Preparing Financial Retirement Plan

The simple truth is that it’s never too early to start planning for your retirement, because there’s a very good chance that it will constitute a significant portion of your life, and you want to be able to live comfortably through it. Only through the proper planning and consideration will you be able to retire with the money you want so you can continue to live a great life. With this in mind, let’s take a look at how you go about planning for the day you no longer have to work.

Step 1: Set Goals

You can’t be successful in your journey if you don’t actually know what you are aiming for. Consider exactly where you want to be financially when you retire, and indeed, when you want to retire, because this will be impacted by finances too. If you’ve only just started out in the world of work, then this might just be a rough plan to retire at state retirement age, and have a good monthly income, but later in life you might have a specific monthly income you want to achieve, or perhaps a lump sum that you’d like to amass.

Step 2: Consider Your Strategy

Most people will do exactly the same thing when it comes to retirement planning, and that is that they’ll simply pay into their company pension plans, and take whatever it is that the government gives them too (this will vary from place to place). This is not always the most effective or lucrative thing to do however. Sometimes you’ll also need to pay extra into your pension, save money in a bank, and perhaps also consider an investment portfolio. Set all of this out with a defined plan, which leads us onto the final step.

Step 3: Putting the Plan into Action

You now know what you want to achieve, and roughly how you’re going to do it. It’s now time to put the plan into action by actually doing things like setting up a savings account and establishing an investment portfolio. You may well find that it’s better if you get help with this part, especially if you’re considering investment, a wealth management company will be able to do most of the legwork for you.

There you have it – retirement finances can seem daunting at first, but it’s all about setting goals, defining a plan, and getting help if you need it.

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8 Roth IRA Mistakes to Avoid

When saving for retirement, a Roth IRA offers the distinct advantage of simplicity. Although contributions to a Roth IRA is not tax-deductible, you can compound your investments and withdraw your money free of taxes, and you are not required to withdraw a minimum amount when you retire. Annual contribution limit is $5,500 ($6,500 if you are over 50). However, despite these benefits, investors can also encounter potential pitfalls and incur unintended tax liabilities. 

Here are the eight common Roth IRA mistakes to avoid. 

1. Not maximizing (or not contributing at all) your Roth IRA contributions per year. If you contribute the maximum of $5,500 a year for 30 years assuming an annual investment return of 5%, you can make $1.1 million in 30 years. Let us say, you hold back and contribute only $5,000 per year, the difference of the $500 per year at a 5% return for 30 years due to compounding amounts to almost $100,000! Also, if you earn enough money to cover the Roth IRA contributions for you and your non-earning spouse, you can max out the contributions each year for both of you.

2. Avoid contributing because you exceed the earnings limit. The IRS prevents high earners to contribute directly to a Roth IRA – in 2014, the earnings limit is $191,000 for a married couple filed jointly and $129,000 for single people or the head of household. One way to circumvent this problem is to contribute to a Traditional non-deductible IRA and then promptly convert to a Roth IRA before the cash earns any returns or else you will be subject to mandatory minimum distributions and ordinary income taxes upon withdrawals.

 
3. Contributing too much. If you contribute more than your allowed amount, you can incur a penalty of 6% per year on the excess contribution. For example, you forget that you have already contributed earlier in the year, or you continue to contribute even after age 70 ½ or for a diseased individual. You can resolve this by taking out the excess money before filing your taxes or carrying forward the contribution to the next year with proper documentation to the IRS.

4. Breaking the rule for rollover. You can move from one IRA account to another or take distributions from a 401K account after you leave a job without incurring taxes as long as you do this within 60 days. Starting 2015, you can do this rollover once during a 365-day period, not a calendar year. More importantly, you can only use this 60-day rollover once per year even if you have five IRA accounts. If you break the rule, you can lose your entire IRA benefits. 

5. Messing up the rollover. Avoid taking the money out from one IRA account to yourself before you roll over to another. It is best to do a custodian-to-custodian transfer. However, you have to be meticulous about the transfer to make sure the money is actually rolled over into the correct IRA account and not a regular investment account. Otherwise you will lose the entire IRA tax shelter.

6. Not knowing the order of Roth IRA withdrawals. Normally, you can withdraw your original contributions and conversion amounts from your Roth IRA tax-free and penalty-free when you reach age 59 ½ and provided you wait for five years. However, each IRA conversion you make is treated separately and is subject to its own five-year waiting period, or you will incur a 10% early withdrawal penalty. 

7. Not paying attention to fees and investments in the IRA account. Discount brokers typically charge no fees when hosting your Roth IRA account and so make sure you do not pay any annual hosting fee. Also when choosing your investments in the IRA account, think about the expenses you are paying in mutual funds. Go for no-load mutual funds or low-cost exchange-traded funds. Also make sure you track regularly how your investments have done over time (at least once a year) and rebalance among cash, stocks, and bonds periodically. Also check whether you have the right mix between value and growth stocks, domestic versus international investments, to make sure you reach your financial goals upon retirement. 

8. Forgetting to take required minimum distributions (RMD) from an inherited Roth. If you are lucky enough to inherit a Roth IRA from someone who is not your spouse but forget to take the RMD as per the IRS rules, you can still incur a penalty of 50% of the money not distributed. Seeking advice on an inherited Roth IRA will save you headaches down the road.

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Real Estate Investing for Beginners

The housing crash has made it possible for you to invest in really attractive homes without having to spend a small fortune and many investors are making the best of the situation. If you want to get a share of the real estate pie but lack the knowledge and experience to go about it with confidence, we are here to help. Here are a few points you should know about the two ways in which you can make this investment.

Direct purchase of property

The most evident way is to buy a house or other kind of property directly from a seller. If you can make a substantial investment, you may even be interested in owning a small apartment complex. If the home or apartment complex is in a good location, finding tenants for the property is easy and you can demand good rentals from them too. Make sure that you comply with fair housing rental regulations, building code requirements and other legalities. Also factor in repair and maintenance costs that you will have to bear before you invest in property.

Investing in REITs

Another way to own real estate is to invest in a Real Estate Investment Trust or REIT. With these you buy shares in a portfolio of properties. REITs give you an opportunity to invest in real estate that may be unaffordable to you otherwise. For example, buying a sky scraper office complex in Manhattan is impossible for you but buying into an REIT that includes this property may be a viable option. In addition, REITs eliminate the hassles of managing maintenance and tackling tenants that you cannot avoid when you own a home or apartment complex that you have let out.

Points to keep in mind with real estate investment

Remember that real estate is a huge asset and a substantial portion of your savings is going to be locked up in it for a fairly long term if you want to make good returns on investment. It is not advisable to do your investing without taking adequate care and giving enough attention to the task. These are some points to keep in mind before investing:

·         Do some research: Whether it is identifying a good property or the right location to buy your home in or a reasonable price to agree upon, doing your homework before making your purchase is a must. After all, you do not want to end up pouring your hard earned money into a property that cannot yield the returns your expect.

·         Be patient: Real estate is typically a medium to long term investment so expecting your property value to soar overnight is simply not a good idea. You may get pressured into selling the property too soon, before it has had time to increase in value. Make a plan beforehand about the time period that you are looking at for your investment to give you returns and once you make the purchase, remain patient until you are sure to get the best returns possible. 

·         Don’t make emotional decisions: It is easy to get emotionally attached to property that you are looking to buy but allowing the emotion to sway your judgment can be a fatal mistake in real estate investing. No matter how appealing a home may be, it is definitely critical to look beyond the appearances and check if the house really makes a good buy considering its age, its condition, location, features, price and other aspects.  If you cannot make an objective decision, call in a  friend or relative who can tell you whether the property makes a worthwhile investment for you.

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Is It Possible to Clear off Credit Card Debt Faster?

Of all debts, credit card debt is cancerous. With high interest attached, it seems to have no end. When you start paying it off, you will feel that it will take you a rebirth before you can manage to get out of the hole. I was in the trap once and know how much difficult it is to jump out of the quagmire.

Still it is possible! It may sound like a ray of hope for some while many will struggle to believe in the seemingly unbelievable talks. It’s not rambling talks as I have faced the problem and conquered the same. Even if you have mountain of debts, you can clear them all if only you dare to stick with a workable plan come hell or high water.

I racked up $2000 on my credit card and now I am a debt-free person. If I can, you can too!

Here are few simple ways by following which, you can pay off your credit card debts faster and guide yourself back to your lost financial freedom. But before applying them, do first thing first.

Open talks with Credit Card Company

You approached them while applying for credit card and this time, you have to do that but for a different reason – to get interest rate lowered. Many debtors are in fear of hearing a resounding ‘NO’ and so don’t request for interest rate negotiation. It is the worst case that you will hear ‘NO’ but what if they say ‘YES?  

Remember the company is also willing to get their debts cleared faster and most of them agree to accept a lower interest rate. And if your credit score has improved since your first taking the card, you have a greater chance to enjoy a lower interest rate.  

Now let us turn attention to the strategies

Pay more than minimum

Suppose you owe a lot on credit card but find a larger chunk of your money evaporating even before you can set aside the sum for payment. Repayment period will be dragged, slapping you with more interest to bear. Set aside a figure more than the minimum payable amount. Promise to yourself that you will not touch it and manage with the rest.

That will save you from impulsive purchase and skew a considerable amount towards credit card payment. If your payment exceeds the lowest bar, it will go towards lowering balance on credit card and small balance implies that debts will be cleared faster.

Consolidate & Conquer

Consolidation is also possible for credit card debts. If you have balance on more than one credit card and payable amount has taken a monstrous figure, get them compacted into a single one. It will facilitate payment and could also lower interest rate.

Start with lowest balance

It is famously known as snowball method as put by Dave Ramsey. First enlist your existing credit card debts in ascending order i.e. lowest balance first. Now clear the lowest balance first while maintaining minimum payment on others. The objective is to instill kind of confidence in you by getting smaller balances wiped out.

Clear card with highest interest rate

It is the most used method to pay off credit card balances. Focus on wiping out balances on high-interest credit card while paying off minimum figure on other existing ones.

There are multiple effective ways of eliminating debts on your credit card but most important is to choose one that you feel comfortable with and cling to it.

So, what strategy appeals to you most?

Editor’s Note: This article is contributed by Tina Roth: a personal finance blogger at PROFinanceBlog. She is commerce graduate and loves to write about money and finance management.

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Can the Iron Ore Market deliver you a Financial Return?

When it comes to investing in metal, it is usually precious materials such as gold and silver that appeal to traders. These sources of wealth are extremely secure and reliable, while assets such as silver also have industrial applications. Given that precious metals can also be traded through ETF’s (negating the burden of ownership), they remain extremely popular in the contemporary economic climate. There are other metals that are worthy of consideration to, with emerging markets like the iron ore sector currently dominating the international export scene.

A snapshot of the Iron Ore Market

Traders are always keen to diversify their portfolios, especially in a volatile economy that is subject to constant and sudden change. The emergence of a relatively new market such as the iron sector therefore represents extremely positive news, especially for investors with a global outlook. This commodity began to dominate the Australian export scene between 2013 and 2014, for example, earning a staggering $75 billion in this time and outstripping the performance of other, more illustrious assets.

Given the strength of the Australian economy, it is worth noting that iron ore has made a huge contribution to this during the last two years. It is the biggest export revenue generator in Australia, accounting for 27% of all exports sales at the end of 2014. Now a more lucrative investment than gold, silver and even coal, iron ore has captured the attention of international traders and provided them with an opportunity to diversify their efforts. Unlike precious metals, however, the value of iron ore is determined almost entirely with its core purpose.

Why Iron Ore has emerged and how to make it work for you

More specifically, the recent economic turbulence has forced governments to consider initiatives that have the potential to drive economic growth. Infrastructure construction has proved to be one of the most popular measures, and this in turn has driven demand for manufacturing steel. Of the estimated 3 billion tonnes of iron ore mined annually across the world, a staggering 98% is consumed by steel mills.

While the decline of the Chinese economy may impact on the global demand for iron ore, for now this is one of the biggest growth sectors in the financial market. This is appealing to traders, who can also benefit from flexible trading methods such as over-the-counter forward contracts and principle to principle buying and selling. This is certainly a market to watch, even as the fortunes of the global economy continue to fluctuate.

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Eurozone Business Activity Better than Expected in October

October has proven something of a struggle for the Eurozone nations. The single currency’s price has remained low throughout, and the continued reverberations of the Greek crisis have been felt within the region, exacerbating new fears surrounding the Volkswagen scandal.

As a result, many expected industrial growth to remain slow, yet recent figures from the US’s Manufacturing Purchasers’ Index (PMI) have proven to be surprisingly promising. With a healthy growth identified over the course of October, we look at the impact this will have on your trades going forwards…

How PMI Scores Work

A key indicator of economic growth within a nation is the US’s seasonally adjusted PMI. It has long been posited as a primary identifier of the financial and manufacturing performance of a locale, and a positive performance often prefaces a rise in the value of a nation’s currency.

The Eurozone’s PMI score is calculated based on the services and manufacturing conditions in eight key countries: Germany, France, Spain, Italy, Ireland, Greece, Austria, and the Netherlands. Where the assemblage ranks below fifty, this indicates a contraction of activity; where it ranks above, it indicates an expansion; and where it remains the same, activity levels have remained static.  

October’s PMI Results

October proved to be a surprisingly healthy month for those countries that are part of the Eurozone. With figures rising from 53.1 in September to 54 this month, this places its performance well above the neutral 50 threshold, indicating promising signs of a continued economic recovery.     

Perhaps more interestingly, this figure also ranks above the figure touted by economists, who expected it to remain around the 53 mark.

This result was particularly surprising because the figure placed not only well above what was expected, but also constituted a two-month high for the beleaguered nations, and one of the strongest monthly expansions seen over the past four years. 

Germany: The Star Turn

This growth came as something of a shock to commentators, traders, and brokers like FxPro, particularly because Germany proved to be the assemblage’s star turn.

Despite fears over the continued impact of the Volkswagen scandal, the Eurozone’s largest economy delivered an incredibly positive performance, scoring 54.5, up from 54.1 in September.

A Less Promising Performance for some Sectors

Unfortunately, continued economic recovery cannot be taken as gospel on the back of these results, as some sectors fared better than others.

Of those less fortunate, the Manufacturing PMI Output Index showed a marked fall in performance. Although it had ranked at 53.4 just one month ago, it fell to 53.3, its poorest score in five months.

The Fate of the Euro

The results of the latest PMI proved to have positive consequences for the euro, which has continued to lag behind many of its European and international competitors.

Indeed, immediately following the publication of this data, the single currency experienced a slight rise versus the dollar, and with renewed faith in the euro, this is a trend that may well continue.

However, this is not information that traders should immediately seize upon. Although current data seems to have been interpreted as positive, leading to a slight rise in the euro, Markit have been quick to comment thus:

“Unless the PMI business activity and price indices pick up in coming months, the relatively weak growth and deflation signalled by the survey will add to expectations that the ECB will step up its quantitative easing programme.”    

In addition, it’s also important to note that these results have been markedly more upbeat that the competing figures produced by the Institute for Supply Management. These indicated that manufacturing growth had essentially stalled in October, leading to a less promising outlook for the remainder of the year. 

So what does this mean for euro traders going forwards? Simply this: proceed with caution.

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