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Monday, February 9, 2009

How You Can Retire On Time And Debt Free!

By Neil101 Venketramen101

Our stock market is unsteady and the latest turn in the financial markets has summon some rather nasty thoughts, back to the days of a miserable and gloomy economy.

At this very moment the stock market is pretty uncertain and if you are banking on the financial systems recovering you could end up in crying over the losses, let alone any of the profits you have gathered over the years.

Briefly there are 8 points you should take into account to enclose the strength of your familys finances and their hope and dreams. Oh by the way, please avoid the mistake of relying 100% on your 401K to assist you through a tough time:

1. You should try and save at least 30-35% of your income into interest bearing accounts akin to a savings account or credit union CD's. Heres the reason for my madness, you can get a rapid return over a shorter period at a elevated interest rate, without taking any more risk. When they the CDs matures or expired their interest bearding duration, simply move the money you have gathered into similar extremely high interest bearing CD and you want to invest the original amount as well as the interest you have earned. The goal is to grow the CD to a rather good size allowing you to divide the CD into 2 single portfolios and reinvesting the funds again. This will all you grow your funds rapidly due to the 8th wonder of the world, i.e. the power of compounding interest. The key is to grow your funds without exposing yourself to any more risk than you have to. Once you have grew your CDs you will have the ability to divert the CDs into the stock market when the time is right.

2. Take some of your 401K and roll it into an Roth IRA - and do not take all of your money out of the company sponsored 401K plan especially if they have company matching funds as this is free money for you to reinvest later when your 401K reaches a favorable size.

3. Speaking of bonds...your money is far safer in a bond than stocks and you don't have to worry about a stock falling and taking your investment with it.

4. One of the worse mistakes is having a substantial amount of debts before you retire. There is no worse feeling than realizing you at your retirement age, and now you have to hunt for another job just to be able to payoff your debt. There you are standing next to some kid young enough to be your grandchild and having to call him/her boss. That is not a anyones idea of a good retirement.

5. Paying off your mortgage while you are young, will allow you to invest in other assets and grow your net worth rapidly. By using a mortgage accelerator strategy, you can become mortgage free 15 years faster, without changing your lifestyle or paying one cent extra towards your mortgage.

6. Set up an emergency fund in a separate account for those annoying little emergencies we all need petty cash for, so you are not tempted into dipping into your retirement funds.

7. When considering your insurance costs, a great idea is to have your home insured at the replacement value, not market value of the home. The same principle will apply for your car. You do not have want to have your car insured at the minimum state value when you reside in a better district or neighborhood. The idea is to have a better insurance coverage for your lifestyle and you may want to possibility of having umbrella coverage to reduce your insurance cost.

8. Getting sick or injuring, yourself could deplete your savings or 401K if you do not have proper Health insurance. Just to elaborate, imagine slipping in the bathroom or injuring your knees. Therefore, you know that you could pay in the region of $6,000 just for the surgery and well over for doctors visits. Which is ridiculous.

The key is to protect yourself and your family in retirement. To be successful and achieve your goals you can set a timeline to address each of the points above, measure, and ensure you are actively taking the right steps to protect yourself.

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