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January 12, 2019

Borrowing money when you’re retired – Knowing your options

retirement money needThere are several retirees who are of the opinion that they won’t be able to obtain a loan just because they don’t get a salary any longer. Although it is true that it can be tougher to qualify for loans during retirement, yet it is not at all impossible. You must have been saving in your retirement accounts like your Roth IRA or 401(k) accounts but something that you should avoid is borrowing from these accounts. This can have an adverse impact on your savings and also on the income that you fall back on during your retirement. There are several kinds of online loans and offline ones which can save you from a financial setback even during retirement. Read on to know more on this.

Borrowing during retirement – How do you qualify?

When you’re self-funded, lenders will typically decide the monthly income utilizing 2 different procedures which are as follows:

  • Asset depletion: In this technique, the lender will subtract the down payment from the entire and sum total of the value of your fiscal assets and then take 70% of the remainder amount and then divide by 360 months.
  • Drawdown of assets: The regular monthly amount that you withdraw from your retirement accounts in the form of income will be taken into account.

Retiree loan borrowing options

Secured loans are still easier to borrow as you can set collateral against the loan but as long as unsecured loans are concerned, they’re tough for a retiree to borrow as there is no collateral to assure timely payment and hence the interest rates will also be pretty high. Here are few loan options combining secured and unsecured.

MORTGAGE LOAN

The most common kind of secured loan is definitely a home loan which carries your home as collateral. However, the income of the retiree is a major setback, more so when most of your income comes from savings or investment earnings.

CASH-OUT REFINANCE LOAN

When you refinance your existing loan with an amount that is more than what you owe and less than the value of your home, this is called cash-out refinance loan. The extra amount that you make is the secured cash loan. This will also extend the time that it take to repay your mortgage loan.

DEBT CONSOLIDATION LOAN

As the name suggests, a debt consolidation loan is only designed to consolidate debt. It is more like refinancing your current debt. This will mean paying off the debt throughout a longer period of time with lower payments. The new interest rate that you pay may be lower than your present rate or may not be.

PAYDAY LOANS

Anyone including retirees can qualify for unsecured short term loans like payday loans. You may check out websites like www.PaydayMe.com to get short term loans during an emergency when you’re sure that money will come in again with which you can repay the existing payday loan on time.

Therefore, when you’re a retiree who is thinking of ways in which you can fund your emergencies, you can take into account the above mentioned options.

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April 15, 2018

Is Britain’s debt detrimental to pension performance?

dealing with debtsAs the saying goes—out of sight, out of mind. And for many, this has been the motto for their pensions. However, the launch of auto-enrolment schemes, increased media coverage and a growing awareness of retirement has shifted these attitudes.

According to the Q2 2017 edition of the Tackling The Savings Gap Consumer Savings and Debt Data report, 598,000 employers were enrolled in a workplace pension scheme. Over the 12-month period, they contributed a collective £87.1 billion. With the popularity of personal pensions continuing, it’s clear to see that Britain is certainly more aware of their pension responsibilities.

Could our other financial commitments be holding back our personal pension savings? The Q3 2017 edition of the report suggests so. During the quarter, 45% of survey respondents failed to make a pension contribution; this was most common in 45 to 54 year-olds (47%). 18 to 24 year-olds had the second largest proportion of people who failed to contribute (44%).

Consider the above in relation to what the report also found. Findings show that a third of its respondents worry about money on a daily basis, while 37% admitted to lying about their debt. Perhaps then it’s not because of a lack of awareness; it may be because their financial situation simply won’t allow them to make a contribution.

Pension contributors added £203 on average to their pensions during Q3 2017. In contrast, the average amount of debt taken on by UK consumers each month stood at £370—significantly higher than the amount put towards their pensions.

A total of £143 per month is spent on average on purchases that are later regretted, the Q3 2017 report found. This includes purchases across food, clothes, alcohol and other items. If this money was invested in a pension instead for the full span from age 30 to 65, it could translate into almost £320,000. Based on the fact that Brits believe they will need £23,000 annually to live comfortably in retirement, this amount would be enough to fund 13 years of retirement.

This monthly spend breaks down to £4.70 per day. As the above example shows, investing this amount instead could lead to a comfortable start to your pension pot for retirement. As such, we shouldn’t underestimate the impact that small yet regular contributions can have. This underlines the importance of better financial management to allow us the capacity to add such funds to our pension pots.

To help you learn more about how much you could potentially need for retirement, True Potential Investor has created the Saving For Retirement: How Much Will You Need? quiz. By answering a series of questions, you can get an idea of the potential pension pot you’ll need—take the quiz today to find out more.

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January 10, 2018

The Benefits of Using ETFs to Build Retirement Wealth

mutual fund detailsExchange Traded Funds (ETFs) are a great way to build an effective retirement portfolio through your Roth IRA or IRA contributions due to their low expense ratios. ETFs offer investors exposure to a diverse set of assets. They are currently one of the fastest growing investment products in the world due to the low expense ratio and their high diversification. ETFs can be traded through virtually every big-name brokerage available. Brokerages oftentimes will partner with ETF providers to offer free-commission on ETF trading, which helps you save even more money on expenses!

ETFs are effectively mutual funds, but trade like any other stocks. When you purchase a single ETF share, you gain access to an entire index such as the S&P 500 or the Dow 30. Or, investors can purchase market segments (e.g., financial, industrial or healthcare sectors) within a given country. Thus, making them a highly efficient investment tool. The substantial growth in the ETF market has led to a number of new, distinct ETF products such as the MSCI All Country World Minimum Volatility Index or the Dow Jones EPAC Select Dividend Index. The Dow Jones EPAC Select Dividend Index provides great dividend growth income and that can be reinvested or used as cash flow for other investment products.

Here are main benefits in investing in ETFs:

1. Flexibility: With a number of distinct indexes and options, individuals with retirement accounts can trade commission-free AND can obtain exposure to countries all over the world. If you choose, investors are able to gain exposure to the entire world if you sure please. In addition, ETFs offer the flexibility to be traded as a stock for a market price.

2. Cost Efficiency: ETFs based on indexes are in one transaction that trade all components of the underlying index. Investors are usually not charged any entry or exit fees and management fees are substantially lower than mutual funds. For example, ETFs expense ratio are usually around 0.1 – 0.8% whereas mutual funds are about 1.40%

3. Transparency: ETFs are transparent due to the fact that they list on regulated markets and track transparent indices. The ETFs are traded through the day and there are highly competitive bid/ask prices provided by market makers ensuring ample liquidity.

ETFs are really a simple form of mutual funds and can be used in a variety of ways. If you start investing early in a set of 3-4 mutual funds that offer differentiating diversification, you will be in a great position for retirement. Investors should set aside a predetermined amount of capital each month to purchase ETFs. Given their low expense ratios and flexibility, investors can sleep well at night knowing that their money is being put to good use and is generating income while they are enjoying life.

ETFs are not a guaranteed investment. Be patient with the market and continue to purchase additional ETF shares regardless. The old saying is: “I would prefer my time in the market rather than timing the market.”

Millionaire Mob is a former investment banker that hopes to offer fair value on Wall Street while traveling the world. I enjoy helping others in achieving financial freedom whether that is through dividend growth investing, passive income techniques or travel rewards strategies.

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June 1, 2017

UK pensions map: how much is being saved?

On average, we add £325 to our pension pots every month, but which area of the UK is best at saving? Find out more from the infographic below from personal pension provider, True Potential.

True Potential - UK Pension map

Created by online investment service company, True Potential

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April 16, 2017

Burgeoning Financial Trends for 2017

financial trendsThe new year and the new presidential administration has ushered in a host of fiscal changes that could impact your wallet. Safeguard your money and act in the best interest of your household or business’s bottom line by learning more about the growing financial trends in 2017.

Rising Interest Rates

Interest rates are on the rise in 2017, creating a financial environment that is geared more toward saving than borrowing. In fact, people who put money into personal savings and retirement accounts have the opportunity to create and grow their wealth. Alternatively, people who need to borrow money face paying higher interest rates and making larger payments on their loans each month.

The higher interest rates correlate to the expanding economy and the creation of more openings in the American job market. As unemployment rates go down and American workers may more money, they have the unique opportunity this year to save money and take advantage of rising interest rates that could lead to greater personal wealth. Capital management services offered by professionals like James Dondero are also expected be more in demand this year.

Freelancing in Retirement

This year also has the makings of being the ideal time for retirees to make some extra cash doing side gigs. It is no secret that retirees are living longer and often outliving the money they have set aside for this time in their lives.

Until recently, however, people in this age demographic had few chances to earn extra cash. Many employers did not want to invest time and effort into training employees who would leave the workforce sooner rather than later.

However, thanks to companies like Uber and Lyft that rely on freelancers, senior citizens now have the opportunity to work for themselves as independent contractors and earn money that will not put their Social Security incomes in jeopardy. Along with driving for Uber or Lyft, they also can freelance as writers, artists, tutors, and other independent contractors.

Investment Portfolio Automation

This year also shows signs of increasing the demands for investment portfolio automation. This automation makes investing with financial pros like James Dondero easier and essentially creates an ideal if not passive way for people to put money into the stock market without putting forth any unnecessary effort on their part.

Further, this automation shows promise of being tax efficient and low in cost. Moreover, it costs the same if not less than an exchange-traded fund.

About James Dondero

James Dondero began his career in the financial industry in 1984 and has since become one of the leaders in capital and investment management. As the co-founder and president of Highland Capital Management, L.P. in Dallas, Texas, Dondero also serves as the CEO and chairman of the board at HCM Acquisition Company. Before founding Highland Capital Management, L.P. he worked for top financial companies like American Express and Protective Life.

He graduated with top academic honors from the University of Virginia’s McIntire School of Commerce with dual degrees in finance and accounting. He is certified as a Certified Management Accountant as well as a Chartered Financial Analyst. He also volunteers for Dallas-based charities and organizations like the George W. Bush Presidential Library and Institute, Education is Freedom, Snowball Express, and the Perot Museum of Natural Science.

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