Financial Planning for Tomorrow.

Financial Planning

General Retirement Planning

What you are making right now, today may be enough for the present. However, you’ll need to plan ahead for a secure retirement and the ability to maintain your lifestyle. First, you need to determine your financial goals — that is, how much do you need after your retire? Once you’ve determined that – how should you invest to meet those goals? The possibilities are practically endless so close examination of your options is essential. Here are a few items to consider. Passbook Savings: Most people are familiar with this. They are insured by the federal government, have set interest rates, usually require no minimum deposit and can be added to and withdrawn from whenever you want. Certificates of Deposit or CD’s come in various amounts and vary from one week to two years. They usually pay high interest rates however, there is penalty for early withdrawals. Individual Retirement Accounts or IRAs, vary on minimum deposit requirements; have maximum limits and in some cases, you can deduct deposit amounts from taxable income. Mutual Fund accounts allow flexibility but you’ll need to determine your income growth needs in order to choose the right type for you. Bond Funds let you buy a diversified portfolio of bonds with varying deposit and maturity requirements. Stock Funds let you diversity your stock holdings, have minimum investment requirements and respond according to the stock market price changes. Treasury Bills are available in $10,000 increments for six month periods and are not subject to state and local income taxes. Take care in choosing your investment avenue. And the best way to begin is to seek out professional assistance.

Retirement Income Providers

What will be your source of income once you retire? Will it be employer funded retirement plan, social security or individual retirement or IRA plans? In reality, it’s best to plan on income from at least two if not all three of these sources to help ensure a secure retirement. Employer funded retirement plans usually consist of pension plans, profit-sharing or a combination of both. Pension plans typically include employee eligibility qualifications and guarantee a certain income upon retirement. Profit-sharing plans are different by the fact that the employer’s contribution to this plan is determined upon its profits. Social security is the retirement plan provided by the government. Social security provides monthly payments to qualified persons. These funds have been made available through contributions made by both the employee and employer by paying social security taxes. Individual retirement plans or IRAs allow you to make annual contributions to the plan. These funds come from your salary, wages or self-employment income — alimony can also be used. An IRA shelters your contributions from current income taxes. Contributions need to be made each year by your tax-filling due date and there is substantial penalty for early withdrawal. Take care in choosing your investments and remember that it’s best to seek out professional advice when it comes to planning your retirement.

How Much is Enough for Retirement?

There is no set amount. Each person needs to decide for themselves how much will be enough. First, decide on how much you’ll need to live on. Take into account what current costs are for housing, food, clothing, transportation, travel, entertainment, etc. You’ll need to make an “educated” guess on what those costs may be in the future — when you retire. Your life will not be the same at that time. You’ll probably need less. For example: Your mortgage will more than likely be paid off, so your housing expense will be reduced. You may not need two cars anymore; your clothing expenses may go down if you’re not having to dress up for work. Do you plan to travel during retirement? If so, your travel expenses may go up. You’ll want to project at least a 4% a year increase on cost for these expenses to account for inflation. Once you’ve figured your expenses, you’ll need to project your income during retirement. Use the Rule of 72 to help you determine the growth of your portfolio. Divide whatever a conservative guest of your interest return per year. For example: 10% per year. Then divide 72 by 10. 7.2 is how long it will take to double your money. The only problem is that you don’t know how long you’ll live. The longer you live, the more money you need to estimate beyond what you expect your lifespan will be. Take care in choosing your investments and remember that it’s best to seek out professional advice when it comes to planning your retirement.

Getting Financial Aid from Your College

Assistance programs sponsored and administered by colleges and universities are an important source of financial aid. College-sponsored aid comes from two main sources: tuition revenues and contributions from private donors. Some scholarships and grants are based on demonstrated need. Others are awarded based on various pre-determined criteria other than or included with need, such as academic performance, field of study, special talents or abilities. Many campuses also offer student employment programs to help supplement finances through the Federal Work Study Program. Many times, these employment opportunities are offered based on skills, not necessarily on financial need. For example: Laboratory assistants, business office aide or dorm advisor. Short term and emergency loans are typically available to all students. Repayment however is usually made during the academic year with low interest or no interest. Since qualifications and requirements vary greatly, it’s best for you to get information directly from the college being considered.

What is EFC

EFC means “expected family contribution”. It’s a financial term which describes what students and/or their parents expect to contribute towards college education. Planning in advance is especially important when you already know that affording college may pose a financial burden. When being considered for financial aid, there are formulas that are used to determine your EFC. The reason for the formulas is to estimate what is expected of you based on other families with similar financial circumstances and what the proportions will be from families that have stronger or weaker financial circumstances. EFC also relates to financial aid eligibility. The EFC amount is subtracted from the cost of attendance at a particular college which results in your “demonstrated financial need”. Your EFC won’t change from college to college, but the determined “need” will vary based on the cost of the chosen college. In other words, your determined financial need may be greater at a higher priced college and lower at a lower priced college. So, what is the best way to meet your EFC? Start saving early, or borrow it all when the time comes. You can even save some and borrow some. But the key is to have a plan on how you want to handle it.

What Types and Sources of Financial Aid is Available

Many types of financial aid programs are available. Here are some of the most common: Grant or scholarships are aid that does not have to be repaid. Loans must be repaid but typically carry low interest rates. Repayment usually begins after you graduate or leave college. Student employment is a program where the college finds you work or you find it yourself and is funded through a financial aid program. Sources of financial aid include but are not limited to the following: Institutional Funding is usually available directly from the college. Many have their own scholarships and grants plus loan and work programs. These are usually funded through endowments and planned budgets. Federal financial programs may include campus based aid, federal Pell grants, federal Stafford loans, and federal parent loans for undergraduate students. Most states also have programs that offer scholarships and grants. Ask your guidance counselor for assistance. You may also find funding available through your local community and community groups such as community agencies, foundations, corporations, unions, religious organizations, clubs, civic, cultural and fraternal groups. Again, your guidance counselor can assist you. You may end up with one or a wide combination of these financial aid programs, so don’t let the cost of a particular college deter you. You can probably afford to go where you want if you fully explore your financial aid options.

Financial Planners

Financial planners are a new type of financial institution that’s emerged in recent years, and with their swift rise in the profession, have come an equally swift rise in abuse. Laws governing financial planners vary from state to state. Virtually anyone can call himself a financial planner with our without credentials, education or scruples. Luckily, more and more universities are offering programs in financial planning. The Institute of Certified Financial Planners based in Denver offers a course leading to a certified financial planner designation. Still, it’s up to you, the consumer, to research the education and licensure of any financial planner you may choose. Look at education, licensure, and ask to speak to other clients. A good financial planner will welcome you to look at his or her background. A bad one may not. Choose a financial planner with care.

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