Why Pensions are a Good Idea

Think about it: not only do you have a secure retirement, but you don’t have to worry about everything else.

Pensions allow you to take the best of both worlds. Your company keeps its income flowing while giving you more control than ever before. Just because the benefits are paid through a traditional pension doesn’t mean they have to stop work.

You can continue working and your company covers your income. If you decide you want to retire, you can do so while still receiving the pension payments your employer would have provided.

No matter how old you are, when the time comes to retire, you can do so with the help of your current employer. So here’s what’s really important.

Benefits from a traditional pension only come if you’re working. If you retire, you have nothing to fall back on except income from social security. It is possible to defer benefits from Social Security, but it does require an additional year of deferral.

Rethinking pensions Unfortunately, once the formula changed in 1983, to index to changes in the real CPI, there is no guarantee of benefits for people who were under the full retirement age when the changes were implemented.

Now, people who were then 55 have a couple of options: draw down their funds, or work until 70 and continue receiving income from the pension.

Now, many companies are asking employees about options that encourage them to work longer. These include some versions of healthcare coverage, and even matching 401(k) contributions, which might entice your employer to keep you on the payroll longer. You can still take benefits from your old employer by working until 70.

But the benefits stop at full retirement age.

So what can be done?

First, employers should adopt the best practices of private companies that have been offering retiree benefits for a long time.

That means flexibility in terms of when and how you quit, plus no reduction in payments for leaving early.

You need to understand that Social Security should not be the only source of income you take from your old employer. When you take benefits from a company that is paying you, you can get them without much problem. You just need to make sure you have covered up any shortfall.

If you plan on retiring at any age, there are ways to check your expected life expectancy. If it is lower than your current age, you should take advantage of them before you retire.

And of course, you should know if your employer has a career income plan in which there are no charges.

This would be the best option if you’re a person nearing retirement age, or you have health problems. Another option is a pension that requires contributions of 3 percent to 5 percent of wages, with a cap on your payments.

This type of pension has a high benefit for both the individual and the employer. You also have less risk. How the cost of calculating pension benefits is calculated is debatable, but if you’re wealthy, you’ll be willing to pay.

And the other option is a lump sum.

This would be paid over a fixed period of time. But if you fail to meet your obligations, the result is the cancellation of your pension.

This type of pension is available to employers that give permanent benefits, such as Social Security. Check with your employer.

You should find the right benefits for your family, savings and specific living circumstances. If you have a need to pass the money on to family members, you should work with your human resources department.

Also, not everyone can work until 70. For example, you may need to work until 70 to support yourself in retirement and your partner in his or her retirement. There are ways to get around the age.

For example, the employee can get medical or terminal care in the hospital when someone is 66 and still in his or her pension plan.

How To Start Saving While You’re Young

You probably have a knack for math.

So one day, you realize you have saved very little money for retirement.

I’m sure there are many reasons why this happens, but many people take a rough estimate at age 35 and think that’s going to set them up for life.

You should never take your savings lightly because every year you delay saving more money comes at a price.

How much are you saving now?

Stop and consider the following question: How much do you need to have saved for retirement if you plan to earn 8% or 9% returns and live in a place with weather that’s at least fair?

There’s not much to do but write a check

There’s nothing much to say other than you should always continue to put money into your retirement plan, but you need to be responsible.

What’s the one mistake you’re making? Look at the mix of income you have coming in compared to spending and debt.

A high-paying job tends to reduce income, and you can’t simply invest extra money into a 401(k) and let everything sit there waiting for a lifetime of returns. You have to save more each year.

My father, a board certified accountant, could never save enough for retirement. He typically maxed out the 401(k) accounts that he had access to and then paid down the debt whenever he could.

When he died, I couldn’t imagine saving more, because the thought of having to face those bills was one reason he hadn’t saved.

What do you need to save for retirement?

What goals have you set yourself?

Do you want to take that corporate pension, or are you just seeking retirement savings opportunities to live the way you want?

Have you started saving for retirement? You probably have a knack for math.

So one day, you realize you have saved very little money for retirement.

Facing this daunting challenge can be pretty intimidating, but don’t be afraid to seek the help of an expert.

Look into IRAs, Group Insurance, Regular 401(k) plans, or other types of retirement plan.

Try to put that $100 on a prepaid card so you can spend it as you please.

But always have three months worth of living expenses saved up in cash to help you meet your monthly budget and meet any expenses that may arise.

Stocks can have bad years, too, but unlike bonds, they will allow you to capture at least some appreciation, even if there is some volatility along the way.

Over time, you can have more confidence in a solid stream of monthly payments from a regular investment.

Too many people think they have time on their side. But the truth is, that means waiting until you’re at age 65 to start saving, which means leaving money on the table.

And that puts you behind not only the eight ball, but also behind your own peers. Stocks like dividend-paying ones are easy to set up if you can only use a tax-advantaged account, such as a Roth IRA or 401(k). But risk can often be greater in this space.

Stocks do come with risks, but if you have long-term beliefs, that can be a benefit. You need to plan ahead, you can’t sit back and hope for the best. There’s so much at stake, and you must be disciplined.

Knowing when is the best time to sell your shares

We have all been through the heartbreak of being unable to sell our shares. The shock of hearing your broker say that “the main market is quiet right now” and it is simply too difficult to locate enough buyers, or having to re-subscribe to keep the stocks you currently hold. Here are the steps that you need to take in order to maximise the value of your shares.

Firstly, contact your broker. If you have an adviser, they are the best route to follow to sell your shares and for the minimum amount that you can.

You will need to check that your brokers have the most up-to-date information available, so firstly a “pricing model” is essential. This allows the broker to work out the amount of money that your shares are currently worth.

The broker may ask you to put in your existing values to give an idea of what it could be worth if you sell now. If your broker has already provided this information then it is their job to check the market to ensure that it is even.

You may also need to get your broker to confirm the price that it would take to sell these shares. You may need to seek independent advice to get a realistic valuation on these shares.

How to do this? Contact an independent professional to run a value. They will aim to cover every possible scenario, not just the one that they would like to happen. They will want to know, for example, how long will it take for your shares to adjust to the market price?

They will also try to help you put together a list of prospective buyers that would make you feel confident about the sale. You should get your broker to put together the contact details of these buyers.


Secondly, ask your broker for a valuation of your shares, which will also cover all the known effects of the market. This could include the various indices used by your broker in order to conduct their modelling exercise, so make sure that you ask your broker what the expected returns are for your specific stocks. For example, do they use the FTSE100, MSCI World, S&P 500, DJI Index etc?

What will it take to sell?

Make sure that your broker is aware of every fact that you have access to in order to get an exact value for your shares. For example, if you own shares in a specific company, the most accurate valuation will take account of the following: the market cap of the company; the dividend yield for each share, the growth that the company has had in the past 5 years; and what the company’s share price has been doing over the last year. If you own shares in a company that has recently had a positive statement then there is nothing more that can be done.

If you don’t have these key pieces of information in order, you may need to give your broker some information about your prospects.

If you are the owner of a company that has lost ground due to management, scandal or worse, you may want to list how you have lost the position and why. For example, can you show us that you now have a lower market cap, lower dividends or worse growth than the company? It is also possible to do this by submitting your report along with the valuation of your shares.


One of the main risks for shareholders is the possibility of re-subscribing to hold the same shares. Most brokerages have the ability to re-subscribe to a stock by placing a financial restriction on it. This can mean that you cannot re-subscribe if prices fall. This can reduce the value of your shares if you don’t realise that your losses have been reduced by this process.

You can contact your broker to see if this restriction is in place for any shares you hold in your portfolio. More mature stocks usually have a restriction of five days. The more recent an issue is, the longer your broker will have to re-subscribe to allow you to hold your shares. If you know that a particular issue has been due to be re-subscribed for a long time, then make sure that you don’t re-subscribe any time too soon.

How to predict a bull market

The first rule of being a bull market is that you don’t want to get out before the party is over.

There is a world of difference between investing in a poor company in the dying months of an improving bull market, and the young investor who believes that in the next few weeks everything will go up. He is doomed to disappointment, especially if it is a retail investor or one who likes to pick stocks.

The most important mistake to make when investing in a market that is likely to last is to not get the signals early enough. Investors forget to monitor market conditions at a time when there are no historic examples of trend reversals that allowed for time to develop.

The most common myth is that the average market continues its rally because a quirk of calendar timing is keeping the price up.

In reality, this hypothesis only becomes viable around the first anniversary of a new market low and rarely is there a full year of further gains between the trough and the peak. Research shows that when the markets experience a decline and price has not yet made a new high in the new year, the likelihood of a new high within three months is very high.

Bull market image

In other words, just because the past three-month period shows weakness and stock prices have yet to make a new high, it is not in the price yet. There is no hope of a gain in value to lead us to believe we have to wait until the next bottom to buy.

Just because the past three-month period shows weakness and stock prices have yet to make a new high, it is not in the price yet

A glance at charts can confirm a bear market when a bearish move shows a bearish cross, but neither the bearish cross nor a bearish divergence is necessarily a sign of a market in bear territory.

The most telling indicators — like commodities, who are indicators of investor sentiment, or interest rates, who are indicators of the health of the economy — are more positive than negative. It is this bottom-up observation that works best with individual stocks.

Some investors do the best work within their own portfolios by waiting out a bear market and missing out on the first earnings season when enthusiasm is at its peak, when the business cycle is strong, or even when the Fed tightens — a cycle which has a bearish correlation with a stock market bear.

It is important to pick stocks that appear to be showing signs of deteriorating fundamentals. However, since stocks are inherently cyclical and will reflect the fundamental changes over time, the strength of their relative price performance is far more important.

I suspect that over the next few years it will be far easier to predict when the markets become overvalued and overbought than it will be to predict when they are undervalued and oversold. The important thing to note, however, is that the markets may be oversold at the same time that they are overvalued.

How to start investing in 2020

We trust those who have millions in the bank and advise us on how best to grow it to be able to make sensible decisions on how we invest our money. Not so many are skilled at protecting or creating wealth.

Most of us treat our existing money with indifference, ignoring opportunities for growth and too often entering into ill-judged investments because of the illusion of control.

But by looking around, there are some straightforward steps that we can take to feel more confident about managing our own wealth.

Finding an adviser Most millennials have never known anything other than working full-time or part-time jobs, so the experience of working with financial advisers has therefore been much more limited.

So, rather than looking for someone in your network with a deep knowledge of the markets, we recommend you search one of the many new investment-related services available.

These companies, many of which have sprung up since the financial crisis, give an increasingly diverse set of data points to help you decide which service is the best for you.

There are also a range of useful research reports and forecasts. For example, the Wealth-X Investment Yearbook reports can offer a real-time snapshot of your personal wealth if you are using its online brokerage service. The researchers at Vertex Advisory think of themselves as risk-conscious without being overly conservative.

It is not just about deciding what services are best for you. If you are happy to build your portfolio yourself, you will find it much easier and cheaper than dealing with financial planners, where fees can regularly approach 6 per cent.

Our own research (the Wealth Intelligence Panel) suggests that only around 20 per cent of millennials allocate more than 5 per cent of their portfolios to financial advice, while five per cent are saving in a tax-efficient wraparound investment fund managed by a fee-only adviser.

Many are really just repeating what has come before. Gaining a view There are many sources of potentially useful data.

As investors, we are fortunate to be able to obtain representative shares through our employer’s pension scheme. We also know that our parents have their own personal savings and investments managed by a professional advisor. Others we know own bonds and shares. Some are making good returns through extra finance.

The stock market, especially big, well-known blue chips, does well at first, but rapidly loses its appeal in uncertain times. The balance changes to bonds, which do well until a serious downturn happens. My grandparents owned shares for more than 60 years but are now buying property to generate capital gain.

Building a portfolio

Bringing it together Many millennials are leaving their money in cash, complicating matters for advisers. The big banks in particular offer a choice of savings accounts with varying rates and conditions, but it is always a good idea to shop around.

Many of us spend a significant amount of our working lives in university or work without control over our savings. It is difficult to see the investment returns you might get if you had a more meaningful horizon, and it is important to control your personal finances if you want to enjoy savings and invest for the future.

By regularly exercising control of your money, you can ensure that it goes further in a very uncertain future, which will in turn help you feel confident about your investment returns.

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