Category: Retire Wealthy
Retirement Planning Checklist
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
Presenter 1>> Welcome to the CalPERS video Retirement Planning Checklist. In this session, we’re going to discuss a list of things you should be taking care of as you get ready for retirement. Before we get to the main presentation, let’s take care of some housekeeping items. To provide you with a future reference, and make your note taking easier, we’ve provided a presentation learning guide. You’ll see the link to the learning guide in the YouTube description box. Please note that due the large number of participants, although the chat feature is active, we won’t be able to respond to member questions during this presentation. If you have any questions, please contact us directly. Here’s the agenda for today’s presentation. We’ll start with things you’ll want to do one or more years away from retirement, and gradually work our way up to retirement and beyond. As we go through today’s presentation, we will reference several CalPERS forms and publications that you may be interested in, so here’s where you can find them.
On our homepage at CalPERS.ca.gov, you’ll find the Forms & Publications column. Select the View All link at the bottom of the list to access a complete list of forms and publications which are shown in alphabetical order. You can also filter by whether you’re an active member or a retiree. One of the publications you’ll want to review as you prepare for your retirement is Planning Your Service Retirement, Publication 1. It has a great deal of good information, including a checklist similar to what we’ll be reviewing here today. There is also a Retirement Planning Checklist on our website. Select the Active Members tab, then find the Resources column and select the Retirement Planning Checklist link. Let’s start by looking at what you need to do about one or more years prior to your retirement. We encourage you to watch our Planning Your Financial Future video series available on the CalPERS YouTube channel. Financial security helps ensure you have enough money for the retirement lifestyle you want. Use our Planning Your Financial Future Checklist as a guide through this video series.
For those who qualify for Social Security, visit our Social Security and Your CalPERS Pension page to learn how your Social Security benefits may be affected by your CalPERS retirement. If you haven’t already done so, sign up for a mySocial Security account at www.ssa.gov/myaccount. Here you can access your statement, review estimates of future Social Security retirement benefits, and more. The service credit you earn is part of the calculation for your retirement benefit. Review your most recent account information in myCalPERS to make sure your service credit is accurate. You can also find a link to your most recent Annual Member Statement here. If you are a year or more away from retirement, use the Retirement Estimate Calculator in your myCalPERS account to estimate the amount of your pension and begin determining when you want to retire. It’s important to be prepared when you decide to take the big step into retirement.
To get answers to most of your retirement questions, the Planning Your Retirement class is a great one to take if you are a year or even further from retirement. Sign into myCalPERS and select Classes under the Education tab to enroll. If you think you may be eligible to purchase service credit, the first thing you should do is review the appropriate publication which provides the types of service credit available, eligibility for each type, and what is needed to submit the request. The publications are A Guide to Your CalPERS Service Credit Purchase Options, or for military time, the Military Service Credit Options publication. The publications can be found on our website. To find the cost of any available service credit purchases. First, log in to myCalPERS, go to the Retirement tab, select Service Credit Purchase, followed by the Search for Purchase Options button. You can also find the Service Credit Purchase link in the service credit box on the myCalPERS home page. Next, complete a series of questions to help determine which service credit purchase types you may be eligible for.
Finally, the system will return the cost for any available service credit purchase options, at which point you can begin the purchase process if you choose to. If you have a community property claim on your retirement account because of a legal separation or divorce, you must provide us with a copy of an acceptable court order that resolves the claim. It’s important to understand that a hold is placed on your account and retirement benefits cannot be paid until your community property issue is resolved. However, you shouldn’t wait to submit your application to retire.
Waiting may affect the retirement date and other benefits. If you’ve been awarded a separate nonmember account, you may be eligible to retire and receive a monthly benefit for this as well. For more information, review our publication A Guide to CalPERS Community Property. You also may want to contact a financial planner for assistance with coordinating your CalPERS benefits with you overall retirement planning. Please remember that CalPERS does not provide financial planning services. Next is nine months prior to retirement. If you're also a member of another California retirement system other than CalPERS, there are steps you need to take to ensure you receive all the benefits you’ve earned from each system. Reciprocity refers to an agreement between CalPERS and many other California public retirement systems that allow members to move from one retirement system to another within a specified time limit and possibly retain some valuable benefit rights such as your highest average pay in the calculation of your retirement. Read our publication, When You Change Retirement Systems, for more information. If you have Social Security or other non-CalPERS income coming later after retirement, you might want to temporarily increase your monthly CalPERS income until those benefits begin. See if a temporary annuity is right for you by reviewing our temporary annuity publication. Moving on to five to six months before you retire.
You should become familiar with the information needed to apply for retirement in the publication A Guide to Completing Your CalPERS Service Retirement Election Application, which is Publication 43. Begin to gather and make copies of the required documents you’ll need, such as a marriage license, or a birth certificate for a lifetime beneficiary. Refer to the Service Retirement Election Application for a complete list of required documents. If you apply for retirement online, you’ll be able to upload your documents into the system. If you choose to mail in the documents, only send us copies, never send originals. Always include your Social Security number or CalPERS ID on every document you submit. If you don’t know your CalPERS ID number, you can find it in your myCalPERS account under the My Account tab in the Profile section. Although an appointment isn’t required, if after taking the Planning Your Retirement class, you have specific questions about your own situation that weren’t answered during the class, you can schedule an appointment by logging on to your myCalPERS account. You’ll find the Appointments link under the Education Resources tab. You determine how you want your taxes withheld.
We can’t offer tax advice so you should check with your tax consultant or attorney to find out about the taxability of your overall retirement income. You can also find more information about your federal taxes on the Internal Revenue Service website at www.irs.gov. For your California taxes, you can go to the Franchise Tax Board website at www.ftb.ca.gov. If you plan on moving out of state, you are not required to pay California State taxes. However, you should check with the state you’re moving to find out what taxes they require and how they are to be paid.
You cannot have out-of-state taxes taken out of your retirement check. And then three to four months prior to retirement. You can apply for service retirement online, in person, or by mail. You can submit your retirement application no more than 120 days prior to your retirement. To file electronically, log in to myCalPERS. Go to the Retirement tab, select Apply for Retirement, and follow the steps for submitting your application and required documents online to CalPERS. We also have a video on our YouTube channel titled Your Online Service Retirement Application that will take you through the steps for completing and submitting your retirement application online. There are a number of benefits to filing for retirement electronically. Easily and securely submit your application at your convenience, 24 hours a day. You can leave the online application and return at any point to complete it. Prior to submission, you can review and edit your information.
You’ll receive confirmation that your application has been successfully submitted. You can upload additional required documents online. And, you can use the Electronic Signature to eliminate the notary requirement for the member signature. If you are unable or do not wish to complete your Service Retirement application online, you can submit the paper application at one of our regional office or by mail. If you bring your application to one of our Regional Offices, both you and your spouse’s or domestic partner's signatures can be witnessed by one of our representatives. If you choose to mail it in, you must have you and your spouse or domestic partners signatures notarized. If you’d like assistance filling out your application, you can enroll in our class Your Retirement Application and Beyond. This class is available online through your myCalPERS account and is also taught by our regional office team members in virtual classes, and also in-person throughout the state. Find the next available instructor-led class in your area by logging in to your myCalPERS account or by calling us.
Be sure you keep a copy of all forms and supporting documents for your records and future reference. Apply timely. Any delay in submitting your application could result in a delay of your first retirement check. If you have a deferred compensation plan such as a 401K, 457, or 403b, check with your plan administrator regarding distribution of your funds. Contact your health benefits officer or personnel office to determine your eligibility for continuation of health, dental or vision coverage into retirement. If applicable, check with your credit union, employee organization, insurance plan, or others to see if certain types of payroll deductions can be continued into retirement. So the next question is, what happens after you retire? As soon as your service retirement application is received, CalPERS will generate an Acknowledgment of Service Retirement letter.
This letter will confirm the retirement date you selected, your date of birth, your beneficiary’s date of birth, if applicable, the retirement option you selected, age at retirement, and the retirement formula along with other valuable information. About two weeks prior to your first check being issued, we’ll send you a First Payment Acknowledgement letter providing you with the date of your first retirement check, the gross amount you can expect to receive, and important income tax information. You’ll also receive an Account Detail Information sheet that provides what was included in your retirement calculation based on the payroll and service credit information posted in your account at the time your retirement was calculated. Finally, if you have CalPERS health coverage, you’ll receive two letters. The first letter will notify you that your health benefits as an active employee have been cancelled, and the second letter notifies you that your health coverage as a retiree has been established. You should keep all these letters, along with other CalPERS information you may have, with your important financial papers. If you expect to have any adjustments to your retirement payment, you should allow four to six months for all final payroll to be processed for adjustments.
An example of an adjustment would be a change in service credit or final compensation that was reported after your initial benefit was calculated. If after six months you haven’t received an adjustment that you think you’re due, you should send us a message through your myCalPERS account or give us a call at 888 CalPERS, which is 888-225-7377. You can find a list of mailing and direct deposit dates on our website. If you applied timely, in most cases you should receive your first retirement check around the first part of the month following your retirement date. If you did not retire on the first of the month, your check will cover the period from your retirement date to the end of the month. After that, your check is mailed or direct deposited around the first of the month. This video will stay posted here on YouTube, so you can come back and catch what you might have missed. All our previous videos are also available on our YouTube channel.
You’ll also have access to the link for the learning guide. Our presentation today was intended to provide you information on some steps you should be taking leading up to retirement. Please note that CalPERS is governed by the Public Employees’ Retirement Law. The information in this presentation is general. The Retirement Law is complex and subject to change. If there is a conflict between the law and the information presented in this presentation, all decisions will be based on the law. Later today, you’ll receive an email with a short evaluation. Please answer all the questions as it’s important for us to get your feedback to help us improve these presentations. Thank you for taking time out of your day to attend this presentation and have a great day.
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401K Explained in தமிழ் (US Retirement Series – 1)
Jason 0 Comments Retire Wealthy Retirement Planning
This episode and next few episodes are going to be US specific episodes. All these US specific episodes will have US flag in their thumbnails. Indian audience, feel free to skip these episodes and save your time. US folks, there are 2 main retirement plans in USA. 1. 401K and 2. IRA. We will cover more in detail about IRA in another episode. In this episode, we will cover 401K in detail. Hi. My name is Vijay Mohan. You are watching – Investment Insights. 401K is a retirement plan offered thru employer.
We will not be able to open a 401K account just by ourself like a brokerage account. We can contribute to a 401K, only if it is offered through our employer. Almost all employers offer 401K plan. Very few small companies do not offer 401K. How much can we contribute to a 401K? Each employee can save up to $20,500 per year. If husband and wife both are working, both can contribute $20,500 each. People older than 50 can contribute more – $27,000/year. That is called as "Catch up contribution". Other than our contribution to 401K, many employers match up our contribution up to certain percentage. Let's say that an employer is matching up to 7%. If our salary is $100K, 7% of that would be $7,000. Let's say that we are contributing $20,500 to our 401k and maxing it out. Employer would have matched up the first $7,000 of that $20,500 and would have contributed that $7,000 to our 401K.
So in total, our contribution $20,500 + employer match up contribution $7,000 = $27,500 would have gone into our 401K account. Employer match of $7,000 would not come under the contribution limit of $20,500. This match is over that contribution limit. In this employer match, each employer has a catch called "Vesting Schedule". This vesting schedule defines when that extra amount matched up by the employer is going to actually credit in our account. Let's say that an employer has a vesting schedule of 2 years, then in that 2 years, the match up amount contributed by the employer will be in our account, but not vested. That means, if we leave the job within the 2 years of joining, then we will not get that matched up amount. But after 2 years, that matched up amount will be ours totally, even if we leave the job. Also, after that vesting period of 2 years, all money matched up by the employer will be vested (available) to us immediately. That means, there will not be any restriction over the matched up money after passing 2 years.
The 2 years I am referring here is just an example. It will be different for every employer. So what is the advantage to us from this 401K? The advantage is, we do not have to pay the tax on the amount we are contributing to 401K. But we should pay tax on withdrawal after retirement. What? No tax for the contributed money, but taxed on withdrawal? What benefit does that offer to us? Good question. To understand that, we should know about our tax bracket.
What we are seeing here is 2022 Married Filing Jointly tax bracket. Let's say that our family income is $120,000. We will come under 22% tax bracket. That does not mean that we will be paying 22% tax for the whole $120,000 we earned. First 20,000 of $120,000 will be taxed at 10%. Next 63,000 will be taxed at 12%. Money earned over that will be taxed at 22% tax. So the 22% tax is charged for the top most dollar we made in that year. This is called as Marginal Tax rate. If we add up all the taxes for individual brackets of 10%, 12% and 22%, that comes out to $17,634. This is 14.7% of our total income $120,000. So actually we are paying only 14.7% of our income as tax. This 14.7% is called "Effective Tax Rate". May confuse between marginal tax rate and effective tax rate. Hope it is clear now. So when we contribute $20,500 to our 401K, it comes out of our top most tax bracket. That means, the tax we saved from the contribution of $20,500 is 22%. $4510. If we withdraw the same $20,500 after our retirement, the tax rate for that would be 10%.
Tax saved for contribution is 22%, while money coming out is taxed at 10%. The difference is 12% in our favor. Or in other words, we save tax in marginal tax rate for contribution and we pay effective tax rate while withdrawal. We all know that effective tax rate will be always lower than the marginal tax rate. This is first advantage. Let's check out a sample calculation to understand the next advantage. Let's say that our family income is $120,000. Then federal marginal tax rate is 22%. Let's use Illinois state tax rate – 5%. For 401K contribution, not just the federal tax, we don't have to pay the state tax as well. Let's assume that our 401K will be growing at 8% growth rate.
We are maxing out our 401K contribution every year by contributing 20,500/year. Tax savings from this contribution is 27%. $5535. We are continuing to do this till our retirement for 25 years. By the end of 25 years, our 401K balance would have reached 1 million 600,000 dollars. The $5535 that we saved every year in tax alone would have grown into $437,000. The absolute tax saved is 5355 * 25 = $138,000. The growth from that savings is approximately $300,000. Or in other words, just because we did not pay (deferred) the tax of $138,000, the extra growth we got from that is $300,000. The growth of money by deferring (not paying the tax now) the taxes to pay later is called as "Tax deferred Compounding". This tax deferred compounding is 401K's second advantage. For these 2 advantages, we can contribute to 401K. We should. So far we have seen a regular pretax 401K. There are other flavors of 401K like Roth 401K and After tax 401K. We will dig deeper into that in the next episode. Thank You..
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How is Wealth Management Different at Fragasso?
Jason 0 Comments Retire Wealthy
Our financial advisors are not the sole
source of guidance for their clients, rather the firm participates and provides multiple
experts to support the advisor and the client. The commitment to team collaboration is ingrained
in our culture and process. This structure helps to mitigate any type of competition among our
advisors and more importantly it motivates all team members to assist for the benefit
of our clients and prospective clients. As we evaluate their unique situations each
prospective client with five hundred thousand dollars of investable assets or above receives
a complementary individualized financial plan. Once an advisor has gathered the pertinent
information our advisors and financial planning analyst teams draft an individualized plan. It is
then presented at our Friday morning analytical meetings. Every advisor, analyst, portfolio manager,
department manager and leaders are in attendance. You receive the best thinking of all of our
professionals on a strictly confidential basis. The group examining your plan collectively represents
over 350 years of financial industry experience.
Because we truly operate as a coordinated team
and our advisors are not competing with one another, we have open collaborative discussions
resulting in a comprehensive evaluation and recommendations from the perspective of all areas
of expertise focused on your unique circumstances. Over the years we have meticulously refined
and improved our client experience. This process always begins with a focus on the unique needs,
goals and challenges for each client.
We do not view the client experience as a single event
or something that is haphazard. It encompasses every aspect of the client relationship beginning
with the initial discovery meeting through the delivery of the financial analysis, followed by
individualized investment management strategies and the ongoing financial reviews for years to
come. Every step of the client experience has a singular focus that is helping clients pursue
their goals. These unwavering steps throughout our clients financial journey allow our team to
continually understand and address our clients financial and emotional needs. We are majority
owned by our employees through an employee stock ownership plan, an ESOP, thus our personnel have
a stake in your favorable financial outcomes. Employees contribute ideas, feel empowered and are
invested in the success of the firm. Our uniquely structured firm is comprised of a collaborative
management team consisting of the executive managers and department managers.
Fragasso has a
low staff turnover which translates to a higher level of expertise. You receive elevated client
service across each position within the firm, consistent long-term client advisor
relationships versus an advisor retiring. The ESOP ownership argues against the
firm being bought or closed entirely. A unique part of our client experience is
that our financial advisors welcome the opportunity to collaborate with your other
professional advisors such as your attorney, accountant and banker. The coordinated effort
between key advisors results in your affairs being arranged in true harmony rather than in
a vacuum. For example, your Investment Portfolio can impact your tax planning strategy and we
can proactively address tax loss harvesting. A change in beneficiary impacts your estate
plan from a legal and financial perspective..
Kevin O’Leary: Why Early Retirement Doesn’t Work
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
This whole idea of financial independence retire early doesn't work. Let me tell you why. It happened to me. On the sale of my
first company, I achieved great liquidity and I
thought to myself, "Hey. I'm 36. I can retire now." I retired for three years. I was bored out of my mind. Working is not
just about money. People don't understand this very
often until they stop working. Work defines who you are. It provides a place where
you're social with people. It gives you interaction with people
all day long in an interesting way. It even helps you live longer
and is very, very good for brain health. Staying stimulated is how people
live into their 90s. I'm not kidding. So when am I retiring? Never. Never. I don't know where I'm going
after I'm dead, but I'll be working when I get there too..
Retirement Planning in Your 50s and Beyond
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
Your 50s are an excellent time to get serious
about retirement planning, and that's because at this point in your life, you may have figured
a couple of things out. You might have a decent idea of where you
spend money, what your preferences are, the things you don't care for so much, and you
might also have some financial advantages at this point in life. Perhaps you've paid off a lot of debt maybe. If you had kids, they're out of the house
or almost independent. And you might be in your peak earnings years
because you have gained some expertise and some knowledge in whatever it is you do for
a living, and one big reason to get serious is you might have more money than you've ever
had before saved up so now it really counts. A 10 % loss in the markets, for example, hurts
a lot more than it did when you were 22 years old.
But whether you're just getting started saving
for retirement or you've been doing it for decades there are some important things that
come up in your 50s that can help you pave the way to a smoother retirement down the
road. The first thing to watch for is catch-up contributions,
and this is not the condiment, this is a catch-up contribution that allows you to put extra
into your retirement accounts each year once you reach age 50. The IRS sets maximum limits on how much you
can contribute to those accounts, but at 50, you can do a little bit extra and that helps
to boost what goes into those accounts each year for example in your 401k or 403 b or
governmental 457 you can put in an extra six thousand six hundred dollars per year as a
catch-up contribution on top of the max that you had back when you were 49 years old and
your knees didn't hurt as much.
For traditional and Roth IRAs, for 2022 that
number is a thousand dollars of extra catch-up contributions. Of course, this is assuming that you have
the cash flow to make the maximum contribution and put the catch-up contribution on top of
that, and if you don't, that's okay, it's not feasible for everybody, just do what you
can. But if you are really trying to maximize your
account balances at retirement, those catch ups are a powerful tool. The next thing to do is to look at your Social
Security and pension benefits. It's a good time to start getting a realistic
expectation of what you might get, and that's because you might assume that you're going
to get a lot more or a lot less, but it's really helpful to start figuring out how those
systems work and how much you can expect each month. If you're eligible for Social Security, you'll
want to go through your earnings history and make sure that that is accurate because if
any years are missing you may end up with a smaller monthly retirement benefit.
Your benefit is based on your 35 highest earnings
years, so you want to make sure that those good earning years are in there and that you
don't have any unnecessary zeros in your history. Keep in mind that you may be able to get some
retirement benefits from a former spouse or your current spouse, so if you're widowed
or divorced, for example, you want to research those potential benefits and you might also
be able to get income on your spouse's earnings record if you are still married and there,
are some strategies you'll want to look at as you go through that process. By the way, I'm Justin Pritchard, and i help
people plan for retirement and invest for the future. So, there will be some resources down in the
description below that cover this in more detail and give you some other pointers.
Another smart move is to manage your debts
or make a strategy for them. So, if you have consumer debts like credit
cards for example, you definitely want to plan to eliminate those debts and make sure
that your spending stays within your income limits so that you're not digging yourself
a hole during retirement or as you head towards retirement. But what about so-called "good debts" in retirement? For example, a mortgage. There's a lot of benefit to being debt-free
and not having a mortgage payment when you're in retirement a lot of people really focus
on getting rid of that loan before their retirement date but it's not necessarily the end of the
world to have a mortgage in retirement, and paying it off quickly out of your retirement
funds can cause some problems. As long as you can fit that monthly payment
into your income maybe that's your Social Security, pensions, and some withdrawals from
savings accounts, and you can manage that debt comfortably, then again, it's not the
end of the world, and remember that that loan payment will eventually go away someday which
frees up cash flow for other expenses maybe health care expenses later in life.
Speaking of expenses, how much are you going
to need to spend? Well, that's something to start figuring out
and there are a couple of different ways to do that this video that's going to pop up
above will give you some pointers on that but basically you can look at your spending
today and maybe adjust that for inflation or you might look at an income replacement
ratio and say maybe I just need 80 percent of what I'm earning now that might or might
not be right for you or you can target a certain level of spending such as $50 or $100,000
whatever the case may be, and with those numbers you can set a goal to start heading for once
you have an idea of your spending and your retirement income sources and your assets
then you can run some calculations and again we're setting your expectations so that you
know if you're on track or not and this can alert you to some potential shortfalls or
maybe let you know if you could retire earlier than maybe you expected there are a lot of
helpful online calculators out there they can do a decent job of getting you in the
ballpark but make sure you understand what their limitations might be so they don't necessarily
get super detailed and you might not be able to adjust all of the assumptions but again
you can get some basic ideas of if you're sort of close or if you're way off on what
you expected another good move in your 50s is to refine your investment strategy so up
to this point you may have been doing some great things to get you to the point where
you are you've built up some nice assets but if you've been using high risk strategies
maybe speculating maybe day trading that sort of thing it's time to ask yourself if that's
something that you want to continue doing at this stage in life it is difficult to consistently
get good results with those high risk approaches and you might have more to lose now than you
did previously.
I'm not saying you can't do it or definitely
don't do it but I would say proceed with extreme caution and maybe just say hey I've done a
good job up to this point maybe I'll reevaluate what I'm going to do going forward. At 50 it's time to start thinking about long-term
care if you haven't already been thinking about it there's a 70 percent chance that
you might need some type of long-term care and that might include everything from somebody
helping you out at home maybe this is a loved one assuming you have somebody at home who
is willing and able and remember it could be physically and emotionally difficult and
it might require expertise but it could include somebody helping you out at home who you know
or you going into a skilled nursing facility and paying those higher costs that are associated
with that higher level of care there are several ways to deal with the costs and that might
include a long-term care insurance policy but those are kind of problematic so definitely
look into them but consider some other alternatives as well maybe instead of maybe to supplement
or maybe you just go with insurance but some other options include saving up assets and
earmarking those for a long-term care event or maybe looking at your home equity as a
safety net to cover some of those big expenses that's not necessarily a fun way to spend
your time so one of the other things you can do is envision how you want your retirement
to unfold and this is a really important step that a lot of people skip it's important to
have something to do with yourself once you stop working you might have gotten a lot of
your social engagement a lot of your meaning and some of your identity out of your work
and you might want to not necessarily admit that but for a lot of people that's the case
it's easy to say that the main thing you're looking forward to in retirement is not going
to work but you probably want to have some ideas on how you're going to fill your time
and that way you're going to number one enjoy it more and number two there might be some
real benefits in terms of your mental and physical health if you are retiring to something
as opposed to just retiring from work, so ask yourself how will you fill your days? What are you most excited about and interested
in? What can you do to find some meaning and some
purpose during that time? And who might you spend time with, and what
are your plans for keeping your physical health as good as you can possibly keep it? So, I hope you found that helpful.
If you did, please leave a quick thumbs up,
thank you, and take care..
What Is A Gold IRA And How It Work
Jason 0 Comments Retire Wealthy Why Gold IRA
in a world where Financial uncertainty often clouds The Horizon a gold Ira stands as a beacon of stability it's not just an investment it's a legacy a testament to the enduring value of one of the world's most precious metals with a gold Ira you're not just securing your financial future you're anchoring it in the unyielding strength of gold this is where safety meets Legacy where each golden glint reflect CS your foresight and wisdom in securing what matters most dive into the world of gold IRA and let the Timeless Allure of gold illuminate your path to a secure prosperous future looking for more information with a team dedicated to finding the latest news and information for gold and precious metals IRAs the retired veteran is your one source to help you with your investment Journey don't forget to check them out you can find the link below what is a gold Ira a gold Ira isn't your average retirement account it's a specialized individual retirement account that allows you to hold gold and other precious metals as a qualified retirement investment this can mean physical metals like bullion or coins as well as Securities related to Precious Metals unlike a Trad additional retirement account a gold Ira is held separately offering a distinct way to secure your future however it's comforting to know that many of the rules like contribution limits and distributions are quite similar J to open a gold Ira you'll work with a broker dealer or other custodian they'll guide you through the process from choosing the right metals to understanding the fine details understanding gold IRAs today we're diving into the world of individual retirement accounts or IRAs with a focus on a unique type the gold Ira while you might be familiar with traditional and Roth IRAs gold IRAs offer a distinctive twist they allow you to invest in gold and other precious metals as part of your retirement savings gold IRA stand apart because they require physical ownership of the metals this means they have to be held separately from your standard Ira also known as precious metals IRAs these accounts can be funded with pre-tax dollars like a traditional IRA or post-tax money similar to a Roth IRA the IRS allows self-directed Ira holders to buy bars and coins made from gold or other approved metals like Silver Platinum or Paladium gold IRAs also known as precious metals IRAs can be funded with either pre-tax or after tax money they uniquely involve buying and storing physical gold and require a custodian like a bank or brokerage to manage the account traditional IRA typically involve Investments like stocks and mutual funds but the IRS permits self-directed IRAs to invest in gold bars coins and other approved precious metals like Silver Platinum and Palladium setting up a gold Ira first it's important to know that you can't set up a gold Ira with traditional custodians like regular Brokers they don't handle specialty accounts like gold Ira to begin you'll need to find a specialty custodian or firm these experts are equipped to manage the specific requirements of a gold Ira including the necessary documentation and tax reporting while gold IRAs involve physical gold or precious metals they follow the same rules as traditional IRAs this means adhering to annual contribution limits and regulations for withdrawals so although the Assets in a gold Ira are unique the overall guidelines remain consistent with traditional retirement accounts gold IRA storage when it comes to safeguarding your precious metal Investments understanding the rules is key if you're investing in a gold Ira it's mandatory to store your physical gold in an IRS approved facility this could be a bank or a specialized depository it's important to note that storing these assets at home is not an option types of gold IRAs gold IRAs are available in various types mirroring traditional accounts traditional gold IRAs funded with pre-tax dollars earnings grow tax deferred with taxed withdrawals at retirement Roth gold IRAs funded with after tax money no immediate tax benefit but tax-free distributions at retirement SCP gold eies for small business employees or self-employed individuals contributions are tax ta free with taxed withdrawals in retirement subject to IRS contribution limits risks of gold IRAs gold eray while believed to be a safe value holder in tough times have drawbacks gold requires storage yields no dividends and has limited industrial use its performance is notable during financial uncertainties and Market volatility but historically it has lagged behind behind the broader markets returns while precious metals have a role in a diversified portfolio their potential to match overall economic returns remains uncertain but before we wrap up today's discussion we have a special gift for you to help you make informed decisions and navigate the world of precious metals investing we've put together a comprehensive gold Ira guide and the best part it's AB absolutely free so make sure to pick up your free gold Ira guide in the link below this valuable resource will be a great addition to your investment Journey a gold Ira is a self-directed IRA allowing investments in physical gold silver platinum and Palladium offering similar tax advantages as traditional IRAs it's often used to hedge against inflation and economic uncertainty however due to specific ific rules governing gold IRAs Consulting a financial advisor is advisable before making decisions
Mastering the FIRE Method: The Ultimate Guide to Early Retirement & Financial Independence
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
at some point of time you would have thought of retiring early or maybe you're thinking of it now and truth be told retirement is not about abandoning work there are very few who would say I won't work any further but what we yearn for is the freedom to operate to live life in the way we want and that brings us to the five moment now fire stands for financial Independence retirement it's a very catchy acronym and to put it in a nutshell it's a program that's designed around saving aggressively investing in high return instruments like equities and disciplined withdrawals which put together ensures you have enough money to cover your living expenses for the rest of your life and therefore retire early in this video I shall be explaining the concept in Greater details we look at the implementation steps some calculations and why fire needs to be a deliberate part of your financial life this might be a short video but it's a very powerful concept so let's begin the concept of fire was popularized in a book titled your money or your life it was built around self-sufficiency control over one's time moderate consumption and of course living life outside the nine to five for instance this guy Pete atney who is better known as Mr Money Mustache applied the fire principles which allowed him to retire from his job as a software engineer at the age of 30.
He's 48 now and he continues to live comfortably of his Investments after so many years and it's not just Pete there are writers bloggers people traveling the world software developers and even YouTubers who are using these principles to lead a more open life and have attached some articles and videos in the description to that effect some of these stories are really inspirational and it proves the fact that a little bit of planning on the financial side can have a profound impact on other aspects of one's life and in a very positive way now there are three parts one needs to address when implementing a fire strategy the first step is savings and the hardcore fire disciple is expected to save anywhere from 50 to 70 percent of one's monthly income this is of course easier said than done and probably where a lot of people make up their mind that this is not their cup of tea but from what I have read and what I've experienced the saving need not be always defined as a percentage and we can also work with absolute numbers which we'll see when I come to the calculations part now when we hear the word saving our first reaction or response is on reducing our expenses however money can also be saved by upping one's income which is what I suggest and it does make sense right I mean there is a limit to what one can save but income generation has a much longer Runway and in our case it can include taking a part-time job doing some consultancy work asking for a pay hike changing jobs for a better salary reskilling oneself or of course starting a side hustle which can be a mix of active and passive work in fact I have a friend in Bangalore who works as a data scientist from Monday to Friday and then on the weekends he takes classes on an edtech platform and also does some consultancy work to put it in numbers what was earlier a monthly saving of 50 000 Rupees is now easily over 2 lakhs a month and this guy has absolutely changed his life around by leveraging what he knows so he's on fire metaphorically speaking and the the fire strategy encourages us to find creative and better ways of increasing our savings rate the Second Step under the fire strategy is to spend wisely notice I didn't say don't spend I said spend wisely which means you need to identify what is an essential expense and what can be tagged as discretionary now people who practice Fire have a ton of helpful advice for us these include driving a good used car instead of a new one renting versus buying a house cooking at home rather than eating out track your daily expenses cancel unnecessary subscriptions Etc from what I've read these small steps can reduce your monthly expenses by up to 30 percent which if you choose to look at it differently is like getting a 30 incremented salary so you don't have to be stinky when it comes to your expenses but try to be a bit more rational about it and the third and final pillar in the fire system is the investment part now on a basic level the system requires advisors to invest as much money as you can and as early as possible so it's the principle of compounding at work here and this table here is a handy guide to how well your Corpus expands when you give it the necessary capital and a decent amount of time to grow now the fire method keeps this investing part ridiculously simple one you invest some money every month or as we call it you set up an sip a systematic investment plan and secondly this money is invested in a low cost Index Fund or ETF which in our case is either the nifty 50 or maybe a slightly broader Nifty 500 Index so essentially the focus here is to participate in the equity markets rather than actively trying to beat it which by my Reckoning should Fetchers and analyze return of 12 to 13 percent again the idea here is to maximize the returns which is why equities have been suggested but if that makes you a little uncomfortable then you can also settle for a mix of different asset classes which is something I explained in my video on asset allocation a few weeks back yet another investment you can make which is encouraged under the fire movement is on account of passive income dividends from stocks interest from your fixed deposits income from your blog your podcast YouTube channel monetization rental income are just some ways of making an Roi from physical or virtual assets now notice I have put this part under Investments and not income because passive income does require a lot of upfront work but once you do the hard work and you do it well one can expect a continuous stream of income over the next few years which will not only support your early retirement Ambitions but will also act as a safety net in fact there is something called an fi Ratio or the financial Independence ratio which largely means if your passive income is greater than your expenses then you're making some great progress on the path to financial Independence so to sum it up remember fire has three simple principles that you need to work on which is save more spend less and invest wisely if you're getting good value from this video then please do give this video a thumbs up and if you aren't a subscriber yet then do consider becoming one as I can then serve you videos as soon as they are released and also share with you some investing strategies tips and stories that are continually Post in the community section the original fire formula is based on the four percent rule which is the amount of saving you can safely withdraw every year without worrying that your money will run out for example let's say you are 29 years old and your monthly expenses are around 50 000 rupees if you want to retire at 40 then you have 11 years to accumulate a retirement fund so here's the math if household inflation is likely to grow by eight percent per annum then the 50 000 you spend now will rise to 1 lakh 16 000 rupees by the time you're 40.
So annually this comes to 14 lakh rupees and per the four percent rule it's 14 multiplied by 25 which means you need to accumulate a couples of three and a half crores to safely navigate through your retirement years or at least that's what the fire formula says now in my view there are some gaps with this four percent rule that I think we should all be aware of firstly this rule is okay for someone who has factored 25 maybe 30 years of retirement but if the retirement Horizon goes higher let's say 50 years for example then this formula starts getting a bit shaky and I've pinned a research study by Vanguard on this in the video's description secondly the four percent rule is a United States origination of the 1990s and has been tested on a historical basis when the yields on equities and Bonds were sufficiently high now we are not Americans and what works there will most likely not work for us which means there's an asset allocation and a market performance risk which needs to be accounted for and finally because each of us have our own preferences income goals saving patterns Etc I always felt it's important to have a customized fire implementation plan rather than picking something off the shelf which is why I created my own fire calculator which gives a clearer picture of how much I need to accumulate when can I idly retire how much withdrawals can I do on a monthly basis and at what point and in what circumstances my retirement money can run out so this obviously starts with the inputs and you need to type in your current age the age at which you want to retire and of course your life expectancy which I hope is strong and long then comes your current portfolio of Investments and this includes your mutual funds fds ppf EPF gold and other stuff and as a best practice kindly exclude the cost of the house where you will be staying post your retirement if you're still working then input the monthly savings and the annual increase you foresee input the expected returns from your investment the capital gain tax that can remain at 10 percent and finally have a view on how much will your expenses be in the first year of retirement and the expected household inflation rate and once we have these numbers keyed in as I have shown in this example the resulting output should clearly tell us three things one the amount of investment Corpus we need at the time of retirement which in this illustration is 2.2 crores at the age of 40.
Secondly we now have Clarity on how much can be spent on an early basis which starts from 12 lakhs so that's one lakh per month and it increases by eight percent every year and thirdly we get to know how sound or unsound this entire construct is like in this case our calculation shows that I'll run out of my money by the time I am 64 years old which is another way of saying that I need to rework my fire math which can include an increase in the monthly savings and the growth rate I can also consider extending my retirement age to a higher number let's say 45 years and finally I I can be a little careful with my expenses and instead of spending a lack of rupees maybe I can make do with 90 000. so there are many permutations and combinations you can look at but my suggestion is try to be a little conservative in your estimates especially when it comes to return on investment the inflation rate and the post retirement monthly expenses now for your benefit I have enclosed the link of this worksheet in the video's description it's a downloadable sheet all the formulas are open so feel free to change the numbers improve the formula if required add your own customization if it helps you but have a clear idea on when and where you need to be on the path to financial Independence so when I first heard and read about fire I was not a big fan of it I mean saving 50 to 7 20 percent of one salary is almost next to Impossible and I would have shut sharp had I not realized that as a method fire is quite flexible and can be used in many different ways so the calculator is one way and you can make a customized version of it but then there are more strategies there are more variants of the fire strategy and if you are interested then do read up on lean fire fat fire Coast fire and a few more of these in related articles that I've Linked In the video's description the point is and I myself realized a very late in life that many of us don't know when to retire how much is needed to retire which is why we continue working in a role or occupation that we don't enjoy much and that's where I think fire as a strategy might be the solution and it's just three things right increase your income and savings lower your expenses and get your Investments right so read up more about this concept in the Articles and websites I've added in the description and I sincerely hope you practice some sort of fire going forward if you found this video useful then do press the like button do subscribe to my channel share this video and I'll see you three days from now until then foreign
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Warren Buffett: Why Most People Should Invest In S&P 500 Index
Jason 0 Comments Retire Wealthy Retirement Planning
why have you advised your wife to invest in index funds after your death rather than berkshire hathaway i believe munger has cancelled his offspring to quote not be so dumb as to sell she she won't be she won't be selling any berkshire to buy the index funds all all of my berkshire every single share will go to philanthropy so that i don't even regard myself as owning berkshire you know basically it's it's committed and i've i so far about 40 percent has already been distributed so the question is somebody who is not an investment professional will be i hope reasonably elderly by the time that the uh estate gets settled and what is the best investment meaning one that there would be less worry of any kind connected with and less people coming around and saying why don't you sell this and do something else and all those things she's going to have more money than she needs and the big thing then you want is money not to be a problem and there will be no way that if she holds the s p of virtually no way absent something happened with weapons of mass destruction but virtually no way that she will shall have all the money that she possibly can use to have a little liquid money so that if stocks are down tremendously at some point they close the stock exchange for a while anything like that she'll still feel that she's got plenty of money and the object is not to maximize it doesn't make any difference whether the amount she gets doubles or triples or anything of the sort the important thing is that she never worries about money the rest of her life and i had an aunt katie here in omaha charlie knew well and worked for her husband as did i and she worked very hard all her life and had lived in a house she paid i think i don't know eight thousand dollars for 45th and hickory all her life and uh because she was in berkshire uh she ended up she lived in 97.
she ended up with you know a few hundred million and she would write me a letter every four or five months and she said dear warren you know i hate to bother you but am i going to run out of money and and i would i would write her back and i'd say dear katie it's a good question because if you live 986 years you're going to run out of money and and then about four or five months later she'd write me the same winner again and i i have seen there's no way in the world if you've got plenty of money that it should become a a minus in your life and there will be people if you've got a lot of money that come around with various suggestions for you sometimes well-meaning sometimes not so well-meaning so if you've got something that's certain to deliver you know it was all in berkshire they'd say well if warren was alive today you know he would be telling him to do this i i just don't want anybody to go through that and the s p will be a i think actually what i'm suggesting is what but a very high percentage of people should do something like that and i don't think they will have us i think there's a chance they won't have as much peace of mind if they own one stock and they've got neighbors and friends and relatives that are trying to do some like i say sometimes well-intentioned sometimes otherwise to do something else and so i think it's a policy that'll get a good result and it's likely to stick charlie well as becky said the wonders are different i i want them to hold the berkshire well i want to hold the berkshire too no i bet i mean i i i don't like them i recognize the logic of the fact that that s p algorithm is very hard to beat in a diversified portfolio of big companies it's all but impossible for most people but you know it's i'm just more comfortable with the berkshire well it's the family business yeah yeah but but it uh i've just i've seen too many people as they get older particularly being susceptible just having to listen to the arguments of people coming well if you're going to protect your heirs from the stupidity of others you may have some good system but i'm not much interested in that subject [Laughter] okay you
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Norway’s $1.4 Trillion Wealth Fund That Humiliates The World
Jason 0 Comments Retire Wealthy
INTRO:
Have you ever wondered why social security is absolute garbage? Every year, they collect 12.4% of everybody’s
income up to $18,000. Yet, they’re projected to fall short of
their payouts by 2034. Some people blame it on the pandemic, others
blame it on bureaucracy, and others suggest that it’s simply a side effect of people
living longer than ever before. While all of these are valid points, none
of these is the fundamental problem with social security. You see, the fundamental problem with social
security is that it generates no real wealth. In 2021, Social Security pulled in $1.118
trillion in income. But $1.001 trillion of that was from contributions
and $41 billion was from income taxes charged on benefits. Social security only generated $76 billion
in investment-based income which is a measly 2.61% annual return. Given that that barely keeps up with long-term
inflation if that, it’s no wonder why Social Security is trash when it comes to creating
real wealth.
Now, you don’t actually have to worry about
social security running out because I’m sure they’re gonna either increase the tax
rate, decrease benefits, and/or print money to make up the deficit. But, what if there’s a better solution. What if instead of investing in low-yielding
bonds, social security invested in the stock market, real estate, and energy not just in
the US but internationally. This would generate true returns for social
security, and they would not be nearly as dependent on contributions. At first glance, this might sound riskier
and it is, but this is exactly what sovereign wealth funds around the world have been doing
for decades.
And the most successful fund of them all is
Norway’s Sovereign Wealth Fund also known as the Oil Fund. As of December 2021, the Norwegian Fund boasted
a total of $1.4 trillion worth of assets. To put that in perspective, Social Security
only controls $2.9 trillion despite the population being 61 times larger. On a per-capita basis, Social Security has
$8,825 worth of assets per person. Meanwhile, Norway boasts a whopping $260,271
worth of assets per person. Norway literally has over a quarter-million
dollars worth of assets per person. Now, I’ve been picking on Social Security
thus far, but really, Norway blows the rest of the world out of the water as well.
China’s wealth fund, for example, controls
$1.1 trillion worth of net assets. But compared to their population, that’s
not even $1000 per person. So, here’s how Norway built the most successful
sovereign wealth fund in history. HISTORY:
Taking a look back, the history of Norway’s wealth fund dates back to the year 1960 when
Norway’s prime minister Einar Gerhardsen got Norway involved in the oil business. He gave oil companies from around the world
licenses to come and search for oil within Norway.
Oil companies were allowed to keep the profits
they generated, but they had to pay petroleum taxes and leases to Norway to continue operations. It took a couple of years to get the ball
rolling but starting in 1966, oil companies flooded in looking for oil. Within the next 4 years, they drilled 37 wells,
and on the day before Christmas Eve in 1969, they struck oil in the North Sea in an oil
field called Ekofisk. This turned out to be the largest oil field
ever found at sea, and by 1971, oil production would begin. It didn’t take long for Norway to start
raking in loads of money, and soon enough, they started to discuss what to do with the
money.
This was not a fast process by any means as
it would drag on for 12 years, but eventually, in 1983, they came to a consensus. They decided to create a fund that could invest
the profits generated from the oil industry hence the name oil fund. The best part was that the government was
only allowed to spend real returns which are the returns after accounting for inflation. This seems like a no-brainer, but it’s not
nearly as common in application. We can’t give Norway too much praise though
given that their government was just as slow as the rest of the world.
It wasn’t till 1990 that Norway actually
went ahead and created the fund, and it wasn’t till 1996 that the fund received its first
cash injection from the Ministry of Finance. It took 36 years to get to this point, but
at least they did it, and now, it was time to invest. INVESTMENTS:
One of the hardest parts of running a successful investment fund is effectively investing all
the capital. Even investing moguls like Warren Buffett
struggle with this issue. Norway also fell into this trap early on and
they would end up investing all of the money into government bonds. But, fortunately, just one year later, they
diversified heavily into equities. Norway approved for 40% of the fund’s capital
to be invested into equities, and they gave Norges Bank Investment Management the responsibility
of investing the money.
Within just 6 months, the bank converted all
40% into equities, and with that, they were booming. In 2000, Norway approved the fund to diversify
into 5 emerging markets, so Norges had a pretty broad set of choices when it came to investments. But this didn’t mean that they could just
invest in anything. There are 4 main categories that are blacklisted
from the fund for various reasons. First of all, the fund is not allowed to invest
in any weapon production companies like Boeing, Airbus, and Lockheed Martin. Secondly, the fund is not allowed to invest
in any tobacco companies. Thirdly, the fund is not allowed to invest
in any companies that cause environmental damage. This one is a bit ironic given that all the
money is the fund originated from oil, but I guess they’re limiting their environmental
impact as much as possible.
Anyway, the last major category the fund is
not allowed to invest in is companies that are notorious for human rights violations. Fun fact, Walmart was blacklisted for this
reason till 2019. With all these guidelines, Norway was chugging
along through the 2000s quite strongly, but then the 2008 financial recession rolled around. In just one year, the fund lost 23.31% or
nearly a quarter of all their investments. Many people in this situation would panic
and sell all their stocks, but Norway wasn’t concerned.
In fact, they were excited and optimistic
to buy the dip. In 2007, Norway increased the fund’s allocation
to equities from 40% to 60%. And in 2008, they created a 5% allocation
for real estate. Honestly, they couldn’t have played this
any better. They brilliantly bought up the bottom of the
market, and they have been rewarded extremely well. In 2009, the fund posted a 25.6% return and
the fund has grown 5x since the recession. Today, the fund boasts an annualized return
of 6.56% since inception which is a bit lower than the S&P 500 7-8% annual. But, the Oil Fund is 18 times as diversified
as the S&P 500 with stakes in 9,123 companies spread across 73 countries. At the end of every year, Norway reveals all
of its stakes in a massive 400-page document. It would take forever to go through all these,
but just skimming over the most notable ones, they have $21 billion in Apple, $17 billion
in Microsoft, $7.8 billion in Facebook, and $14.5 billion in Amazon. Considering all this, I don’t think you’d
be surprised to hear that the Oil Fund is the largest stock owner in Europe. And given how strategically they’ve played
the market so far, I think they more than deserve that title.
WITHDRAWALS:
Having all that money is great and all, but what’s the point if you can’t spend it. As we previously touched on, Norway is allowed
to withdraw real returns from the fund every year, but Norway didn’t even do this till
2016 when they made their first withdrawal. Since the 1990s, Norway has averaged about
2% inflation per year, so this would mean that Norway is allowed to withdraw about 4.5%
per year because that’s their real annual return.
But they don’t even allow for that. Norway limits its withdrawals to 3% per year
which is very similar to the 4% rule with the S&P 500. The rule goes that if you withdraw 4% or less
every year from an investment into the S&P 500, you’ll never run out of money. So, it’s again quite smart that Norway has
limited withdrawals to 3%. After all, you don’t want to kill the golden
goose. When the country needs money though, Norway
doesn’t hesitate to take out the full 3%. In 2020, for example, Norway withdrew $37
billion from the fund to battle the pandemic.
Anyway, looking forward, Norway predicts that
the worst-case scenario for the fund in 2030 is $455 billion and that the best-case scenario
is $3.3 trillion. If the best-case scenario plays out, the Oil
Fund would overtake social security in assets in the second half of this decade. And at that rate, the fund would have $1 million
per citizen by 2040. Having said that, there’s no question that
the Oil Fund is a massive success financially. But, critics argue that the fund isn’t nearly
as successful when it comes to ethics.
ETHICAL CONCERNS:
Probably the biggest criticism against the Oil Fund is that all of its contributions
are derived from oil. But the truth is if Norway didn’t take advantage
of the demand for oil, someone else would’ve filled the gap. Over the past 60 years, it simply wasn’t
feasible to produce renewable energy on such a large scale. So, if Norway avoided oil, it’s not like
customers would’ve switched to renewable energy. They would’ve just gone to Saudi Arabia
or Canada for oil, and these countries have plenty of oil to make up for the disparity.
So, personally, I don’t believe that Norway
did anything unethical by leveraging its resources or the demand for oil. Another major criticism against the fund is
that their ethical boundaries aren’t enough. As a country, many argue that they have the
responsibility of being a good role model and supporting productive businesses only. One of the industries that critics argue the
fund shouldn’t be involved in is gambling and betting. This has actually been an ongoing issue for
many years now, and Norway has taken steps to ban investments in casinos.
But so far, nothing concrete has taken place,
and the fund invested into Draftkings as recently as March of 2021. And finally, the third biggest criticism against
the fund is that it’s controlled by Norges bank. Norges bank basically has full control of
the fund, and as long as they don’t break any guidelines, they can do whatever they
want. The bank does have 500 well-qualified financial
professionals, but at the end of the day, final investment decisions are left to just
17 finance ministry bureaucrats. When the fund had less than $100 billion,
this wasn’t a very big concern. But now that the fund is reaching into the
trillions, these guys have substantial financial power.
They could use this power to prop up their
own investments and/or manipulate the markets. Aside from having a lot of power, many argue
that these leaders aren’t actually that great when it comes to investing and that
hiring better leaders would lead to far better returns. While all of these points are fair, I don’t
think you can complain too much given how well the fund is performing in comparison
to the rest of the world. APPLICATION TO THE US:
Given how successful the sovereign wealth fund has been for Norway, would it be possible
to apply such a system to the US? Well, some states in the US already have a
sovereign wealth fund like Alaska. The Alaska Permanent Fund was created back
in 1976, and similar to the Oil Fund, the Permanent Fund is made possible through oil
revenue. As of 2021, the fund had $81.9 billion worth
of assets, and they disperse roughly $1600 per year per resident.
So, clearly, such a concept is not foreign
to the US; however, it would be quite difficult to create a national sovereign fund especially
if it was funded using contributions. Here’s the thing, while such a program would
be extremely helpful to people with bad spending habits and little to no investments, it’s
not all that helpful for disciplined savers and investors. At the end of the day, such a fund is just
going to match the market if that.
So, many would far prefer to just do that
themselves. If such a fund was created though, it wouldn’t
be all that hard to manage logistically. For example, if half of Social Securities’
reserves were converted into a wealth fund, that would entail investing about $1.5 trillion. While that’s a large amount, it’s quite
manageable within the financial world. After all, BlackRock has nearly $10 trillion
under management. So, creating such a fund would definitely
be more of a political issue than a logistical issue.
Personally, I’d be a fan of converting Social
Security into a wealth fund given that any sort of return would be better than Social
Security’s 0% real returns. But that’s just what I think. Would you guys support a sovereign wealth
fund? Comment that down below. Also, drop a like if you’re a fan of Norway’s
wealth fund. And of course, consider joining our discord
community to suggest future video ideas and consider subscribing to see more questions
logically answered..
Two-Pot Retirement System Explained by Old Mutual Corporate
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
Old Mutual 0:00
Very few South Africans reach the end of their working careers with
enough money saved for their retirement. To help retirement fund members preserve funds for their
retirement, National Treasury has proposed a new two-pot system for retirement funds. Your future
retirement fund contributions will be allocated to two components. One is a savings component, the
other is a retirement component. For this example, we'll use the pots to illustrate the concepts.
When the two-pot reforms go into effect, your retirement fund will value
your existing retirement savings, and will allocate this amount to its own pot,
which the industry calls the vested component. The current rules will still apply to your existing
retirement savings. This money will be subject to the existing rights of access and existing
withdrawal tax tables. Then, 10% of this pot, up to a maximum of R30,000 will be allocated
to your savings pot and will be available for you to withdraw. Going forward, 1/3 of your future
retirement contributions will go into the savings pot. This pot is designed to be your lump sum at
retirement. However, in the case of an emergency, you'll be able to withdraw the money from
your savings pot once every tax year.
This amount will be taxed to your marginal tax rate.
Remember, any money withdrawn from your savings component before retirement will reduce your lump
sum at retirement. The minimum withdrawal amount will be R2 000. The remaining two thirds of your
future retirement contributions will be allocated to the retirement pot. To preserve your savings,
you won't be allowed to access this money until you retire. At your retirement, you'll have to
use it to buy a pension or annuity. The aim of this is to provide you with an income during your
retirement years.
There are a few important things to note. The two-pot retirement system is to
be implemented on the 1st of September 2024. This will only affect your future retirement
contributions from this date. If enacted, the two-pot system will affect pension funds,
provident funds, retirement annuity funds, and preservation funds. Your existing retirement
savings will be subject to the old rules, so there's no need to panic. Provident fund members
over 55 will have the option to stay and continue contributing to all their retirement savings
to their existing provident pot. The two-pot system will give retirement fund members access
to a portion of their savings in an emergency. This savings component will also be available as
a lump sum payment at retirement if you don't make withdrawals. At the same time, the majority
of your time and savings will be preserved to provide you with an income during your retirement.
If you have any questions about these proposals, and how they might affect you or your retirement
fund, please reach out to Old Mutual.
.
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