Perhaps you’re sitting there scratching your head, wondering what happened to your plans! 

Whatever grand allusions you had for retirement – whether it was spending more time with family, more time volunteering or simply more time seeing the wonders of the world  - maybe you find yourself thinking “I may never be able to retire.”

Here are five reasons why you’re off track for your retirement goal and what to do about it.

Market Tank

The 2008-09 recession wiped out many a 401k  and along with that many retirement dreams were dashed!  We’ve had a great recovery so far and many people have gotten back some of their losses.

However, not everyone has the luxury of waiting around for the market to recover fully.

What to do:

Consider postponing retirement and/or reducing your lifestyle.  You may need to cut back the dreams of traveling every three months or getting that second home in Florida. 

Also, re-evaluate your risk tolerance and time frame and consider making some changes to your portfolios.  If you find you have a longer time frame, you may be able to afford a bit more risk to make up some losses.

You Lack Specific Retirement Goals

Is retirement just a grand dream that has no plan of action around it?  You know the old cheesy saying:

Aim for nothing and you’ll hit it every time

There’s some truth to that.  Those who have a plan, review it regularly – making changes as needed – are more likely to reach their goals!

What to do

Take some time and write down what it is you’d like to accomplish.  If you’re married, I highly suggest getting on the same page with your spouse. 

Write down things like:

• When you’d like to retire
• What you’d like to do in retirement (i.e. – travel, volunteer, golf, short-term missions)
• How much money you’ll need for retirement
• How much you currently have saved

Compare where you’re at with where you’d like to be at retirement and consider a course of action to help get you there.

You Make Emotional Decisions

“Markets are down – SELL!”,  “Markets are up – BUY!”, “I want a new 50″ TV – BUY IT”

Are you like a yo-yo when it comes to financial decisions.  This is a sure way to get off track for your retirement goals!  Emotional investing and decision making doesn’t work and will lead to some pretty bad choices.

What to do

If you change direction like the wind consider developing a plan you are comfortable with in good times and in bad.  Consider your risks, your goals and your temperment and get a plan and stick to it only making tweaks as needed.

You Don’t Know When to Sell

This can relate to emotions, but on a broader scale it’s fairly easy to know when to buy an investment.  Most people can identify a deal.  Last March when stocks were half off, there were a lot of deals to be had.

The tougher part is knowing when to sell.   Since March, markets are up some 60% – knowing when to sell is hard.  Why? Because we all want to think a rising investment will continue and we don’t want to sell early and have the stock take off

We’d rather hang on too long than give up some growth even though we might be up some 30%!  Perhaps it speaks to our greed.

What to do

Rebalance your accounts regularly.  Rebalancing simply means getting back to your original asset allocation model by selling investments that are high and buying investments that are low. 

In other words if you start with a 50% stock; 50% bond portfolio and through market growth you are at 60% stock; 40% bonds – sell 10% of your stocks and reinvest into bonds.

There’s a lot of debate at how often you should do this, but I suggest at least annually and if you’re able to perhaps check the percentages quarterly to see how far from your originals you are.

You Don’t Know How Much You Need for Retirement

This was referenced above, but deserves it’s own point.  It seems like many people have no idea how much they need for retirement!  Many people assume they need a million dollars or some other really high amount and therefore they think “I’ll never be able to get there”.

What to do

Retirement is up to you!  Not the government, not your company – it’s up to you.  Therefore it’s vitally important to sit down and figure out what you want to do, how much it will cost and figure out how much you’ll need for retirement. 

Don’t just take these broad “You need 70% of your pre-retirement” figures you find in some financial magazine as truth! 

Everyone is different – therefore your goals are different than mine.  Make a personalized plan to figure out what you need.

How about you?

What else would you add to the list – what else have you found helpful in your retirement planning?

Success!  Wikipedia defines it as:

The achievement of an objective or a goal.

When it comes to retirement many of us want to achieve our goals.  The fact is, for most of us retirement is a marathon race and not a sprint so it’s important to have some ideas in mind to keep you on the right track.   Here’s a look at seven tips to successfully achieve your retirement goal:

Start Now!

“But I didn’t get an early jump on saving when I was younger, so what’s the point”.  It doesn’t matter.  If you haven’t saved anything yet – you need to start ASAP!

If you have started saving already – reevaluate the amount you’re putting away and determine if you can begin putting an extra $50 or $100 (or whatever amount you can).

Define Your Goals

Of course you have to know what target you’re aiming for if you’re going to hit it.  If you don’t have some defined goals you’ll really have no idea how to evaluate your progress.

This is Planning 101.  What do you want to achieve?  When do you want to achieve it?  Maybe it’s a certain dollar figure in your 401k or a goal to retire at a certain age.  Or, maybe it’s to have enough money to do short-term missions trips or serve at homeless shelters.

Sit down and jot some ideas on a piece of paper with your loved one so you can get a taste of what you’d like to do.

Determine Your Time Frame

Now that you’ve got some idea of what you want to accomplish and perhaps the age at when you’d like to retire determine how many years you have to make that happen. 

If you want to retire in five years, but you’re not really saving much right now and you’re strapped with debt – maybe you need to reconsider. 

Realistically determine your time frame and keep this number in the back of your head as you make other decisions regarding retirement.  If you need to start putting more away, sit down and take a look at expenses you can cut out or cut down on and make a huge effort to save more.

Determine Your Risk Tolerance

Now that you have your time frame set and your goals in mind – you can determine how much risk you should be taking.

Generally speaking, the shorter your time frame – the less risk you should be taking.  If you’re in your 30’s and you’ve got 30 years til retirement you have some time to make up any losses.

However, if you’re in your mid 50’s and you’ve got less than 10 years you may want to pull the reigns in a little and shift to a less aggressive portfolio mix.

Comfort level with your risk plays a big role in determining your tolerance as well as knowing how much you need to retire.  If you don’t need that much more to achieve your goal – you can scale back the risk.  If you need more – you may need to dial it up a bit to get some gains.

Diversify Yourself

Diversification comes in three areas:

1. Investment – Diversify your portfolio and your asset classes.  You don’t want all your eggs in one basket as the old cliche goes. The reason is because you don’t know what’s going up or down from one year to the next.
2. Time – Diversification from a time standpoint essentially means that you have some shorter term investments as well as longer term investments.  It also means you plan for the unexpected (think short life span) as well as longevity.
3. Tax – This means you spread your savings among taxable; tax-deferred and tax-free accounts to take advantage of the unique tax benefits of each.

Become Debt Free

To me, this is huge.  If you can become debt free before you retire you free up opportunities to give more during retirement, you releive the stress of needing to have a bigger nest egg or larger monthly income stream.

Debt can be bondage.  Ideally, you’ll be in a much better position if you can pay off all your debts including your mortgage. 

Now I know some will argue that there will be lost tax benefits.  Sure, that might be, but some of that can be made up from charitable deductions (goal: give away the amount you’d pay in mortgage interest!). 

Freedom from debt is liberating – and you’ll be glad you wiped them out before you retired.

Review Your Goals Often

In order to stay on track you need to have set reviews.  These can be done annually or semi-annually.  The point is to schedule time to sit down and revisit your goals, check your progress and determine if any changes need to be made.

You won’t know how far off course you are if you don’t review.

Hopefully these tips will give you a start in achieving your retirement success. 

How about you?  What other tips would you add to the list?

No doubt most people have heard of a Roth IRA, after all, they’ve been around since 1998.  Although they’ve been available for over 11 years, I’m constantly amazed by how many people are just simply unsure of exactly what they are or what they do. 

The Basics: What is an IRA?

An IRA is simply an Individual Retirement Account (IRA) that provides investors an opportunity to save for retirement in a tax-advantaged way.  Generally, you must wait until 59 1/2 to withdraw the money without IRS penalty. 

A Roth IRA is an Individual Retirement Account named after its legislative sponsor, late senator Bill Roth, that was established in 1998 to provide an alternative method of saving for retirement that offers different tax advantages than the Traditional IRA. 

Features

The main difference between the Traditional and the Roth IRA is how it is taxed.  With a Traditional  IRA, you typically contribute before-tax (with some exceptions) money to the account.  Depending on your eligibility, you can deduct your contributions from your income on your current year taxes.  You receive the tax break now.  The money grows tax-deferred so when you pull your savings out in retirement you have to pay taxes on every single dollar you withdraw at whatever your current tax rate is at the time.

The Roth IRA is just the opposite.  You contribute after-tax dollars to the account and the money still grows tax-deferred.  You cannot deduct your contributions; however, in retirement you can withdraw your money (provided you meet certain qualifications) completely tax free. Not only that, but as long as your Roth IRA has been in existence for five years, your beneficiaries on the account can pull out money income-tax free, so the Roth IRA becomes a nifty estate planning tool as well.

Advantages

1. Obviously the biggest advantage to the Roth IRA is the tax-free withdrawals in retirement.  This can be a huge potential tax savings for you especially if you think tax rates will be going up.

2. The Roth offers more flexibility on withdrawals prior to retirement.  You can withdraw your principal (your contributions)  tax and penalty free at any time during the life of the Roth IRA.  To an undisciplined person might have trouble with this, but someone who runs into a bind an is cash strapped can have a little comfort knowing they have some additional money available.  This is a huge plus compared to the Traditional IRA, where you would pay a 10% penalty on any pre-59 1/2 withdrawals as well as taxes.  

3. Another advantage is that you can contribute to the Roth even if you are covered by an employer-sponsored retirement plan (401k etc).  With the Traditional IRA you are subject to income testing to determine if you could contribute when covered already by a plan  at work. Even if you could contribute, you don’t get to take advantage of the deduction on your taxes.  So the Roth becomes the perfect additional savings plan when you already have a 401k or other employer plan.

 4. For older folks, the fact that you do not have to take withdrawals is a major advantage as well.  With a Traditional IRA, the government forces you to take money out at age 70 1/2 or face a 50% penalty for not withdrawing your savings.  The main reason is of course to generate tax revenue.  Since Roth IRA distributions are tax free, you don’t have to worry about this rule. 

Key Tradeoffs

1. Your contributions are limited.  Currently in 2009, you may only contribute $5,000 and if you are over 50 you can contribute an additional $1,000 for a “catch-up” provision.  Depending on your income, you might be phased out of your contributions.  For example, a couple making between $166,000 and $176,000 will have their contributions limited.  Income over $176,000 disqualifies you for Roth contributions altogether.  Try this online calculator to determine how much you can contribute to a Roth.

2. You still might have to pay taxes on non-qualified distributions.  In order to meet the specifications for a qualified distribution, you must have had the Roth opened for at least five years and meet one of the following:

• Reached age 59 1/2 by the time of the withdrawal
• Withdrawal is due to qualifying disability
• Withdrawal is made for first-time homebuyer expenses (up to $10,000) 

Again, you are still able to withdraw your contributions at any time without penalty or taxes.

3. Tax treatment differs depending on the state.  The tax laws mentioned above correspond to federal law.  Your state may have differing laws for Roth IRAs You should check with your tax advisor to ensure you won’t have to pay state taxes. 

How Do I Get One?

You can open a Roth IRA through any financial institution, bank, life insurance or mutual fund company or even right online through a brokerage website.  Where you establish one primarily depends on your own needs and preferences.  There are many investment options available as well, so consider the types of investments that will suit your needs (i.e. stocks, funds, CDs, ETFs etc).

Contributions must be made by the time you file your tax return. So in essence you have until April 15 of the following year to get your Roth contributions in for the previous tax year. 

The Roth IRA can be a great investment and retirement savings vehicle for many people.  Be sure to do your homework, develop a plan, assess your needs and be comfortable with your decision.

The financial health of two of the biggest government programs has worsened due to the affects of this recessionary market. The Social Security Administration announced today that Medicare is now paying out more in benefits than it is receiving, and that by 2016 Social Security will be paying out more in benefits than it receives.

Insolvency for Social Security has been revised to 2037, four years sooner than was predicted last year. Medicare is in worse shape with predictions of insolvency by 2017. With unemployment reaching 25 year highs at 8.9%, America has fewer workers paying into Social Security exacerbating the problem.

Timothy Geithner, Treasury Secretary and head of the trustees group said, “the longer we wait to address the long-term solvency of Medicare and Social Security, the sooner those challenges will be upon us and the harder the options will be.”

That is a pretty obvious statement. It is also obvious that we shouldn’t depend on the government for our retirement plans. Let this be a reminder that retirement planning is our responsibility.

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