Free-Reprint Article Written by: Daniel Lamaute See Terms of Reprint Below.
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Less than 1 out of 5 workers felt very confident about having enough money for a comfortable retirement, according to the April 2008, EBRI Retirement Confidence Survey. And with good reasons, inflation is zooming at the same time that asset values are flagging. Additional Article Information: =============================== 646 Words; formatted to 65 Characters per Line Distribution Date and Time: 2008-05-08 11:12:00 Written By: Daniel Lamaute Copyright: 2008 Contact Email: mailto:[EMAIL PROTECTED] For more free-reprint articles by Daniel Lamaute, please visit: http://www.thePhantomWriters.com/recent/author/daniel-lamaute.html ============================================= Special Notice For Publishers and Webmasters: ============================================= If you use this article on your website or in your ezine, We Want To Know About It. Use the following URL to let us know where you have used this article, and we will include a link to your website on thePhantomWriters.com: http://thephantomwriters.com/notify.php?id=6017&p=load HTML Copy-and-Paste and TEXT Copy-and-Paste Versions Of Article Are Available at: http://thePhantomWriters.com/free_content/db/l/in-fear-of-retirement.shtml#get_code --------------------------------------------------------------------- In Fear of Retirement Copyright (c) 2008 Daniel Lamaute Lamaute Capital http://www.InvestSafe.com Many baby boomers are staring at retirement like a deer caught on oncoming headlights. They are not sure what to do or what else to do. They fear that whatever they have in savings just might not be enough. Less than 1 out of 5 workers felt very confident about having enough money for a comfortable retirement, according to the April 2008, EBRI Retirement Confidence Survey. And with good reasons, inflation is zooming at the same time that asset values are flagging. By far the biggest assets of the Baby Boomers are the equity in their house and the balance in their 401(k) plan. Both of those have been going down lately. The median house price is already down 13% from last year and some like Goldman Sachs think that prices could fall by 30%, wiping out the equity for million of homeowners. Meanwhile employees are growing more skeptical that their 401(k) will even keep up with inflation. According the Financial Times, between March 10, 2000 and January 31, 2008, the average annual return from the S&P 500 was 1.52%. That's nearly eight years of diminutive return on stocks - so much for the hypothetical 8% average projected stockmarket return widely used by financial planners. Is this current slowdown different from other slowdowns? Will the economy recover in short order? We dont know, because several aspects of this slowdown are unique in historical context that make the situation unnerving. While the economy will find a new equilibrium and stabilize eventually, for Baby boomers the timing of the recovery and duration of this slowdown are critical to their ultimate financial well being. The first of the Baby Boomers turn 62 this year. About 10,000 per day will reach that age for the next two decades. Clearly those around 60 have fewer options and chances to recover from a bad hit on their assets than those in their 30s and 40s. There are several steps Baby Boomers can take to protect their financial standing. One of those steps is to reduce their debt, especially debt from high interest rate credit cards. Many cards charge anywhere from 20% to 30% interest on credit balances. That means that an item can end up costing more to finance than to purchase. For example, an owner pays $5,000 by credit card to replace a leaky roof. By paying $100/mo at 21% interest it will take 119 months to pay off that debt, for a total cost for the repair of $11,900, ($5,000 to the contractor and $6,900 to the bank). It is better to pay with cash if available, or to use credit with lower interest. Unfortunately, with declining home prices low interest rate equity loans are getting harder to obtain. Another source of credit could be a 401(k) loan. Thats because with a 401K loan: * There are no taxes and penalty on early withdrawal as long as the loan is repaid on time according to the loan terms. * The 401(k) loan is set as low as prime rate, recently at 5 1/4%, is fixed for the 5 year normal term of a 401(k) loan. * The interest paid on a 401(k) loan is credited to the 401(k) account - so borrowers pay interest to themselves, not to a bank or other lender. Employees should ask their employer if their 401(k) plan allows loans. Those who are self-employed, such as independent contractors and individuals with their own business (part-time or full-time) can set up their own Self-employed 401k with a loan feature. One can transfer funds from IRAs, 401k from a previous employer, SEP plan or other qualified retirement funds to a Self-employed 401(k) and borrow up to a maximum of $50,000 or 50% of the account balance, whichever is less. Defaults on 401(k) loans are subject to taxes and a possible 10 percent early withdrawal penalty on any outstanding 401(k) loan balance. --------------------------------------------------------------------- By Daniel Lamaute, Lamaute Capital, Inc., http://www.InvestSafe.com Lamaute Capital is an investment firm that specializes in setting up retirement plans for small business owners and non-profit organizations. --- END ARTICLE --- Get HTML or TEXT Copy-and-Paste Versions Of This Article at: http://thePhantomWriters.com/free_content/db/l/in-fear-of-retirement.shtml#get_code ..................................... 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