I would say that It is more important now than ever before to save for retirement. Why? Because money talks! The cost of everything keeps rising. Prescription drugs, medical care, food, utilities, you name it. Even Social Security keeps going up year after year, until soon we will be paying a percentage of every dollar we earn into Social Security. At present we are already paying Medicare – 1.45 percent – of every dollar we earn.
Everybody and everything spells money. Money created banks. Money created Uncle Sam. Money created Nursing homes! They were all designed to latch on to your money. Speaking of nursing homes, believe me, you don’t want to take up residence in any nursing home! They take your money, but give you very little care and attention. They are not the cleanest place you’ll find either. Most of the ones I have visited smell like a garbage dump! Most are under-staffed with unprofessional help.
If you haven’t accumulated a sizable nest egg for retirement and have only Social Security to live on, then there is a good chance your siblings will turn you over to a nursing home and turn the Social Security check over to the nursing facility!
On the other hand, if you have accumulated a good sized estate with plenty of cash and control the purse strings, then you still have some clout. In other words, your relatives will not be as eager to ruffle your feathers. When they start talking about the rest home you can let them know that you are thinking of changing your will and leaving your money to charity! This usually changes their attitude quick.
It’s just a cold, hard, fact of life, that when you’re old, wrinkled and destitute, living on a small Social Security check, no one wants you, not banks, not Uncle Sam,not Life Insurance and not nursing homes. They do want your money.
We all know that Social Security income is not enough to live on. With this in mind we definitely need to save for retirement and become financially independent. There are many ways to make this happen. First and foremost is the 401-K and pension plans where you work. Where you can contribute up to 10 percent of your before-tax earnings and your employer matches a certain percentage- usually 25 percent to 50 percent the first five years-up to 5% of your contribution Then dollar for dollar up to five percent thereafter. These plans have have made several wealthy retirees over just a few years.
Since several companies have reneged on these plans you may want to look at alternatives. Two alternatives, Life Insurance and US Savings Bonds.
Life Insurance- I don’t mean policies that only pay you if you die. I’m talking about life policies that build cash value and pay you if you live and the premiums stay the same until maturity. However, it is important that you buy life insurance when you’re young and healthy. When you get older it becomes more expensive and in many cases, if you are in bad health, you cannot even buy it!
Life insurance may not be the best investment you could make, but it is safe and sound. The best part about life insurance as an investment for the future, is that it’s cheap when you’re young. You can pay for it by the month and wind up with a few hundred thousand dollars cash value.
Unlike the stock market, which can go down, down, down, and leave your investment worthless-Life insurance is a sound investment-because you know what the cash value will be from year to year. Then after a few years if you decide you no longer need insurance, or you just need a nest egg for other investment, you can cash it in for the cash value.
I’m not suggesting that you shouldn’t invest in the stock market. You can make money in the stock market if you know what you’re doing. Just be sure to keep a good life policy to fall back on! You can always borrow the cash value after the policy has been in effect for at least two years. A good life policy and a fine home can grow into wealth for retirement.
US Savings Bonds. Many folks may frown on this method of saving. I have found it to be a valuable tool to financial success. EE Bonds have a maturity date of 20 years and draw interest for 30 years. They will more than double what you pay for them in just a few years.
If you keep them for the full interest bearing life they can become quite a windfall for retirement. The interest accrues monthly and compounds semi-annually. The good part is that you don’t have to hold them until maturity.
You are only required to hold savings bonds for one year from the date of purchase. Of course if you hold bonds less than five years, then you are penalized the three most recent month’s interest.
Interest earnings on savings bonds are exempt from state and local income taxes. They are subject to Federal, state and local estate inheritance as well as Gift and other excise taxes. plus Federal income tax.
I like to purchase the $500 denomination bonds every two weeks. Paper bonds are bought for half their face value. A $500 bond for $250. A $1,000 bond for $500 and so on. After a few years if you want to start cashing a couple each month it makes a nice supplemental income.
EXAMPLE: Let’s say you have been buying just one $500 EE Bond every two weeks for a period of 5 years and you are retiring with a company pension of $2,400 per month and your Social Security amounts to $1,700 a month then at least $250 every 2 weeks from each bond.
This would give you $4,600 a month income for the next five years assuming that you only cashed two bonds each month. Of course after twenty years each bond would be worth at least $500 and would give you $1,000 a month- $500 every two weeks for 20 years-
Hopefully your pension and Social Security could be set up two weeks apart and the bond every two weeks would insure a constant cash flow.
You can check all this out on the Internet by using the savings bond calculator at www.treasurydirect.gov/BC/SBCPrice .
Now look at a recent calculation for redemption date March 2007 for 3 different issue dates for $500 denomination EE Bonds . Interest rate 4.00%.(Purchase price $250)
Issue Date 01/1987-`Issue Price $250 – Value as of March 2007 $697.80
Issue Date 01/1985 -Issue Price $250 – Value as of March 2007 $840.00
Issue Date 01/1992 -Issue Price $250 – Value as of March 2007 $572.40
So as you can see the longer you hold the bond the more it is worth especially after the 20 years. In the 2nd example after 23 years the $250 you paid for the bond has more than tripled! Remember we are looking at just one bond, but if we figure two bonds each month for 20 years, then at the end of the 20 years cashed them all in we would have a small fortune, even after taxes.
Of course after the 23 years the majority of your bonds would be at least face value. If you look at the 3rd issue date-01/1992, after 16 years and 3 months the value of this $500 bond, which you gave $250 for is worth $572.40. And more than doubled what you paid.
This is just a couple of suggestions for saving for retirement. There are many ways, but the main thing is make it happen!