Archive for June, 2016

Here are The Top 5 Best and Worst Cities for Retirement

Thursday, June 30th, 2016

The golden years are great for many reasons: It’s often a time meant for relaxing, exploring and enjoying quality time with family. But figuring out where to retire to can be a bit trickier.

Which place has the best health care? What kind of climate do you want? How much money are you willing to spend? Luckily, the Bankrate.com team took all of those factors and more into consideration for a recent survey to reveal which cities are the best and worst places to retire.

Arlington, Virgina, was ranked the best city to retire to in the United States according to a new Bankrate.com survey.

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The study took into account nine categories: cost of living, climate, health care cost and quality, taxes, crime, well-being, walkability and cultural vitality.

So which destination came in at No. 1? They found that Arlington, Virginia — near the nation’s capital — is the best city to retire because of its cultural opportunities, great health care and a strong sense of well-being among seniors. While the high cost of living is the city’s main drawback, the benefits of the other categories outweighed that downside.

Top 5 cities for retirement

1. Arlington, Virginia
2. Franklin, Tennessee
3. West Des Moines, Iowa
4. Sarasota, Florida
5. Scottsdale, Arizona

Worst 5 cities for retirement

1. Niagara Falls, New York
2. Milford, Connecticut
3. San Bernardino, California
4. Troy, New York
5. Worcester, Massachusetts

Franklin, Tennessee, came in second place as the best place to retire in the country.

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And it’s not just the East Coast that made the top of the list. Cities all over the country ranked in the top five. Franklin, Tennessee, came in second place, and West Des Moines, Iowa; Sarasota, Florida; and Scottsdale, Arizona, took the remaining spots.

“We found that smaller cities and suburbs fared the best,” said Bankrate.com analyst Jill Cornfield in a statement. “Most seniors prefer to live in these types of communities because they offer access to big-city amenities without as much hustle, bustle and crime.”

The skyline of Des Moines Iowa, keeping it small town and quaint.

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Who can resist the beach? Sarasota, Florida, made the top five cities to retire.

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Where shouldn’t you live as you grow older? According to the study, Niagara Falls, New York, is the worst place to retire. It was dragged down by high taxes, a cold climate and an above-average crime rate. Milford, Connecticut; San Bernardino, California; Troy, New York; and Worcester, Massachusetts, rounded out the bottom five.

Scottsdale, Arizona is a great place to live out your golden years according to the survey.

scottsdale

While Bankrate’s study looked at a variety of factors and focused on cities, an earlier survey conducted by caring.com ranked which states are the best for retirement based on health factors alone. In their findings, South Dakota ranked No. 1, with Iowa, Minnesota, Alaska and Oregon rounding out the top five. West Virginia came in last as is “sorely lacking in important quality of life and health care offerings for seniors.”

Will Brexit Impact Your 401K?

Monday, June 27th, 2016

Brexit

Global stock markets on Friday did not react well to the Brexit vote by the United Kingdom, that decided to officially part ways with the European Union.

Whether you’ve been closely following the vote, or you’re are just getting up to speed, you’re probably wondering what to do with your 401K or IRA now that U.S. and global stocks are declining. The answer depends, at least somewhat, on your age.

20s or 30s

Now is a great time to invest more for retirement. You have many decades to go before you are likely to retire, giving you plenty of time to recover from any short-term or midterm losses. Despite occasional dips, the stock market trends upward, averaging about 8 percent in annual gains over time. Very few years see a clean 8 percent gain, however. Some years are flat, and some years have big swings in either direction. Still, if you’re saving for a goal like retirement, investing in the stock market is the best way to put your money to work for you.

You don’t have to be an investing expert to get involved. Choosing a target date retirement fund is a perfectly good option for investors. Your 401k is sure to have a few such choices, so look for the target date that is nearest to the year you will be in your late 60s. For example, someone who is 30 today would want to choose a target date fund associated with the year 2050.

40s or Early 50s

Get serious about your retirement portfolio. You’re in your peak earning years, and if you’re behind in your retirement savings then it’s time catch up. Don’t try to time the market, and don’t let fear drive your investing choices. Hopefully you have an investment strategy for your retirement accounts, and now is the time to stay the course. If you don’t have course, this is a good time to get one.

You’ve been around the block when it comes to investing, so you know periodic declines are part of the game. The future of Brexit has introduced a lot of uncertainty into the global economy and, by extension, the stock markets, and the markets hate surprises. Put your savings on autopilot and stay focused on your long-term goals.

Late 50s or 60s

Re-evaluate your current investments. The closer you are to retirement, the more unsettling market turmoil can be. Don’t rush to make quick changes today, but do take some time in the near future to assess your current investment choices and make sure they’re in line with your age and goals.

In addition to your retirement portfolio, it’s worth taking a hard look at your current employment plans. If you plan to continue working at your current job for the foreseeable future, then make sure your company is solid and can survive a possible downturn. Or if you’re interested in an encore career, start the process now. Making a career transition before retirement can be a good way to give yourself a few more years of saving and investing, but it can take 18 months or longer to make a switch. No amount of preplanning is too much.

After the current acute market reaction settles down, the Brexit vote is likely to have an ongoing effect on the global economy and global markets. No matter what happens or what the markets do, remember that investing is never an emergency. Move slowly and thoughtfully, while keeping a clear focus on your personal goals rather than any panic that may arise.

Self-Directed IRA Real Estate FAQs

Thursday, June 23rd, 2016

FAQss

I don’t have enough money in my SDIRA yet to pay for an investment on my own, what are my options?
This is a very common roadblock that a lot of investors have, but it also comes with simple solutions. One solution is to pool your resources with another investor, or private lender, to come up with the funds necessary to purchase the property in question. If you invest 50% of the funds in the property, your IRA is then owns 50% of the title, and is subsequently responsible for 50% of the costs to maintain the property, pay taxes, and whatever costs are associated with the property.
Aside from private lenders, there are other seller carrybacks like mortgage companies that may also lend to your IRA to purchase property.

What is checkbook control, and is it necessary to purchase real estate?
You absolutely do not need an IRA LLC (or as it’s referred to here, as checkbook control) when you’re looking to invest in real estate, but it’s definitely helpful. Pairing your self-directed IRA with checkbook control allows you to pay for services associated with your property quickly, and easily. You’re essentially cutting out the middleman and the paperwork that you would normally have to deal with without checkbook control.

Am I limited to only buying single family homes?
You actually have a great deal of options in types of real estate you’re allowed to invest in. Since your IRA is a self-directed IRA, your options are sort of unlimited as far as real estate. Here are just a few:

  • Apartments
  • Commercial property
  • Duplexes
  • Condominiums or townhomes
  • Single family, or multiple family homes
  • Tax liens certificates
  • Tax deeds

So what would the caveats of investing with an IRA be?
There are a few laws and rules that the IRS has put into place that an investor needs familiarize themselves with before any decisions or moves are made. There are prohibited transactions, and disqualified persons in all self-directed IRA real estate accounts that all investors have to follow.

Prohibited transactions include any direct, or indirect selling, exchanging, or leasing of any property between an IRA and a disqualified person, and a disqualified person would be:

  • The IRA owner
  • The IRA owner’s spouse
  • Lineal descendents
  • Spouses of lineal descendents
  • Investment advisors
  • Fiduciaries
  • Any business entity (LLC, Corporation, Partnership, Trust) in which any of the disqualified persons previously mentioned has a 50% or greater investment in.

The Case for Starting to Save for Retirement at 25

Monday, June 20th, 2016

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Like other things in life, saving for retirement is easier when you have a specific goal. And while $1 million doesn’t have to be your magic number, for most Americans, saving up a nest egg of a million is a pretty safe bet. There’s no way to know exactly how much money you’ll need in retirement. After all, you don’t know how long you’ll live or what unexpected costs you may face, but there are some general guidelines out there worth paying attention too.

The best news is that saving up $1 million isn’t as hard as it might seem, thanks to the power of time and compound interest. The trick is saving as soon as possible, so many experts advocate for starting at 25, where you’re just out of college, and starting your first “grown up” job. While your new job may offer their own retirement program (such as self-directed IRA services, or 401K services), some don’t. Here’s where your own effort and research will have to come in.

For a 25-year-old, time is your biggest asset as an investor, and starting young — for those who can — is the best way to ensure a comfortable retirement.

savings graph

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Assuming a 10% annual rate of return — the historical average of the S&P 500 — and 40 working years remaining, a 25-year-old could build a $1 million retirement nest egg by saving just $175 a month in their investment accounts. Their total contributions over those 40 years would amount to less than 10% of that total — just $84,000. All the rest would come from returns on investment.

That said, contributing a set amount of money each month over your entire career may be unrealistic, especially given that young people tend to earn more money as their careers progress, and they may also need to pay down college loans or save up for major purchases like a home. Inflation will also lower the value of a defined contribution. However, that also means younger people may want to set their goal above $1 million, as the dollar’s buying power is sure to decrease significantly between now and when they retire.

One smart strategy for keeping up with inflation is simply to raise your contribution each year by 3%, the historical inflation average. This should be manageable, as annual raises tend to match cost-of-living or inflation rates.

No matter how you start, starting early — even if you have very little to save — is vital, as it will maximize the benefits of compound growth. Investing just $50 a month from age 25 to 35 would yield a nest egg of $10,000 in 10 years. As you age, such a head start can make a big difference in your ability to reach your goal, as you’ll see below.

Talk to an advisor, and do a little research. A little effort goes a long way.

And Now: John Oliver Giving you the Retirement Advice you won’t Hear Elsewhere

Monday, June 13th, 2016

and now

“Money — you know, the thing that everyone likes to think they’re good with, despite the evidence provided in every episode of The Suze Orman Show,” said John Oliver on Sunday’s Last Week Tonight. One of Orman’s main themes is that people should be saving for retirement, and Oliver agreed. “It is true that as we all live longer, you should absolutely save for retirement, if you can,” he said.

“And many do — we currently have around $24 trillion sitting in retirement assets,” Oliver added. “And a lot of that money is in the hands of financial services companies, so let’s talk a little about how they work — which I know sounds boring, but as a favor to your future self, it is worth watching this for 20 minutes, because you could easily make small mistakes which could seriously cost you down the line.” For the next 15 of those minutes, Oliver walked viewers through the slippery label “financial adviser,” explained why “fiduciary” is a key term, and talked extensively about the 401(k), which “can be a gold mine for financial service companies,” thanks to the compounded effect of fees: “Think of fees like termites — they’re tiny, they’re barely noticeable, and they can eat away for f—ing future.”

“Between financial advisers, high fees, and underperforming active management, the entire financial planning industry is a potential minefield, and you need to pay attention,” Oliver said. “But here is the good news: It doesn’t actually have to be that complicated, and it might be getting simpler,” thanks to a recent Labor Department rule. He ended on a hopeful note: “For your average person trying to save for retirement, it doesn’t need to be this confusing. The truth is, as long as you remember a few key things, you’re probably going to be fine.” And for the last few minutes of the show, Oliver had Billy Eichner and Kristin Chenoweth lay them out for you, in a way that won’t put you to sleep. Watch the clip below.