, and see which ones will prove more profitable to you, as a result of the said stimulus.

Dealing with Market Volatility

The pace at which the value of financial securities has fluctuated is stunning. The market trends in the past have shattered the investors’ confidence and the recent trends in no way promise a secure future. Evaluating investment options for what remains with investors has become a cumbersome task. Disinvestment in the money market has left investors with limited options to make returns on their capital−in−hand. Prudent investors have a hard time coping with the market volatility.

Here are some investment techniques and options that may suit the current circumstance in the  market.

Diversify Investments
Instead of putting all eggs in one basket, evaluate viable options, available. This would also mean keeping the capital secure in exchange for low profit margins. This also requires an effort to remain updated with prevailing economical situation and market trends.

The Long Term Approach
The recent market trend does not reflect an overnight hike in the price of shares and stocks; capitalizing the upward moving graph is no longer an option. Evaluating options that may defer immediate returns but may pay off in the long term, and considering investments in Initial Public Offers by companies with a sustainable position, may prove to be a wise decision.

Securities Backed by the Government
Investments in fixed return investment schemes offered by the government is also an option. The capital is always safe for sure, the returns are guaranteed. It is a secure mode of investment.

Guaranteed Financial Instruments
Private companies offer short and long term investment plans paying a low but a guaranteed return. It is a low risk, low return option. It is availed by those who wish to keep their capital secure.

The Right Time to Buy the Right Stock
Financial consultants and traders are discouraging investment, the immediate future is bleak no doubt, but a wisely speculated move could take a favorable turn. An overall study of the market trends and industry will help shed light on the sectors that would flourish in the near future. Investing in companies that have a reasonable opportunity to grow a few years down the line may become profitable.

Saving and Retirement Plan Offered by Life Insurance Companies
Signing up for a secure retirement plan offered by an insurance company may prove viable; the insurance company will allow the investor to pay the premium all at once for a certain number of years. Not only is the capital safe and the returns fixed but a few features (riders) in the policy provide a cover for the investors health and well being.

Know the available options and wisely diversify investment in order to gain small but stable returns and sustain capital. The existing market trends may not permit returns on investment neither security for the capital invested. Coping up with the market volatility would perhaps mean investing in prize bonds, guaranteed instruments and investment certificates.

Determining the Best Investments for Today

There was a time when it was simple to choose a product to invest in. The economy was not in trouble and people were not hanging onto that last dollar for dear life. However, things have changed drastically and this has caused many people to take pause before investing a dime in anything. In all fairness, we cannot say this is not a smart decision. Investing can be a risky business and with all the current choices, it is easy to be swept up in a bad decision. Let us look at a few things people are investing in that still seem intelligent.

Gold and Diamonds

No matter what happens in the future, gold and precious gems will never collapse, in terms of value. Sure, the market may go up and down a bit, but all in all an investment made in either of these things is sound, provided you know how to approach the matter, and invest wisely. Obviously, you do not want to take every bit of money from all your accounts and run out on a gold and diamond shopping spree, but collecting pieces over time is very smart. The best thing about investing in jewelry is that there is always a gold buyer or someone offering cash for diamonds out there in case you find yourself in a pinch and choose to sell earlier than planned.

Forex and Other Currency Trading

This is a little more complex than buying and collecting jewelry. In fact, unless you educate yourself well and get the help of a reputable professional, investing in currency exchange of any kind can be a bad move. Nevertheless, this has become a very popular method of investing and more people are finding themselves drawn to it. If this sounds like something you think you would like to try out, read up on it and learn. Choose a broker at first to help you make good choices, and no matter what you do, never invest too much at one time.

Stock in New Companies

Of all the investments, this can be the trickiest. Many of us kicked ourselves in the early 2000’s because we didn’t have the foreknowledge to invest in Apple or other technological products we never knew would become as popular as they are now. With stock investing, you make a choice based on what you think a product will do. Since this is extremely hard to predict, you can either lose your shirt or make a million off a stock investment. Again, tread these waters carefully.

Saving Money and Avoiding Debt

There are currently millions of people dealing with massive amounts of debt. Many of these people will spend years attempting to recover from the debts that are currently producing large amounts of financial stress within their lives. However, learning budgeting techniques can help to prevent them from happening in your life. Very often, financial problems come about as a result of spending more money than you are taking in. When you setup a budget for your expenses during a defined period of time, this would help you to prevent going into debt as a result of spending too much money. The easiest way to go about budgeting your expenses would be to set a ceiling to determine how much you are able to spend on things such as food, clothing or gas. Once you have determined these amounts, you need to deduct for any expenses as you incur them during the period. Typically, people would set financial goals during the month, deducting from the budget would enable you to remain on target and avoid overspending in the process.

Making use of budgeting calculators would make this process a lot easier. Instead of having to do all the work yourself, these calculators would help you to set financial goals and stick to them. Very often, relationships are defined by financial matters such as going into debt without the ability to control your spending. When you have a boyfriend or girlfriend, you may want to take them into consideration when it comes to your spending. If you can manage your expenses through budgeting, you will avoid placing a strain on your relationships. Additionally, you may find it easier to set aside money for the purpose of spending time with someone that you care about. Getting into a relationship can cause a lot of financial stress, but budgeting can help save your relationship. Instead of allowing your marriage or dating relationship to come under pressure as a result of very high financial expenses, you want to learn how to budget your expenses. When you work at saving money, it will become easier than ever.