A recent video by CNN money suggests that a good benchmark for preparing for retirement is to set a goal of having one’s investments reach 5 times that of their salary by the age of 40. So, if one were making $65,000 a year, the goal would be to have $325,000 in investments.
Additionally, they recommend setting a goal for age 50 to have investments worth 10 times that of one’s salary and about 20 times one’s salary by 60. Assuming one can achieve a 7% return on their investments, they should see a doubling of their money every 10 years. Under this method CNN claims that at 65 one could begin withdrawing 4% of their investments each year permitting them to take home 92% of their previous salary, a very comfortable amount to live on.
Financial planning is never an exact science – during 2009 it was not uncommon for many people at age 40 to be unemployed, so this benchmark would be of little assistance to them in planning for the future. Likewise, someone making minimum wage at age 40 will struggle to save much for retirement while someone making 6 figures would be perfectly fine not having anything saved at age 40.
The most important concept is that one plan. With the new year approaching, now is a great time to sit down and plan for the next decade, when and what to save, and how aggressively you’re going to need to save in order to be comfortable in your retirement years.
photo credit: anotherloverholenyourhead
Tags: investments, savings
28.Dec.09 
Financial Planning 
Comments (0)
Most economists agree that a certain amount of unemployment is normal and indicates a healthy economy. This frictional amount tends to hover just above 4%. Once unemployment starts to climb much above that you begin to see a troubled economy.
With the exception of the mid-west, our country has been climbing quickly towards a 10% national unemployment rate. The last 2 years have seen unprecedented unemployment in many of America’s largest cities.
A visual timeline of the unemployment trend can be viewed here.
10.Dec.09 Financial Planning Comments (0)
According to the NY Times: “the number of food stamp recipients has climbed by about 10 million over the past two years, resulting in a program that now feeds 1 in 8 Americans and nearly 1 in 4 children.”
This offers a brutally realistic view of the state of our economy, with most areas experiencing 100% growth since 2007 in food stamp usage. States like Michigan, Oregon, and Maine along with much of the south are currently seeing food stamp usage climb in excess of 20%.
09.Dec.09 Budgeting Comments (0)
As the end of the year approaches, it’s good to look back and make sense of the mistakes made to ensure they are not repeated in 2010.
Here’s ten financial mistakes to avoid:
Not diversifying. Seeing many stocks drop 50% or more in the recent financial upheaval left many with depleted retirement funds. Owning a diverse mixture of investments can help offset the bad years and hedge towards equal gains in good ones.
Not investing: The only thing worse than seeing your retirement drop 50% is not having one at all.
Early Adoption: New technologies can be great fun, but they can also be costly mistakes. Just ask anyone that bought an HD-DVD player for $1,000.
Playing Penny Stocks: Investing in Penny stocks can bring overnight gains of 100% or more. More frequently than not it results in a total loss.
Investing in FOREX: Foreign exchange markets are extremely risky. One example, a 13% CD offered on the Icelandic Crona ended up costing investors $6,000 or more.
Not Fighting: Whether it be a wrongful tow, a denied insurance claim, or a simple overbilling standing up for yourself and fighting yields better returns than doing nothing.
Buying Cars (or anything) based on monthly expense: The monthly payment should not be your primary method of determining your purchase. Actual price should.
Buying things on credit: If you cannot afford it, save until you can. Buying things based on expected earnings or promotions often results in large credit card debt.
Not getting credit: Credit scores require a credit history. Failure to ever get a credit card can make getting a mortgage impossible.
Buying a Condo: While condos can be great buys for many, those that bought just before the bust saw their value drop by as much as 90%, along with skyrocketing HOA fees.
Not diversifying. Seeing many stocks drop 50% or more in the recent financial upheaval left many with depleted retirement funds. Owning a diverse mixture of investments can help offset the bad years and hedge towards equal gains in good ones.
Not investing: The only thing worse than seeing your retirement drop 50% is not having one at all.
Early Adoption: New technologies can be great fun, but they can also be costly mistakes. Just ask anyone that bought an HD-DVD player for $1,000.
Playing Penny Stocks: Investing in Penny stocks can bring overnight gains of 100% or more. More frequently than not it results in a total loss.
Investing in FOREX: Foreign exchange markets are extremely risky. One example, a 13% CD offered on the Icelandic Crona ended up costing investors $6,000 or more.
Not Fighting: Whether it be a wrongful tow, a denied insurance claim, or a simple overbilling standing up for yourself and fighting yields better returns than doing nothing.
Buying Cars (or anything) based on monthly expense: The monthly payment should not be your primary method of determining your purchase. Actual price should.
Buying things on credit: If you cannot afford it, save until you can. Buying things based on expected earnings or promotions often results in large credit card debt.
Not getting credit: Credit scores require a credit history. Failure to ever get a credit card can make getting a mortgage impossible.
Buying a Condo: While condos can be great buys for many, those that bought just before the bust saw their value drop by as much as 90%, along with skyrocketing HOA fees.
photos: futureback credit: {Guerrilla Futures | Jason Tester}
dvd credit: hainteractive
car credit: Police_Mad_Liam
card credit: apesara
04.Dec.09 Financial Planning Comment (1)
The government of North Korea has decided to devalue its currency at an exchange of 100 old Won to 1 new won. Allegedly an attempt to punish those that have profited from the black market, the government is limiting the amount each resident may exchange to $150,000 won. This limit has caused stores, restaurants, and all other forms of commerce to close until the new currency takes effect. It has also led to at least 2 suicides as residents deal with the harsh reality that their life savings has been reduced to at most, $150.
This act is not unique to North Korea. Many countries including Argentina have replaced currency in the past in order to curb inflation.
photo credit: sludgegulper
03.Dec.09 Budgeting Comments (0)
Americans with an AGI of less than $75k are eligible for a $400/per person stimulus credit. The making work pay stimulus has been attracting noticeably less attention than other stimulus offerings. For those that have normal paychecks the stimulus is applied directly through reduced withholdings. Those that are self employed, do not have withholdings, or otherwise need to claim the credit may do so by filling out an IRS schedule M and requesting $400 on their 1040.
A video on the IRS’ channel on Youtube (The IRS is on Youtube!) explains the credit in better detail. It can be viewed here.
photo credit: alancleaver_2000
03.Dec.09 Financial Planning Comment (1)
A new stock exchange is experiencing astonishing growth on the African continent: the Somali Pirate Exchange. Having quickly grown from 15 to 72 ‘maritime’ firms, the exchange allows local residents to contribute supplies, manpower, or funding to piracy efforts. With 10 successful ransoms paid, the exchange has offered an impressive return on investment to financiers from Somalia and neighboring countries.
Taking place in a small fishing village, Piracy has dramatically affected the local economy. According to Reuters:
“Piracy-related business has become the main profitable economic activity in our area and as locals we depend on their output,” said Mohamed Adam, the town’s deputy security officer.
“The district gets a percentage of every ransom from ships that have been released, and that goes on public infrastructure, including our hospital and our public schools.”
With piracy efforts commanding up to $4,000,000, a single ransom plays a dramatic role in changing the wealth of investors. One investor in the recent Spanish ransom hijacking received over $75,000 for her investment of a rocket-propelled grenade.
photo credit: twicepix
02.Dec.09 Financial Planning Comments (0)
