Tuesday, July 25, 2006

Planning for Our Futures

Whether it's Capital Gains Tax planning, or just plain financial planning, the bottom line is just to start. Below is a good article from the news. The moral of the story is Just Do It!

Got a plan for your retirement?: NML speaker says it's more crucial now

Milwaukee Journal Sentinel, The (KRT) via NewsEdge Corporation :

Jul. 24--About 76 million baby boomers are headed toward retirement over the next three decades, and many of them are simply drifting there without a plan, says Lee Eisenberg.

"It's human nature that people don't like to think about getting old," said Eisenberg, a former Lands' End executive who wrote a bestselling book about retirement, "The Number." "When you're in your 30s or 40s, or even your 50s, you do everything in your power very frequently to deny the inevitable, which is that you are going to get old, and that there may not be too many institutions or people out there to take care of you."

But people need to take a look -- the sooner the better -- not only at how big of a nest egg they'd like to have, but also at what kind of retirement they envision, said Eisenberg, who will speak Wednesday to thousands of Northwestern Mutual Life Insurance Co. agents in Milwaukee for their annual meeting.

There has been a transition during baby boomers' lives that Eisenberg calls "the new rest of your life" instead of the old way of viewing retirement.

"Basically, it has to do with going from a former system in which there were very stable, really predictable support systems in place -- namely corporate pensions and an unquestionably secure Social Security system -- to the new rest of your life where each of us basically is responsible for ourselves," he said during an interview from his Chicago home.

Eisenberg said that when 401(k) retirement plans came into existence in the early 1980s, "a lot of people didn't see the handwriting on the wall" that their employers and the government weren't going to take care of them when their careers ended.

"When it was introduced, there was no big press release that said, 'Guess what? All the retirement funding rules are now dramatically going to change and you better somehow get on the boat and make sure that you are doing what you can individually to take care of your future,' " Eisenberg said.

At the same time, boomers have been coasting through an unprecedented period of low inflation, and easy credit has made them splendid consumers but not-so-good savers, he said.
"As a result, a great many people now are finding themselves unprepared," said Eisenberg, an editor at Esquire and Time magazines before joining Lands' End in Dodgeville as an executive for creative efforts from 1999 to 2004.

His book "The Number" examines the process of planning for retirement -- not just financially but emotionally. The title, in its narrowest definition, refers to how much money a person needs to feel financially secure in the later stages of life.

It's impossible to come up with a figure without envisioning what kind of a retirement a person plans to have, he said.

For example, people may choose to keep working past age 65 because they want to. They might do a new kind of work -- something they've always wanted to do.

They might scale back their lifestyle, which, of course, will require less income. On the other hand, some may want to maintain the same standard of living they had in their peak earning years, which will require that more be put away.

" 'The number' is not just how much, but 'the number' also really has to address what for," Eisenberg said.

He said people need to ask themselves what will really matter to them in retirement once their basic needs are met.

"That examined life may well be a lot less costly than a life in which you just assume, 'Well, you know, I know I'll still need two SUVs and it would be nice to have a condo in a warm place,' " Eisenberg said.

Beyond human nature, several problems hinder adequate retirement planning for many Americans, he said.

One is that students often aren't taught from an early age the fundamentals about money, including the "magic of time and compounding interest" and the danger of putting too much money in one investment. As a result, the workings of money and investing remain a mystery.
Another problem is that professionals with great know-how about money usually aren't very interested in helping average-income people because they can't make enough money off them. Planning professionals normally cater to those who already have a bundle, he said.

"There is no question that a great many people who need financial planning the most are people who either can't afford it or can't figure out a way to get it, and we're going to have to figure out a way to do that as a society," he said.

Eisenberg said financial services companies tell him a lot of people don't start asking questions about retirement planning until they're in their 50s. While that's far from ideal, it's better to get serious about saving later than never, he said.

Many people in their 20s aren't counting on Social Security when they retire, which may inspire them to get a better jump on retirement planning than their mothers and fathers did, Eisenberg said.

"I think they will begin to take much more seriously the need to sign up for the 401(k) and begin to realize that over the long term, that can make an enormous difference," Eisenberg said.
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Paula Straub
SaveGainsTax
Paula's Site

Monday, July 24, 2006

The Alternative Minimum Tax - Gotcha!

Few people and many professionals really know much about the dreaded Alternative Minimum Tax, how it's calculated, and when it might really bite you.

I read an article today that had some good examples. It's amazing that something with such good intentions in 1969 is catching so many undeserving individuals today and no one is willing to permanently get rid of it or to bring it up to date for whom it is meant to catch.

Bloomberg.com: Worldwide

For anyone selling highly appreciated assets, you should visit your CPA and have them do a calculation to see if this will affect you if you chose to sell and "just pay taxes".

Proper planning is always the key!

ps. Really hoping to debut my two new websites by Aug 1st. Stay tuned.

Paula Straub
SaveGainsTax

Capital Gains Tax Resource - Interview with the Pros