Browsing Category: Retirement

What Are The Benefits Of A SIPP?

If you’re in the process of considering pension options, there’s a very good chance you’ve been looking at opening a SIPP (Self Invested Personal Pension). You’ve probably heard that there’s benefits to be had from a SIPP as opposed to other options, however are you aware as to what they are? To try and help you consider all options, we’ve put together a brief look at the benefits of a SIPP to enable you to make the best and most informed decision when it comes to taking out a pension.

SIPP Gives Flexibility & Controlmoney retirement

When it comes to a SIPP, you’re in full control as to how your money is invested and there’s a significant number of options available to you, all of which come with complete flexibility. You make the decisions as to what your money is invested in and who manages these investments for you and it’s this level of control which you receive when compared with other types of pension which has made SIPP’s an increasingly popular option in recent years.

When it comes to the ways which you can invest within your SIPP, there’s a significant number of options available, with investment opportunities ranging from bank accounts (this is always the starting point as all cash must first come into the SIPP’s own account before being channelled into other investments), savings bonds and stocks and shares through to gold bullion, investment platforms, land and even commercial property.

With a SIPP, you call the shots and are in full control over every aspect of your pension, unlike personal and stakeholder pensions where the pension provider makes the decisions on how and where investments are made and simply send you an annual statement on your fund’s performance.

Transfer Multiple Pensions Into A SIPP

Many people accumulate numerous workplace pensions throughout their adult life and, as such, find themselves with more than one pension. A SIPP can offer you a fantastic option to combine multiple pensions into one and invest as you wish, as per the other benefits outlined above.

Tax Benefits

Perhaps one of the more attractive benefits of a SIPP to the majority of investors is the tax benefits which are associated with them. As an example, as a basic rate tax payer, an investment of £8,000 in a SIPP would automatically become £10,000 due to the government adding £2,000 (20%) tax relief. Such tax benefits can significantly increase your pension pot and if you’re a higher rate tax payer, you’ll receive additional relief, however it won’t be automatically added to your SIPP.

Transparent and Competitive Fees

When compared with other types of pension, SIPP’s offer incredibly transparent and competitive fees, giving you the confidence that more of your money is going into your pension pot. No one wants to be paying over the odds on fee’s and with the like’s of Liberty SIPP’s pension calculator, you can clearly see what you’ll be paying and how much you could save when compared to other options.

Increased Level Of Service

When you take out a SIPP, you’re going to be dealing with a provider who is able to offer a much greater level of personalised service than the providers of personal or stakeholder pensions. You’ll almost certainly have a dedicated team who look after you and give you the level of service which reassures you that, even though it’s invested into a pension, your money is still yours and that you’re in full control at all times.

All in all, SIPP’s offer a whole host of benefits when compared with other types of pension and at the time when you’re looking either at transferring other pensions or opening your first, they’re an option seriously worth considering.

Matthew Rankine is the technical sales and marketing manager at Liberty SIPP, using his finely tuned knowledge of pensions to drive the company forward. Matthew has a genuine passion for pensions and is constantly trawling through the registered pension scheme manual looking for new bits to excite himself.

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Is a Target Date Retirement Fund for You?

tracking your money

All of my 401 K money is in a target date fund. I’ve haven’t talked about my this strategy for a couple of reasons. The choice illustrates my lack of sophistication when it comes to investing. Plus some writers have expressed negative opinions about this investment choice.

This type of fund may be the right choice for you so let’s talk about it together without embarrassment.

What is A Target Date Fund?

A target date fund may also be called a lifecycle or age-based fund. It is a mutual fund consisting of a mix of assets (stocks, bonds, etc.) that becomes more conservative over time based on the target date.

Typically the target date is included in the name. Investors selecting the Vanguard Target Retirement 2020 Fund most likely plan to retire during or close to the year 2020. The year may be adjusted based on tolerance for risk. I chose a fund later than I plan to retire because it was more aggressive.

Until target date funds were offered at my employer, I muddled my way through selecting funds and trying to keep them balanced based on my risk tolerance. I’m sure I lost a lot of potential earnings with this haphazard method.

Pros of a Target Date Fund

tracking your money

There are many reasons people like me choose this type of mutual fund. Target date funds are simple and that appeals to us. I don’t have to decide which funds from the list of options to pick let alone worry divid

Re-balancing is automatic and handled by the fund manager. No need to move funds around because the ratios are out of my contribution among them.

Lastly, it’s hands off once you get started. Just pick the desired target fund and you don’t have to think about it. I don’t worry because an individual fund might be doing bad this week resulting in no stress.

Cons of a Target Date Fund

I alluded to one of the problem with lifecycle funds. They don’t take the risk tolerance of individual investors into account. The assumption is that all people planning to retire in 2030 (or whatever date) want the same allocations. The way around this problem is to select the fund with the desired balance instead of by date.

Another concern is the one size fits all approach. Everyone in the fund has the same stocks, bonds, etc. If you want an unique portfolio, this isn’t the right option for you.

Be selective in choosing the fund because some consist of funds from a single company (for example all Fidelity or all Vanguard). Diversification is important to ensure all your eggs aren’t in one basket.

When comparing my annual returns to some of my friends, I’m comfortable with my decision to invest in a target date fund. I usually beat or come close to their returns with a lot less stress. Maybe it’s also the choice for you. What’s your retirement fund investment strategy?

Using Annuities for Your Retirement

annuities as part of retirement

Once of the most common complaints that people have with planning their retirement is that they don’t know where to invest to get the money that they need. Perhaps they’ve accumulated some money in their nest egg and as their planned retirement date comes they worry about having the income.

For some baby boomers, using annuities as part of their retirement plan may be the way to go.

annuities as part of retirement
Should annuities be a part of your retirement?

What are Annuities?

There are several types of annuities, but the main gist of it is that you give a principle sum to the annuity company and they guarantee a fixed amount (single premium immediate annuity or SPIA) or an amount based on a benchmark for the rest of your life (single premium immediate variable annuity). They can provide a predictable stream of fixed income.

Advantages of Annuities

The main advantage of annuities for most people interested in them is that annuities reduce some of the risks with retirement.

One risk that some investors find themselves worrying about is wondering whether the amount they’ve saved will last long enough. With better health care, many are living longer, which means that the money has to be large enough to cover one’s lifespan.

Market uncertainty is also another concern of many investor, especially as they get closer to retirement. Annuities are guaranteed for the rest of one’s life, so there is an element of consistency that is reassuring for some people.

Disadvantages of Annuities

For all the benefits of annuities there are some drawbacks to consider. When you purchase an annuity, you can not pass it on to your heirs.

For some soon to be retirees the solution to this is just use a portion of their retirement nest egg for an annuity. They can get some certainty with their income and still a portion available to leave to their heirs.

Deciding If Annuities are Right for You

You have to weigh the pros and cons of using annuities for yourself. For some retirees they find that annuties can give them some predictability that they’d want.

If you do decide to set aside a portion of your retirement savings for annuities, please check that the company you work with is financially sound. There are ratings agencies that you can use to check – Moody’s, Standard and Poor’s, and A.M. Best.

Even if your company is currently in good standing, as a matter of precaution you should also check with your state about their guarantee association coverage should the company become bankrupt. You want to protect your money, especially as you approach retirement.

I’d love to hear from you. How many of you are thinking about retiring in the next 10 years or so? Have you though about the pros and cons of having annuities in your retirement plans?

Disclosure: Post includes information sourced from Genworth Financial

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Can I Retire? by Mike Piper

can I retire mike piper review

Retirement is on people’s minds, but for most, it’s a far off goal even if they are older. Too many people wonder if they can retire when they want to, but aren’t sure how to check.

Last year I received a copy of Mike Piper’s Can I Retire? from Mike himself. Besides being extremely knowledgable about investing, he was a really sweet guy. He’s genuine and he wants to help others with their investments through his books and his site The Oblivious Investor.

If you’re on the fence on whether or not to pick up this book, here’s my review.

Basic Book Info

Can I Retire? Overview

What’s Inside can I retire mike piper review

If you’re curious about what Can I Retire? covers, here is the table of contents:

  • How Much Money Will You Need?
  • Safe Withdrawal Rates: The 4% “Rule”
  • What if 4% Isn’t Enough?
  • Index Funds and ETFs vs. Active Funds
  • 401(k) Rollovers
  • Asset Allocation in Retirement
  • Managing Your Long-Term Bucket
  • Roth Conversions
  • Distribution Planning
  • Asset Location
  • Other Tips for Taxable Accounts
  • Finding Help With Your Plan

Who is This Book For?

While it appears from the chapter titles that this book may be a long, it’s actually quite concise. Mike tends to format his books to cover a very specific topic in about 100 pages or less. For those looking at getting a grip on their retirement, this is the perfect book to start off with since it discusses and defines the terminology an math behind retirement easily.

If you’re looking at a quick book to reference for an answer, check out this book. For those looking at digging deeper with investing, Mike and I both recommend The Bogleheads’ Guide to Retirement Planning.

Photo Credit: Mike Piper