Ken Himmler.com

Women face special challenges when planning for retirement. Because their careers are often interrupted to care for children or elderly parents, women may spend less time in the workforce and earn less money than men in the same age group. As a result, their retirement plan balances, Social Security benefits, and pension benefits are often lower. In addition to earning less, women generally live longer than men, and they face having to stretch limited retirement savings and benefits over many years.To meet these financial challenges, you’ll need to make retirement planning a priority.

Begin saving now
To maximize your chances of achieving a financially secure retirement, start with a realistic assessment of how much you’ll need to save. If the figure is substantial, don’t be discouraged–the most important thing is to begin saving now. Although it’s never too late to save for retirement, the sooner you start, the more time your investments have to grow.
 

Save as much as you can–you have many options
If your employer offers a retirement savings plan, such as a 401(k) or a 403(b), join it as soon as possible and contribute as much as you can. It’s easy to save because your contributions are deducted directly from your pay, and some employers will even match a portion of what you contribute. If your employer offers a pension plan, find out how many years you’ll need to work for the company before you’re vested in, or own, your pension benefits. Women struggling to balance work and family sometimes shortchange their retirement savings by leaving their jobs before they become vested in their pension benefits. Keep in mind, too, that because your pension benefits will be based on your earnings and on your years of service, the longer you stay with one employer, the higher your pension is likely to be.

Most employer-sponsored plans allow you to choose from several investment options (typically mutual funds). If you have many years to invest or you’re trying to make up for lost time, give special consideration to growth-oriented investments such as stocks and stock funds. Historically, stocks have outperformed bonds and short-term instruments over time, although past performance is no guarantee of future results. However, along with potentially higher returns, stocks carry more risk than less volatile investments. A good way to get detailed information about a mutual fund you’re considering is to read the fund’s prospectus. It includes information about the fund’s objectives, expenses, risks, and past returns. A financial professional can also help you evaluate your retirement plan options.

Save for retirement–no matter what
Even if you’re staying at home to raise your family, you can–and should–continue to save for retirement. If you’re married and file your income taxes jointly, and otherwise qualify, you may open and contribute to a traditional or Roth IRA as long as your spouse has enough earned income to cover the contributions. Both types of IRAs allow you to make contributions of up to $5,000 in 2008 and 2009, or, if less, 100% of taxable compensation. If you’re age 50 or older, you’re allowed to contribute even more–up to $6,000 in 2008 and 2009.

Plan for income in retirement
Do you worry about outliving your retirement income? Unfortunately, that’s a realistic concern for many women. At age 65, women can expect to live, on average, an additional 20.3 years.* In addition, many women will live into their 90s. This means that women should generally plan for a long retirement that will last at least 20 to 30 years. Women should also consider the possibility of spending some of those years alone. According to recent statistics, 43% of older women are widowed, 11% are divorced, and approximately half of all women age 75 and older live alone.* For married women, the loss of a spouse can mean a significant decrease in retirement income from Social Security or pensions.
So what can you do to ensure you’ll have enough income to last throughout retirement?

Here are some tips:
• Estimate how much income you’ll need. Use your current expenses as a starting point, but note that your expenses may change dramatically by the time you retire.
• Find out how much you can expect to receive from Social Security, pension plans, and other sources. What benefits will you receive should you become widowed or divorced?
• Set a retirement savings goal that you can work toward, and keep track of your progress.
• Save regularly, save as much as you can, and then look for ways to save more–dedicate a portion of every raise, bonus, cash gift, or tax refund to your retirement savings.
• Consider purchasing long-term care insurance to help protect your retirement savings and income from the high cost of nursing home care.
*Source: National Vital Statistics Report, Volume 56, Number 16, 2008
**U.S. Department of Health and Human Services Administration on Aging, A Profile of Older Americans: 2007

What’s your excuse for not planning for retirement?
I’m too busy to plan. Perhaps you’re so wrapped up in balancing your responsibilities that you haven’t given retirement planning much thought. That’s understandable, but if you don’t put retirement planning at the top of your to-do list, you risk shortchanging yourself later on. Staying focused on your goal of saving for a comfortable retirement is difficult, but if you put yourself first it will really pay off in the end.

My husband takes care of our finances
Married or not, it’s critical for women to take an active role in planning for retirement. Otherwise, you may be forced to make important financial decisions quickly during a period of crisis. Unfortunately, decisions that are not well thought through often prove costly later. Preparing for retirement with your spouse will help ensure that you’re both provided for, and pave the way to a worry-free retirement.

I’ll save more once my children are through college
Many well-intentioned parents put their own retirement savings on hold while they save for their children’s college education. But if you do so, you’re potentially sacrificing your own financial security. Your children have many options when it comes to financing college–loans, grants, and scholarships, for example–but there’s no such thing as a retirement loan! Why not set a good example for your children by getting your own finances in order before contributing to their college fund?

I don’t know enough about investing
Commit to spending just a few minutes a day learning the basics of investing, and you’ll become knowledgeable in no time. And remember, you don’t have to do it by yourself–a financial professional will be happy to work with you to set retirement goals and help you choose appropriate investments.

Just what you need, right? One more time-consuming task to be taken care of between now and the end of the year. But taking a little time out from the holiday chores to make some strategic saving and investing decisions before December 31 can affect not only your long-term ability to meet your financial goals but also the amount of taxes you’ll owe next April.

Look at the forest, not just the trees

The first step in your year-end investment planning process should be a review of your overall portfolio. That review can tell you whether you need to rebalance. If one type of investment has done well–for example, large-cap stocks–it might now represent a greater percentage of your portfolio than you originally intended. To rebalance, you would sell some of that asset class and use that money to buy other types of investments to bring your overall allocation back to an appropriate balance. Your overall review should also help you decide whether that rebalancing should be done before or after Dec. 31 for tax reasons.    Also, make sure your asset allocation is still appropriate for your time horizon and goals. You might consider being a bit more aggressive if you’re not meeting your financial targets, or more conservative if you’re getting closer to retirement. If you want greater diversification, you might consider adding an asset class that tends to react to market conditions differently than your existing investments do. Or you might look into an investment that you have avoided in the past because of its high valuation if it’s now selling at a more attractive price. Diversification and asset allocation don’t guarantee a profit or insure against a possible loss, of course, but they’re worth reviewing at least once a year.  

Know when to hold ‘em

When contemplating a change in your portfolio, don’t forget to consider how long you’ve owned each investment. Assets held for a year or less generate short-term capital gains, which are taxed as ordinary income. Depending on your tax bracket, that rate could be as high as 35%, not including state taxes. Long-term capital gains on the sale of assets held for more than a year are taxed at lower rates: 15% for most investors, 0% (through tax year 2010) for anyone in the two lowest tax brackets. (Long-term gains on collectibles are slightly different; those are taxed at 28%.)

Your holding period can also affect the treatment of qualified stock dividends, which are taxed at the more favorable long-term capital gains rates if you have held the stock at least 61 days. (Those days must occur within the 121-day period that starts 60 days before the stock’s ex-dividend date; preferred stock must be held for 91 days within a 181-day window.) The lower rate also depends on when and whether your shares were hedged or optioned during those 61 days. Check with your tax professional to make sure you don’t inadvertently incur unnecessary taxes by selling or buying at the wrong time.

Make lemonade from lemons

Now is the time to consider the tax consequences of any capital gains or losses you’ve experienced this year. Though tax considerations shouldn’t be the primary driver of your investing decisions, there are steps you can take before the end of the year to minimize any tax impact of your investing decisions.

If you have realized capital gains from selling securities at a profit (congratulations!) and you have no tax losses carried forward from previous years, you can sell losing positions to avoid being taxed on some or all of those gains. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 for a married person filing separately) or carried forward to reduce your taxes in future years. Selling losing positions for the tax benefit they will provide next April is a common financial practice known as "harvesting your losses."

Example: You sold stock in ABC company this year for $2,500 more than you paid when you bought it four years ago. You decide to sell the XYZ stock that you bought six years ago because it seems unlikely to regain the $20,000 you paid for it. You sell your XYZ shares at a $7,000 loss. You offset your $2,500 capital gain, offset $3,000 of ordinary income tax this year, and carry forward the remaining $1,500 to be applied in future tax years.

Time any trades appropriately

If you’re selling to harvest losses in a stock or mutual fund and intend to repurchase the same security, make sure you wait at least 31 days before buying it again. Otherwise, the trade is considered a "wash sale," and the tax loss will be disallowed. The wash sale rule also applies if you buy an option on the stock, sell it short, or buy it through your spouse within 30 days before or after the sale.

If you have unrealized losses that you want to capture but still believe in a specific investment, there are a couple of strategies you might think about. If you want to sell but don’t want to be out of the market for even a short period, you could sell your position at a loss, then buy a similar exchange-traded fund (ETF) that invests in the same asset class or industry. Or you could double your holdings, then sell your original shares at a loss after 31 days. You’d end up with the same position, but would have captured the tax loss.

If you’re buying a mutual fund in a taxable account, find out when it will distribute any dividends or capital gains. Consider delaying your purchase until after that date, which often is near year-end. If you buy just before the distribution, you’ll owe taxes this year on that money, even if your own shares haven’t appreciated. And if you plan to sell a fund anyway, you may minimize taxes by selling before the distribution date.

Know where to hold ‘em

Think about which investments make sense to hold in a tax-advantaged account and which might be better for taxable accounts. For example, it’s generally not a good idea to hold tax-free investments, such as municipal bonds, in a tax-deferred account (e.g., a 401(k), IRA, or SEP). Doing so provides no additional tax advantage to compensate you for tax-free investments’ typically lower returns. Similarly, if you have mutual funds that trade actively and therefore generate a lot of short-term capital gains, it may make sense to hold them in a tax-advantaged account to defer taxes on those gains, which can occur even if the fund itself has a loss. Finally, when deciding where to hold specific investments, keep in mind that distributions from a tax-deferred retirement plan don’t qualify for the lower tax rate on capital gains and dividends.

Be selective about selling shares

If you own a stock, fund, or ETF and decide to unload some shares, you may be able to maximize your tax advantage. For a mutual fund, the most common way to calculate cost basis is to use the average cost per share. However, you can also request that specific shares be sold–for example, those bought at a certain price. Which shares you choose depends on whether you want to book capital losses to offset gains, or keep gains to a minimum to reduce the tax bite. (This only applies to shares held in a taxable account.) Be aware that you must use the same method when you sell the rest of those shares.

Example: You have invested periodically in a stock for five years, paying a different price each time. You now want to sell some shares. To minimize the capital gains tax you’ll pay on them, you could decide to sell the least profitable shares, perhaps those that were only slightly lower when purchased. Or if you wanted losses to offset capital gains, you could specify shares bought above the current price. 

 We all have moments where we daydream about our perfect retirement scenario. Some of us want to spend our golden years traveling the world and see for ourselves the wonders we hear about everyday on the news. Others want to have a nice retirement near the coastal waters and bask in the comforts of the warm, setting sun while enjoying the companionship of loved ones. Whatever your personal dream for the future may be, it is very important to consider the monetary requirements needed to realize your fantasies. It is essential that you develop a retirement plan.

It generally goes without saying that when setting aside money for retirement you want to get the most out of your investments.  Every type of investment carries with it a certain amount of risk.  This has a tendency to scare people into sticking with the safest investments possible because they are afraid of losing all of their money.  Unfortunately, the risks involved with investments are not always clear at the outset.

While it may sound like a good idea, the fact is letting your money sit in a standard savings account could cause you to effectively lose more money than you would be risking in other forms of investment.  It is very true that a little bit goes a long way, and over time a small investment could grow exponentially.  Unfortunately, there are a lot of other factors that are figured into the growth of your money.  One of these factors that is often overlooked is the ratio of interest to inflation.  If the level of interest is lower than the level of inflation, you will effectively lose money in your investment.

With any investment option the goal is always to get the highest interest rate possible.  This is especially important when we take the rate of inflation into account.  The value of the US Dollar changes over time.  Placing $1 in the bank now might result in $100 in 20 years but the value of that $100 will be different than it is today.  To avoid losing value in your investment it is important that your interest rate is the same as or (preferably) higher than the inflation rate.  For this reason the safest investment options for you may not be the best options for you.  Talk with your retirement planner if you are having trouble finding investment options that will give you the most return.

In the light of the present recession, everyone is looking for ways to make safe investments.  Unlike in previous generations, today’s primary resource for conducting the much needed investment research is none other than the Internet.  Unfortunately, there are a lot of dishonest people who have caught on to the fact that everyone is looking for a way to make a easy, safe investments.  These dishonest individuals have set up several elaborate scams to swindle honest, hardworking individuals like you out of their hard earned money.  You will need to equip yourself with the information you need to avoid such scams when doing your own investment research.

One of the most common scams comes in the form of unqualified individuals who claim to be reputable investment advisors.  These are sometimes easy to spot because they make unrealistic claims about your money.  Unfortunately there are also many well thought out scams that are hard to spot.  Sometimes scammers assume the identities of actual, licensed investment planners with outstanding credentials.  If you are not careful you can lose a lot of money in a short amount of time.

The best way to avoid these types of scams is to double-check all of your references.  Never send anybody money for investment services until you are absolutely sure they are who they claim to be.  Most reputable investment planners have only a select few websites that they operate with, and these websites are usually well documented by services that specialize in this kind of research.  When in doubt, do a google search with the name of the individual or service in question followed by the word ‘scam’ to find complaints other people have had.  When in doubt, follow this golden rule of Internet investing:  If it sounds to good to be true it probably is.  There are many legitimate investment services out there just waiting for you to find them.
 

When an individual starts down the path toward financial independence, it is understood that he or she will have to make adjustments along the way.  Even the most well thought out plan cannot take into account every unforeseen situation that can interfere with your future plans.  For this reason, it is extremely important to stay on top of your financial situation so that you can make the appropriate adjustments to your savings and investments as necessary.

There is no substitute for being well informed about the laws that govern things such as taxes, investments, or anything that could affect your personal financial status.  State and tax laws have a tendency to change seemingly overnight, and adjustments to your financial retirement plan may have to be made so that you continue to get the most out of your hard earned money.  Failure to stay on top of your financial situation in this way could even have some potentially dire legal consequences.  Always check with your retirement planner when you hear about new laws that could concern your savings and investments.

Besides legal changes, there are many other situations that you should stay well informed about.  New financial opportunities become available every day for those who are actively looking for them.  Whether it is a new investment opportunity or a special holiday savings account with a particularly high interest rate, adapting your plan as necessary can make you a lot more money in the long run. 

If you get in the habit of doing investment research, watching the economic forecasts, and playing an active role in the investment process, you will be better equipped to deal with life’s uncertainties.  All it takes is a little bit of time, effort, and energy and you will be well on your way to true financial independence.