Retirement Planning: Are You a Saver or Spender?

Retirement Planning: Are You a Saver or Spender? | Money Savvy Living

It is hard to turn on the news and not hear about the sluggish state of the economy, the low amount of job growth, how much debt the country is racking up… or how seemingly inevitable cuts will be coming to social security benefits in the future because of these factors…  So when we hear these things, we need to take a moment and actually look ahead to what those long-term effects could mean for your personal financial future.

While it may seem nonsensical to think that the May jobs report has anything to do with your personal retirement planning, or even your current financial situation, it truly is an indicator of our country’s economic heartbeat and the overall economic impact is actually quite far reaching. When job creation is low, and the job participation rate is low, there are less people paying taxes into the system, and potentially, more people collecting benefits such as unemployment and food stamps. When we are in an economy that is not bringing in more revenue than is going out, we have a budget deficit each year—and that adds to the interest compounding on our current national debt to create an even larger debt. So it starts to become clear as to why this affects you personally: less money going into the Social Security fund now will mean less to come out of it later—when you are ready to retire.

With all of this in mind, it may surprise you to know that 33% of Americans have no retirement savings at all, and less than 25% of the people who do have retirement savings actually think that it will be enough. Do you have enough? How do you know if you are on the right track?

This graphic from Rosland Capital, a premier precious metals asset and gold IRA firm, breaks it down for you:



Rosland Capital Avenue to Retire | Money Savvy Living



So the first thing that you need to do is find out if your employer offers a 401k program, and if they do, start contributing as soon as you qualify. Why is this so important? There are 2 main benefits from participating in your employer’s sponsored 401k:

  • Employer matching—most employers will match up to a certain percentage of your personal employee contributions. It is literally free money. For example, if you contribute 2% of your income from each paycheck, your employer may match that, so your total is now 4%.
  • Tax benefits—if you contribute to a traditional 401k, you will get money taken out of your paycheck pre-tax—so that means you are paying less tax now on your current income. If you are contributing to a 401k that has a Roth option, then you will pay tax on the money that you contribute now, but it will grow tax-free!

If you are self-employed or your employer doesn’t offer a 401k, then you can always set up your own IRA, or individual retirement account, and receive the similar tax benefits—you can get a tax deduction for contributing to a traditional IRA, or again, enjoy the tax-free growth of a Roth IRA.

So how do you choose which investment products are right for you? There are several factors to look at: how long you have until retirement, what your goals are, and what you risk tolerance is. Every individual’s situation is unique, so you will need to look at these factors with your financial advisor to determine the best investments. Once you know your time horizon, what your investment goals are, and the type of investor that you are, you may even want to check out these 3 ways to creatively diversify your investment portfolio to further decrease your risk.


Are you a saver or a spender?

With all of the uncertainty in the economy, and even with social security, you want to make sure that you are preparing yourself for retirement—so that you can live comfortably in your golden years without having to worry if the government will cut your social security benefit.

So if you are one of those 33% that have no retirement savings, here are a few ways that you can start saving today—without having to drastically change your lifestyle:

  • Take advantage of your company’s 401k matching—it’s literally free money going into your retirement that you don’t have access to now anyways. Example: you put in 1% of your paycheck (you probably won’t miss just 1%!) and your employer puts in 1%, so you are now saving 2% from each pay…
  • Pay yourself when you get paid. When payday comes, determine an amount that you want to set aside in a saving (retirement) account. Even if you can only start with $5 per pay, that is fine. Get into the habit of saving and then maybe gradually increase it each time you get a pay raise. If your goal is to save $100 per pay, then map out a plan to get there.
  • Give something up. This is hard to hear sometimes because we get into habits or become accustomed to doing things a certain way and don’t want to give anything up. However, if you can sacrifice eating out for lunch one day per week, or give up getting a latte before work, or cancel a membership that you maybe don’t use anymore…all of those are items that you are paying out money for each month, but could live without. So rearranging your budget and putting that money toward savings and retirement will be way more meaningful. Besides, you can pack a lunch and bring coffee from home if you know that sets you up for a better future, right?!
  • Don’t spend your tax return! If you get money back when you do your taxes each year, don’t spend it. This is money that you haven’t had access to all year long, when you get the check in the mail, simply deposit it in your retirement account.

Calculate the best age to start receiving your Social Security Income benefit


How do I know at what age to start receiving my Social Security benefit?
This is one of the most common questions that people have that are nearing retirement. If you have ever examined “Your Social Security Statement” prepared specifically for you by the Social Security Administration, you know there are three different figures that show up for your retirement amount, based on the age that you decide to start receiving your benefit—before full retirement age, at full retirement age, or after full retirement age.

What is full retirement age?

• Born 1937 or before that, full retirement age is 65.
• Born 1943-1954, full retirement age is 66.
• Born 1960 and later, full retirement age of 67.

A detailed chart can be found at for further reference.

What is the best age to start receiving my Social Security benefit?
To calculate the age at which one should start receiving their Social Security Benefit, it takes a bit of math in order to calculate the breakeven point. If we calculate the breakeven point, we can tell how long it will take before all benefits are equal. From this point on, we can tell which age would be the most beneficial. Each individual’s situation is unique and needs to be calculated based on those circumstances. While other factors may be considerations as to when to start receiving the benefit, such as potential pension income, 401k, or IRA income, this example will only look at the social security benefit alone.

Hypothetical Scenario:
Early retirement, age 62……………..benefit $600 a month
Full retirement, age 67………………..benefit $900 a month
After retirement, age 70………………benefit $1100 a month

The first breakeven point that we reach is at age 77. At this point, if you had started receiving benefit at early retirement age of 62 or waited until age 67, you have received an equal amount of benefit payments, in this case the total amount of payments would be $108,000. This means that any payment the recipient receives after turning age 77, it would have beneficial to wait until age 67 to collect social security because that is a higher payment than if they had started at age 62. From this point on, the best option is the benefit payment starting at age 67, until the recipient would reach age 83.5, at which point, we reach another breakeven amount. At age 83.5, the total amount of payments for starting to collect social security at age 67 or age 70 both total payments of $178,200. Beyond this point, the best option, the one that yields the highest total amount of benefit for the recipient, is to have waited to collect until age 70.

Considerations to take into account when deciding to collect
Obviously, no one know exactly how long they are going to live and be able to collect benefits, so this factor is always going to be an unknown. Each person’s situation is different, so the time that is best to start collecting your social security will be individually based. Probably the biggest factor to consider is the current financial situation at each retirement age—early, full, late. For example, if you are still working and don’t really need the income at early retirement, it may make sense to wait until full retirement age to collect a higher amount once you do actually retire. Talking with your tax accountant or financial advisor—along with your spouse or other family members—regarding these choices, to determine your specific needs will enable you to make the most informed decision possible.

*The scenario used in this article is for illustration purposes only and is no indication of advice for a specific situation.

This article was previously published on my Examiner Personal Finance Page.

3 Ways to Creatively Diversify Your Investment Portfolio

Photo by: Lendingmemo via Flickr

Photo by: Lendingmemo via Flickr

When you think of investments, you probably think of putting money in a specific stock or mutual fund. While those are probably the most widely known investment vehicles, there are a few other investment options that can help you to effectively plan for retirement and diversify your portfolio. Learn what zero coupon bonds, annuities, and managed futures are, and how they can benefit your investment portfolio.

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Benefits and Tax Obligations of Starting a Side Business

Outsmarting the System
Guest post by Anthony C. Campidonica:

Starting a side business can help you reach financial freedom. The extra money you earn through your business can reduce debt or be invested.

Starting a Business. Starting a side business can be as simple as offering a service you already provide. For instance, if you are a bookkeeper as an employee, you may be able to do extra bookkeeping on the side for other companies. You can sell items you already have, such as kid’s clothing. Alternatively, you can resell items to which you already have access. For example, a client I work with is a cycling enthusiast. He was able to track down very hard to find bike parts, and now runs an online business reselling the parts to other cycling enthusiasts.

Tax Benefits. A side business can present you with favorable tax opportunities. Business owners are allowed to convert personal expenses into legal business deductions if those expenses are considered ordinary and necessary expenses related to the operation of the business activity. These expenses include, but are not limited to, cell phone bills, computer, and meals and entertainment.

Tax Obligations. As a self-employed individual, you are generally required to pay quarterly estimated taxes for your self-employment tax and income tax.

Self-Employment Tax – Self-employment tax (SE tax) consists of Social Security and Medicare tax. It is similar to the Social Security and Medicare taxes withheld from the pay of most employees. You are generally liable for SE tax if you had net earnings from self-employment of $400 or more. Self-employment tax is a percentage of your net earnings from self-employment. Net earnings are calculated as the gross income you derived from your business less ordinary and necessary business expenses.

Income Tax – You are required to pay income tax, which is in addition to the SE tax, on your net earnings from self-employment. This is a tax imposed on your income from your business, which is determined by applying a rate to the net earnings.

Quarterly Payments – Because you do not have an employer withholding Social Security and Medicare taxes, and income tax for you on your earnings, you make estimated payments to pay these taxes. Speak to a tax professional or use the worksheet in Form 1040-ES, Estimated Tax for Individuals to find out if you are required to file quarterly estimated tax payments and if so, the amount of the taxes.

Recordkeeping. Based on my experience, the taxpayers who were the most organized with their records paid the least amount of taxes because they were able to account for their income and expenses. Learning how to properly substantiate your expenses can save you both time and money. There are many software programs that can help you maintain your records in an orderly and consistent manner.

I strongly recommend you talk to a tax professional regarding the tax implications of starting a business and the tax obligations that come with it.

If you are interested in learning more ways to legally reduce the amount of taxes that you owe each year, Mr. Campidonica has offered my readers a discount when purchasing his book, Outsmarting the System. Use coupon code Gina5 and receive a 5% discount.

About the Author: Anthony C. Campidonica (Tony) spent over eight years as an Internal Revenue Agent (tax auditor) with the Internal Revenue Service (IRS). This experience provided him with unique insight of tax laws and the opportunities provided to the rich. Tony recently wrote Outsmarting the System because he believes that everyone – not just the rich – need to be aware of the constraints of the system and the opportunities provided to them through the tax laws.

Tony is a Certified Public Accountant (CPA) in California and an Enrolled Agent (EA). He holds a Master of Business Administration (MBA) and a Master of Science in Accountancy (MSA).

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Investing Basics: how to choose the right investments

Build your nest egg of savings the right way.

Build your nest egg of savings the right way.

The idea of saving money for retirement, a child’s college education, or even a down payment on your first home may sound pretty easy, and most people understand the value and benefits of planning for the future; however, choosing what to invest in can be more confusing.

Whether you are investing in a savings account, personal IRA (individual retirement account), or a 401K through your employer, it is important to pick the right investments for you. So how do you know which investment options to choose? There are a few factors to keep in mind when deciding in which types of products to invest:

  • time horizon
  • risk tolerance
  • diversification

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