Is my nest egg enough?

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This may be a bit off topic for me but this is a subject of great concern and interest. I continually come across people who in their later years are finding themselves in a financial position where they have no savings, big debts and nothing planned for their retirement years and are now looking for employment to get by and make a living.

To make matters more interesting, there are those who predict that in the not too distant future the economy in the US will be in trouble from a big stock market crash and trouble with the US dollar. Be that as it may, I think it is only prudent to plan ahead and do whatever is necessary to secure one's future against any possible economic calamity as well as simply having enough money to live on during retirement years without having to work.

That begs the question: "Have you saved enough to retire above the poverty line?" Whether you are an employee, self-employed or a business owner, an adequate nest egg will be needed to retire. Planning for the financial needs for retirement is likely the biggest investment that you will make.

To get the best return out of an investment requires a plan. The longer you take to start the plan the steeper the mountain becomes. Even small amounts compounded (e.g. interest on interest) over a period of time become much larger amounts.

There are several sources of retirement income including:

1. Continue working. This, of course, only works if you are healthy and can do the work. Wouldn't it be nicer to not have to worry about working and spending the time on your own interests?

2. Social security - requires no plan but will likely not be adequate. In 40 years there will be multi millions of baby boomers. You do the math.

3. Retirement plans and pension plans

4. Investments including savings accounts, stocks, bonds, real estate, sale of a business, etc.

5. Living with your relatives but only if they live in Beverly Hills or Hawaii.

So, options 3 & 4 require some planning or your only option will be working. The length of time to retirement is a major consideration when creating a plan. A 25 year old has a longer time to create that nest egg. It is beyond the scope of this article to discuss all the various options in detail but here is a quick summary of the more popular ones.

• Savings accounts. Simply build up a savings account at a bank, trust company or credit union. Good source if you have the time.
• Company pension plans. The employer contributes to a plan, which begins payments when the employee retires. These are not as popular now as companies struggle to keep up with the pension funding obligations. If a company goes bankrupt it could wipe out your pension. The "old" days of an employee for life are long over.
• IRA (Individual Retirement Accounts).You pay into a fund each year, get a tax deduction while in the higher tax brackets(depending on the type of IRA); then you take it out when you retire and pay the taxes then at lower tax bracket(again depending on the type of IRA). May work well if you have the time and have modest retirement needs.
• 401(k) plans. (The 401k refers to a section in the IRS code.) Employers typically offer employees a plan with options where the employer also may contribute to your account. The employee is not taxed on the income until it is withdrawn and it grows tax free in the account. It is your plan and you can take it with you.
• Real estate. Real estate. There are basically two investment techniques: buying low and selling high (called flipping) to build up cash or buying rental properties for long term growth and continuous monthly cash flow. Real estate can be an excellent investment vehicle for long term security.
• Building a business. This is one of the favorite ones of entrepreneurs. They spend years or tens of years building a business that can be passed to children, sold to junior partners or sold outright to a larger company.
• Investment in coins. . Rare coins have a number of advantages including: high portability, require no maintenance and the transactions are generally unregulated. Some research and education is helpful before investing in coins.

There are lots of complexities about these plans so be sure to consult a financial advisor. It is also good to have a mentor for real estate or the growing-a-business strategy. What's important is that you become familiar with all the various options available through research and education. We can recommend sources of information if you are interested.

Here are some tips that I think are workable:

1. Create a plan. The longer you wait to create a plan, the harder it becomes. You have few options at age 65 but nearly unlimited ones at age 25.
2. Create a budget and include an amount for retirement. If you are an employee check out what options your employer offers. A regular deduction from your paycheck may hurt in the beginning but it will systematically build your nest egg. You have to get your own financial affairs in order. If you are having trouble making ends meet and set aside money towards your future, stop for a moment and get educated on how to handle personal finances. It can be done and life will be easier.
3. Make it a habit to put money aside. Set up 3 piggybanks. One for Savings, one for Investments and one for Tithing. Put any amount of money in each of these every day. Make it a ruthless habit. At the end of the month, send it off to the bank, investment account and to your favorite charity. It is important to also give to others as part of your plan.
4. Think like an investor. Invest your money in things that will make money for you, rather than just spending it all on "doodads". Get to a point where your assets work for you, rather than you working for money.
5. Be informed. There are unlimited amounts of information available in books, CD's, TV shows, magazines and now the Internet, which seems to have an endless supply of useful data and resources.
6. Whether an employee or an entrepreneur, make yourself valuable by working hard and continually learning to improve your abilities.
7. Each day increase your wealth and business expertise.

Set the stage now for that bright and rosy future by creating a workable financial plan that will get you where you want to go. Take that first important step to financial freedom.

Why not have the goose and the golden egg!

Call Mya today at 1-888-773-0014 or e-mail at mya@thepeoplelink.com

Reprint rights. This newsletter may be reprinted providing the following resource box is left intact: Mya Borgman is the Founder and President of The People Link, a professional recruitment agency with a unique personal touch. We are committed to finding the ideal job match between employers and job seekers. Take advantage of our hard earned experience gained with the successful placement of over 1,000 candidates. The most frequently filled positions include Finance, Sales Managers, Executive Placements, Administrative Assistants and Executive Secretaries. Inquiries from both employers and job seekers are held in absolute confidence and treated with discretion. Mya can be reached at (818) 890-9998 or by email at mya@thepeoplelink.com. Mailing address: PO Box 921316, Sylmar, CA 91392. © Copyright 2004-2005 Mya Borgman. All Rights Reserved.
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