The Bucket Approach for Retirement Income

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For many people the worst part of investing is short term volatility of the market. Going through that stomach turning rollercoaster can keep you up at night. You worry if you are going to have enough money to cover daily expenses. Staying invested during these trying times is very hard to do if you are worried about your life savings going down everyday. 

The solution is to find a way to keep you afloat during these frightful time. You need to find a way to insulate yourself from the storm until your through it. The "Bucket Approach" is a possible way to help you through these tough times.

Harold Evensky, President of Evensky & Katz Wealth Management, has come up with the "Bucket Approach" as a strategy for solving this problem. Back in the eighties Harold developed this approach which includes his five-year mantra. It simply means do not invest money you are going to use within 5 years.

His plan says to carve out a lump sum that you will be needing, short term. These needs can be a second home you may want to purchase in 3 years. You take that chunk of money and put it in short-term bonds or cash. Also, that goes for your retirement money that you need to live on for the next five years. But in this instance, you would be losing to much in potential growth so through experience Harold says to only take out two years worth of living expenses. The rest of your retirement money stays in your total return portfolio.

What you do is take that cash and set it up to pay yourself a check once a month like a payroll check. The market can be volatile, but you know where your grocery money is coming from, so you are not going to be panicked when the market is going down. As you manage your investment portfolio you need to rebalance as necessary.

This helps you be much more cost and tax efficient in managing that portfolio. You are not going to have to sell at the wrong time. You can sleep through volatile times. Your worry level should be way down during the tough times. Your portfolio may be down but you have money to live on for two years. This relieves any need to sell off your investments at the wrong time.

How Many Buckets Do You Need?

The amount of buckets you need can be as many goals you need to finance within a five year period. But for the small investor two buckets will do. One bucket with two years of expenses and the other holding your retirement portfolio. The most important thing is you have your short term cash in a bucket available to spend. Having other buckets for a trip or college expense, or a car is also good to do if you have the funds available. There is no reasonable limit to how many buckets you can have. 

The problem with multiple buckets is there more to keep track of but you are in a more organized position. Plus you are able to borrow and move around cash between buckets as you see fit. This system gives more control over your finances

My Take.

I believe this plan can work and solve the number one problem of retirement investors which is selling at the low. It would of worked in the last deep decline. You would of been able to hold on till the market began to rise again. I can imagine the freedom having two years of expenses put aside. Not having to worry about paying the bills and knowing you are able to ride out the storm. What's your take?

Technology Invades the World of Finance

In the world of finance, there have been a number of innovations that have changed the way people conduct their business. Thanks to technology, there have been a number of different advances in the finance arena. Here are a few examples of ways that technology has changed finance:

Smartphone Apps

Smartphone use has been growing rapidly in the last few years, with millions of people using these devices. With so many smart phones, there are also millions of apps being made. Many of these apps make it easy to manage your finances. Banks like Discover Bank offer apps so that you can check your account balances, transfer money, or make payments from your phone. Investment companies offer apps so that you can check your trades while on-the-go.

Investing Software

If you are an investor, there are a number of software programs out there that can help you do your job easier. For example, there are programs out there that can actually automate your trading based on algorithms. With these programs, you simply upload them to your trading platform, and then they start trading your account for you. This makes it possible for you to go do something else while the software is trading your account for you.

Peer to Peer Lending

In the past, when you needed to borrow money, about the only option available to you was to go to a bank and ask for a loan. In today's world, you can borrow money from other a regular people who have a little bit extra to loan. Thanks to peer-to-peer lending networks, you can get connected with people who want to lend. The peer-to-peer lending site handles the details like transferring the money and checking the credit of the borrowers. This has made it possible for many people to borrow money when they need it.

Virtual Wallet

Virtual wallets have made it possible to make payments with your smartphone. Using near-field communication technology, you only have to get your phone close to a scanner and the payment is charged to your account. This makes it easier and faster to make a payment.

Technology has completely changed the way that people handle their finances. In the future, there will be many more technological advancements that have an impact on the area of finance. By taking advantage of some of these advancements, you can save time, protect your money, and get some more peace of mind in the process.

529 Plans Diversifying with ETFs

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Diversification is the backbone to any investment plan. 529 plans are going to give investors more diversification by adding ETFs. They need to attract more investors and give them a larger choice of investments to purchase for their college savings plan. 

The 529 savings plans are a tax-advantage method for saving toward future college expenses. Parents can build a college savings fund that pays for a person’s room, board, mandatory fees, books, computer and tuition. Contributions in the 529 savings plan are not subject to federal tax as long as the money is used for college expenses. Today, mutual funds make up the largest share of the college-savings 529 industry.

Last year, on average, 529 plans lost almost 1% while the S & P 500 stock index returned about 2%. This caused a pull back in contributions. This addition of ETFs will not only hopefully attract more investors but also will give savers a more positive growth. 

Recently, Nebraska introduced four ETFs in three of its 529 plans. One of New York's plans recently added six ETFs, while Nevada's Upromise 529 moved almost exclusively to ETFs and away from mutual funds, which still dominate the college-savings industry. The addition of ETFs by 529 plans will give investors choices that will satisfy views that 529 investment choices are to risky.

What do the critics say?

The positive news is that they like the lower expenses ETFs offer. 529 plans with ETFs have an average expense of 0.61%, compared to the industry average of 1.12%. They claim 529 plan investment managers are adding ETFs in an attempt to make quick and easy changes to portfolio allocations at a fraction of the cost. ETF products can be traded throughout the trading day while mutual funds can only be reconstituted at the end of the day. 

Don't worry, the addition of ETFs are not changing the rules, you won't be allowed to buy and sell your investments in your 529 plan. 

These changes will attract more money in to the plans. You will have more choices in your investments. Diversification will benefit your 529 plans overall growth and help to minimize any market fluctuations. 

Related articles

• 10 Frequently Asked 529 Plan Questions (50plusfinance.com)
• 529 Plans Use For K-12 Education Proposed (whatisa529plan.com)
• How To Mess Up Your 529 College Savings Plan (whatisa529plan.com)
• 5 Top Rated 529 College Savings Plans (whatisa529plan.com)

Finance For a Great Retirement!

(Photo credit: Wikipedia)Although there can be no mandatory retirement age and people nowadays are working well into their seventies, the time when one is in one’s fifties is a good time to start planning for retirement. And 65 (or in some places, 67) is, after all, the age at which people become eligible for retirement benefits such as pensions. This article will be primarily about equity release schemes and the best ones there are out there.

The precise definition of an equity release scheme is when somebody uses the value of their residence to get a lump sum of money, thus providing themselves with a steady source of income, while retaining the use and possession of it. When the beneficiary dies—or occasionally, before then—they must repay that amount; and any pre- existing mortgage must also be paid off.

There are five basic types of equity release schemes:

(1) Home income - a form of lifetime mortgage (see number 4) whereby the capital can be used to purchase annuities which the lender himself may provide.

(2) Home reversion - where the homeowner sells his house to a reversion company, in whole or in part, so that the latter owns that much thereof, but the resident still retains the right to live there and (depending on his choice) receives a lump sum and/ or a regular income.

(3) Interest only - the borrower makes interest payments for as long as he remains on the property, with the loan itself being repaid upon the borrower’s death.

(4) Lifetime mortgage - whereby the homeowner takes out a mortgage loan on the property, retaining ownership thereof for as long as he remains living there, repaying the loan and compound interest that is added to it throughout its term by selling the house and moving into a retirement home.

(5) Shared appreciation mortgage – again, the homeowner retains the right to live in the house; he takes out a capital loan and in turn, owes the lender any increase in the value of the property.

Equity release has a number of advantages. The most important, of course, is that it provides the borrower with a steady source of income for the rest of their life. But there are other benefits as well. It can reduce the amount of inheritance tax on the property. Decline in interest rates are no problem, as the mortgage can easily be refinanced with another provider at a lower price. Likewise with downturns in the housing market: Here the borrower is protected by the no negative equity guarantee, which ensures that the total amount of the amount borrowed and the interest accumulated on it cannot exceed the house’s future value when it is sold as outlined in the terms of the scheme.

It is quite easy to take part in an equity release plan. An individual’s eligibility depends largely on the mortgage provider; however, in most cases the minimum age is 55 (but see under reverse mortgage, below) and the person must be retired, since, as mentioned above, the purpose of the scheme is to allow retirement itself to provide a source of income. Those who prefer to release income, or to take out a home reversion loan (described above), generally have to be at least 65. The property must be owned by the applicant and in good condition. It should also be on either long leasehold or freehold.

Most schemes operated under the term “equity release,” including those described below, are available only in the United Kingdom. In the United States, a form of equity release called reverse mortgage is provided to those 62 and over under an HUD-administered federal program.

Some of the best equity release schemes are:

• Equity Release—variable type, no early repayment charges accrued on the loan
• Aviva Lifestyle flexible option—fixed
• Liverpool Victoria flexible lifetime mortgage—fixed

In Stafford, England, Lyndon and June Watts, age 71 and 74 have enjoyed a happy elderly life due to equity release. They used the money to make improvements to their house, which is also worth more now than when they first took out the loan, go for holiday and spend money on their grandchildren.

Author Bio - Jonny Webber lives in Manchester, where he works as a free lance writer creating content about Health, Fitness and Finance. To find out more about Equity release visit www.equityrelease123.co.uk Follow him on twitter by clicking @Jonnywriter

Make The Most of your Car Insurance

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Scouting for the best car insurance can be tiring and time consuming. But, purchasing auto insurance is not a herculean task! All it needs is some research and a little planning on the type of coverage you will require to keep you and your family safe. However, to choose the best insurance you need to understand the types of insurance and how to make the best use of it.

Types of Car Insurance

The UK government introduced a law in 1930 which stipulated that every vehicle owner should have a third party personal injury insurance; and it is mandatory to either have security, be insured or should make a deposit of a specified amount as per Road Traffic Act (RTA) against the liability of injury caused or property damaged by the vehicle.

Just like any other insurance, car insurance has also been constructed to meet the requirements of the policy holder.

While some of the below-mentioned insurance policies can be chosen as per individual requirements, some are compulsory in accordance with the law.

RTA only Insurance: has very low coverage for the damage done to the third party.
Third Party only Insurance: this is the most commonly available; and considered a basic, legally required car insurance.
Third Party, fire and theft insurance: is the most purchased car insurance that covers all third party liabilities and, unlike the preceding insurances, it provides coverage to the vehicle if damaged.
Fully Comprehensive Insurance: It is the most expensive type of insurance and is a hybrid of all of the three above-mentioned insurances.

How to make the best use of your Car Insurance

You might have chosen car insurance that suits your requirements, however, it is most useful if you are able to utilise its full potential. And if you are a new buyer or even an experienced one, you might want to consider these criteria for your car insurance:

1. Do analysis on the organisation you are going to be associated with and make a comparison of the deals offered with others on the market. Give importance to the premium paid and the level of coverage offered.
2. Opt for the firm that has a good reputation and have already established themselves on the market; this is an easy way to judge if the company is genuine or not.
3. Do not buy add-ons that you don’t need! You need to focus on the essential parts of the car and not the luxuries. Add-ons are not reimbursed or replaced in case of accidents or theft (unless you have an additional insurance policy for it)
4. Maintain a good credit score if you want to qualify for lower interest rates. Although, Car loans UK can give you good deals on loans for your car irrespective of the credit score.
5. Do research while renewing your policy. Save time and money with accurate policy information and ask your insurance company for new deals that could benefit you.
6. Reduce Premium by driving less every year. If you prove to your insurance company that you drive less, you will get reduction on premium
7. Raise your deductible and you can get lower insurance premiums. And you can also create a separate fund in case of an emergency or accident.
8. Enrolment in defensive driving course will make you eligible for special discounts after completion by insurance companies. This is followed by most of them so make the best use of it.

Author Bio: Hi this is John. My passion is to write on Finance and Travel Blogs you can reach me @finance port.

6 Places To Retire Abroad and Save Money

When I retire I see myself with a beautiful house on the lake with my fishing boat catching a few fish and sipping on a cup of coffee. But for some, that is to laid back and not very exciting. To spice up your retirement have you ever considered retiring abroad?

If you are thinking of going overseas you better do a lot of research and maybe even take a few vacations there to see if it meets all your needs. I did some research in the United Nations World Tourism Organization 2012 publication and found the top six destinations. 

If you are a bit of an adventurer you may find overseas living intriguing. As you do your research you will find many web sites, media outlets, authors, and bloggers who can help you find what's best at a reasonable price.

France.

Here you will find the food and culture center of the world. France was rated as superior in the 2010 International Quality of Life Index. Their health care is also rated as very good. On the downside they do have high taxes, a difficult bureaucracy, and high prices. So it's better to find yourself a place outside the larger cities.

Turkey.

Though on the edge of the European landscape, they consider themselves more Western than Middle Eastern country. Soon to become part of the European Union they are one of the top growing economies in the region. You can find retirement destinations in the mountains or at the seashore. Property in turkey is well suited for retirement or vacation living.

Mexico.

Being the closest destination to the U.S. and already popular with retirees for its money saving standard of living, Mexico is a great choice. In Mexico, you will find modern and up to date health care near big cities. Many retirement and vacation communities have been providing a relaxing life under a warm sun and tropical weather for many years. 

Panama.

Another small country that wants to attract the foreign investor and retiree. The currency is tied to the U.S. dollar, there are retiree discounts, and favorable tax treatment on income and new homes. Mostly a rural spot with no major metropolitan areas, so traveling for major health care may be necessary. The weather is also warn and tropical.

Costa Rica.

A small country in Central America that is already the home to many people that have chosen the laid back life style. It has a good economy and a stable government that encourages the foreign dollar to its shores. Retirement income and real estate profits are untaxed, combine that with lush beaches and country side living, you have a perfect destination.

Italy.

Who could argue about Italy being a great place to retire to. You have the great food, culture, and the Mediterranean weather is very attractive to visitors. The best bargains are in the southern areas and again staying in the country side is going to save you a lot of money. Like most metro areas you will be paying a premium for city life.

This is only a short list of all the possible destinations to retire at. You need to consider other obstacles to living abroad like language, government stability, and living standards. These and many other things need to be considered for such a big move. 

Living overseas is going to give you the adventure of your life. It takes a certain mindset to leave you home country and live abroad. Maybe after a while you may become homesick. There is much to consider in living overseas. 

Do your research and take a vacation to your destination and see if it is all you thought it would be. Good Luck.