Should You Crack Your Retirement Nest Egg?

More and more, people are considering a raid on their retirement funds. Some to pay off accumulated debt, and others because they cannot stand the psychological impact of watching the value of their retirement funds shrink
Sadly, many feel driven by necessity due to the dismal economy and its affect on the job market. In many cases using retirement funds in an attempt to postpone foreclosure, or to pay down personal debt is only a temporary solution, and the problem is compounded when tax time arrives.
Consider this: Retirement accounts are protected in case of bankruptcy or other debt collection efforts.
For those affected by volatility in the markets, resist the urge to lock in your losses by withdrawing retirement funds.
Consider this: Leave the funds in your retirement account and reallocate them to less volatile money markets or high-grade bonds. Remember, if you don't have time for the market to recover, you certainly don't have time to start saving all over again for retirement.
Retirement accounts funded with pre-tax dollars will be taxed on withdrawal. A hardship withdrawal will not exempt you from the tax, or the ten percent penalty if you are under age 59-1/2. The penalty exists to discourage using retirement plan funds for any purposes other than retirement.
Consider this: what will be your standard of living in retirement if all you have to depend on is Social Security?
When consulting with a financial advisor, be sure to explain what your concerns are and the reason for your request. In addition, you should consult a knowledgeable tax professional about possible tax consequences before making any irreversible decisions on this matter.
Consider this: Are there other options with less overall financial impact? Ask about loans from 401k/403b, penalty free distribution if you experience separation from service (for any reason) at 55 and over, or a 72t distribution.
If you still feel that raiding your retirement account is your only option have the fund manager withhold twenty percent (or more depending on your tax bracket) for the IRS, plus an additional ten percent if you are under age 59-1/2. This should cover some, or all, of the tax and early withdrawal penalty come tax time.



Heidi Herne is the sole proprietor of Green-eology.com, an online shopping portal and blog. Go Green! Pass It On! She is a Partner in an IT Consulting Firm, a freelance writer, a website author, an online business coach, and a Senior Tax Advisor with a leading US Tax Firm. The views expressed here do not reflect on any affiliations of the author.

The Nest Egg Myth: How the Rules to the Game Have Changed

Few would disagree that the nest egg (long-term) savings concept is as American as Mom and apple pie. So how could it be a myth? Actually, it was not until about 10-20 years ago. But as President Obama recently said in his 2011 State of the Union speech, "the rules to the game have changed".
"Nest Egg:A special sum of money saved or invested for one specific future purpose. Examples of the purposes for which nest eggs are usually intended include retirement, education, and even entertainment (vacations and cruises). The main idea is that the money in the nest egg shouldn't be touched except for the purpose for which you saved it."-Investotopia.com
The American Institute for Economic Research released (January 2009) their cost of living research, which monitors the cost of living over time. Since 1990 the average American is paying 248 percent more for health care and 157 percent more for oranges and tangerines. The good news is your money is going further when it comes to technology. Computer prices have dropped more than 89 percent since 1990. Television prices are down by 83 percent and children's toys have dropped 43 percent. The Institute's report concludes: "No matter what the politicians and monetary authorities say, the buying power of the dollar continues to decrease".
Despite an economic landscape completely unrecognizable from just 30 years ago, the financial services industry still beats the drum for long-term savings and investments as the exclusive retirement solution or best supplementation thereof. Never mind today's near-extinction of company pensions combined with a debt-based currency and subsequent exponential rise in the cost of living topped off with a dollop of low-paying, part-time or no work.
Problem is... there's no money in truth.
It's pretty much business as usual. Yet how could anyone figure that last century's strategies might apply to the wild-west 21st century economy? The truth is that different times demand strategic revisions of the best ways to build wealth and manage personal finances if to achieve similar financial security.
Trust me, this more than just another good idea.
Back in the good-old-days of pay-as-you-go, company pensions and a dollar worth much more than the 4.5 cents-worth it now purchases, nest eggs made a whole lot of sense to fulfill retirement dreams. But that was then and this is now: Do-it-yourself retirement plans, increased credit use, mounting household debt and subsequent issues due to stress tell a different story.
Money simply does not go as far in 2011.
The good news is that those who have seen the writing on the wall choose to take the (personal finance) road less traveled. They rethink traditional strategies and apply more relevant ones even though less conventional and perhaps outside their comfort zones. They believe such strategies will get them safely away from living on the edge and towards financial sustainability. Plus, they are determined to avoid the usual-suspects of personal problems brought on by a sinking personal economy; (marriage, family, work performance, substance abuse and mental and emotional health).
Change the sequence.
Relevant strategies, based on and redesigned to reflect the typically omitted relevant data about money as debt, empower everyday people. How so?They shift the emphasis away from doing whatever it takes to enlarge the nest egg to the importance of first putting the focus on doing whatever it takes to establish financial stability in the present and how to maintain it.Otherwise, important decisions made by desperate and stressed-out people easily lead to more of the same. Going forward with stability provides a foundation for sound and creative retirement strategies.
Certainly nest-eggs have their place in one's long-term financial plan but because they are hatched from debt-based money they also lose their mojo over time. Inflation and its subsequent cost-of-living ultimately take their toll. Those, whose dreams have rested heavily on a cashed-out nest egg, face the ever-increasing cruel reality of lost purchasing power.
To first seek stability reflects the actions of informed individuals and families who refuse to wait for increased value-erosion of their dollars. Yet as creatures of habit educated by the financial services industry, it's hard for most people to wrap their heads around the fact that their money is worth more today than it will be tomorrow and especially, after years parked in a securities investment. Debt-based money is time sensitive because the system-design used in central banking recognizes increasing debt as the measure of success.
Stability is the key to financial sustainability.
Maybe the current food and gasoline prices going through the roof to bleed budgets will provide a wake-up call. These higher prices remind us that the official government inflation rate (Consumer Price Index CPI) does not include food, energy or housing prices in its calculations to make the CPI erroneously low and deceptive when used to plan budgets.
While most understand how important it is to update their computer's software to stay in the game, far fewer consider how essential it is to update the way they think about and deal with their money. Why is it that humans tend to pay attention to something only once it directly hurts them? Debt-based money will continue to lose value. Just as sure as night follows day and a snowball rolling down a hill grows larger, currency's value will erode at an accelerating pace as interest compounds.



Susan Boskey is an alternative financial consultant and author of The Quality Life Plan: 7 Steps to Uncommon Financial Security. Her book goes where no other personal finance book has dared to go. It not only exposes the systemic-root cause of the 2008-09 economic meltdown but perhaps more importantly, provides critical strategies for everyday people to turn the tide and build real wealth.
As millions struggle to find an honest way off the vicious cycle of credit and debt, frugality measures and debt-consolidation offer some relief but not enough. For families to achieve similar financial security and well-being as in times past, an entirely new personal-finance model is called for. The Quality Life Plan offers exactly that by providing strategies using a big-picture perspective about money and wealth. Without the big picture, strategies alone are proving to be insufficient. Those yearning for a quality life of simplicity, creativity and financial sustainability find practical answers via the book's alternative approach and user-friendly workbook format complete with recommended action-steps. There's no turning back once you're in the know.
Sign up for a free eCourse to learn more at http://www.AlternativeFinancialNow.com where you can also purchase the book.

Using a Home Equity Loan to Feather Your Retirement Nest and Protect Your Nest Egg

Diversification and risk management is one of the keys to long-term personal wealth management and successful retirement planning. In Canada, as in the United States, the equity that homeowners build up as they pay off their Canadian mortgages represents a key asset - if not the key asset - in their personal wealth portfolio.
Recent turmoil in the U.S. credit and real estate markets, with one in 10 homes having been in some phase of the foreclosure process during the last year, justifiably has Americans close to retirement age - the leading edge of the Baby Boom - nervously eyeing what they see as their retirement nest-egg and hoping that it doesn't slip from a premium Grade "A" Jumbo double-yolker to a Grade "A" small, or worse. The 'Henny-Penny' type of homeowner, whether in Canada or the US. - those who are sure that "the sky is falling" at the first drop of rain - may wish to consider moving equity they have watched build up over time as they paid down their mortgage to more diversified holdings. In Canada, unlike the United States, where interest paid on a home mortgage is NOT tax-deductible - as it is in the U.S. - the nervous homeowner who shifts some of the equity that has built up in his or her home to a conservative, balanced investment portfolio not only diversifies and gains an umbreella if stormy times lay ahead in Canada's real estate market, but also gains a tax-advantage. The interest paid on borrowed funds that are secured against the equity in your home and used for investment purposes is tax-deductible in Canada, unlike the interest you have paid on your home mortgage to build that equity in the first place.
Part of the speculative impulse that propelled the U.S. real estate markets into the murky waters they now find themselves in was fueled by the tax advantage homeowners could gain by writing off the interest on their mortgage payments - aside, of course, from their overly lax lending policies and regulatory oversight that ended in swaths of creditor red ink as the market for sub-prime mortgages and overtly speculative 'Ninja' mortgages ('No Income, No Job or Assets') overheated and then boiled over. The bigger the mortgage, the bigger the write-off against your employment and investment income. This was particularly attractive for business owners, middle-class investors and the self-employed making big money in the Clinton years, only to see the economy tank at the end of George Bush's presidency - precisely the newly affluent who along with blue-collar manufacturing worker who are particularly vulnerable if the markets for goods and services go south - or overseas.
Now, as the big bulge of Baby Boomers gets set to retire, both in Canada and the United States, it is becoming clear that the long-term growth oriented investment practices and strategies that have feathered retirement nests on both sides of the border may not be the best strategies to pursue once you are in the nest, atop the egg and incubating it. The equity in a home - particularly if you have managed to pay off that home, as most but not all homeowners will do by the time the timing for retirement is ripe - is a significant asset that needs to be protected. Leveraging that financial asset you have quietly built up over time into a secured, safe and stable income stream in retirement takes as much forethought and planning as it did to accumulate your nest egg in the first place.
Remember, a properly diversified investment portfolio will almost always weather a downturn in the economy better than an undiversified one will, particularly if one or two sectors are particularly challenged by market conditions and trends. Ensuring the equity assets you built up in a home as careers were pursued and families were raised is critical to your wealth management and retirement planning strategies once the fledglings have left the nest. Utilizing the equity you have built up in your home to get an additional investment stream up and working in your favour by essentially securitizing your home equity through a home equity loan may be one of the best options there is for doing so - particularly in Canada where this gives the homeowner/investor access to tax advantages long enjoyed by our counterparts down south.
Of course, as with any investment strategy, do the research. Talking to an experienced investment planner and Canadian mortgage broker can help you determine whether now is the time to diversify the nest egg of equity you have built up in your home. Then, and only then, can you get back to dreaming of that snug, retirement bird house in the Kawarthas, Kananaskis or Kennebec.



For more information on home equity loans, or to see if you qualify for a home equity loan that will allow you to diversify and protect the equity you have built up in your home visit an experienced and trusted Canadian mortgage broker at www.candianmortgagesinc.ca or call 1-888-465-1432 to speak to an experienced broker agent.

When Your Nest Egg Is Too Small: How to Make Last Minute Changes to Save Extra Money for Retirement

So you've put your kids through school. Genuinely, congratulations...it's no easy feat. But now that it's time to relax and focus on you, you realize: your nest egg is much smaller than it should be. You were so focused on the kids that you forgot to save for yourself, and with retirement less than a decade away you can't help but get a bead of sweat on your brow.
What will you do?
No, you don't need a Christmas miracle to bulk up that nest egg from quail- to ostrich-sized. You just need to think smart and act fast. A retirement wealth advisor can help you make the right changes to your stock portfolio and get you on the right track for last minute retirement investing.
One reality is that to save a lot of money in a short time is that you will need to cut spending. Financial planners are great at helping you find corners that can be cut. Each dollar saved in your daily life is a dollar put into the stock market. If you and your financial advisors work together well, those dollars could double, quadruple... you get the idea. Cut down on spending as much as you can, and put each of those dollars into some sort of stock, bond or mutual fund as soon as possible.
That said, you want to be sure not to get overly aggressive with stocks. As so many retirement financial planners know, the gut feeling of a fearful investor is to act fast (and often without a full understanding of their action) or to sit on what money they do have (and lose out on potential opportunities). It's in cases like this where having a financial planner is most helpful; having a person with a clear, concise mind lay out possible options for you is much better than risking everything on a personal whim.



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Joy Compass: How To Make Your Retirement The Treasure Of Your Life

Books And Seminars On Retirement. Includes Topics Related To Quality Of Life In Retirement, E.g. Managing Change, Entrepreneurship, Etc.

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How Would a High Five vs. High Three Salary Calculation Affect a CSRS or FERS Annuity?

With the deficit "super committee" hard at work to figure out how to trim the budget, the issue of high five vs. high three average salary calculation to determine federal retirement annuities has hit the front lines again. If the proposed high-five calculation passes, how would it change the average federal employee's retirement benefits?



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What to Consider During the 2011 Federal Benefits Open Season

Many factors affect people's retirement decisions. Social Security clearly plays an important role. Majority of people retire at ages 62 and 65. Greater wealth tends to lead to earlier retirement, since wealthier individuals can essentially "purchase" additional leisure. With the open season running Nov.14 - Dec. 12, the Office of Personnel Management has listed three basic questions to ask yourself in this fact sheet



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