The need for Additional Voluntary Contribution and its Positive impact on the Life of the Retiree-Odunze Reginald C

 

source of the picture is ftadvisers

The need for Additional Voluntary Contribution and its Positive impact on the Life of the Retiree

The idea of additional voluntary contribution stems from the inability of the pension pot to take care of the pension’s expectations, expenditures, medical expenses and other issues arising from the pension contributions.

Most retirees often discover that their pension Pot is not enough to carry them through  and that bring us to the idea of voluntary contribution. Most retirees develop one problem or the other when they discovered that their pension pot is not enough to carry out coupled with the rising cost of living and the sudden realization that the money they saved will not be able to cater for their old age.

Old age is what people pray for  right from their upward age of 15 years and I wonder why people feel terrible uncomfortable on advancing old age. The result has been that bleak rather than happiness.

And according to Richard Evans in an article in the Telegraph Newspaper he noted that “more than a million people have started a self-invested personal pension or Sip since their introduction in 1989, although many run their Sipp with help from a financial adviser.
These plans offer a simple and tax-efficient means to save in a wide variety of investments, from shares and bonds to cash and even, for more sophisticated investors, assets such as commercial property.”

The pension Reform Act 2004 and the pension Reform Act 2014 was explicit on that and it states in section 9 subsection 5 , Any employee to which the act applies may in addition to the total contribution being made by him and his employer make voluntary contribution to his retirement savings account.

The need for voluntary contribution came as a result of the insufficiency of pension contribution and the inability of some private sectors to pay accrued pension rights. The need for accrued pension stems out of the desire of the Federal Government to cater for the period preceding 2004, where an employee have put in number of years to the organization. But a situation where the organization what do the retiree do,  of course nothing , but if there is additional voluntary contribution , it can take of any shortfall in the expectation   of the retirees pension pot.

Retirees should make it as a duty to check their pension from their Pension Fund Administrators or they make online pension calculator which has in built mechanism capable of calculating the contributor’s likely expected values and returns

In voluntary contribution, the amount is irrelevant, it is better to start small, so that you don’t feel unsafe especially when your salary is meager, and couldn’t carry through you through. 

REGINALD ODUNZE.COM

What happens when Americans fall into the holiday shopping debt trap-Mandi Woodruff

Five years since the Great Recession officially ended, shoppers are feeling twice as generous when it comes to their holiday spending.

Americans plan to spend an average of $861 on holiday gifts this year, up 8% from 2013 and double their meager $417 budget in 2009, according to the American Research Group. (Meanwhile, a Gallup survey found that Americans will spend an average of $720 on gifts this year, slightly higher than their $704 estimate last year.)
This is no doubt a good sign for retailers — especially given those ho-hum Black Friday sales reports — but just because consumers plan on shelling out bigger bucks this year doesn’t necessarily mean they can afford it.
Holiday budgets may have swelled but wages certainly haven’t. 
Over the last 30 years, median hourly wages for Americans rose just 6.1% (0.2% annually on average) and the lowest-paid workers (the bottom 10%)  actually saw their earnings decline by 5.3%, according to the Economic Policy Institute.  
As such, household earnings have barely kept pace with the rising cost of fixed expenses — the roofs over our heads, the cars in our driveways, and the food on our tables.
On top of that, less than half of Americans said they would be able to come up with cash for a $1,000 emergency expense in a recent survey by the Consumer Federation of America.
And yet, we’re hitting the malls anyway. Should we be worried?

“If we continue to live over our means, we’re just going to have to repeat the lessons we learned during the recession,” says Tiffany Aliche, founder of "The Budgetnista," personal finance educator and author. "Not only are we not saving but we’re spending what we can’t afford.”

Larger families arguably have an even more difficult time stretching their dollars around the holidays. When Aliche lost her job as a schoolteacher during the recession, she and her family implemented a new holiday tradition: each Thanksgiving, she and her four sisters put their names into a hat and agreed to purchase a holiday gift for only one person. For their parents, they pooled their cash and bought a group gift.

“It’s fun but you have to get everybody on board,” she says. “It’s much easier for everybody to put in $50 than me purchasing a $250 gift by myself.”

Culled from yahoo finance

The retirement threat few people think about- Steve Vernon

Thinkstock

Financial risk can be notoriously hard to spot, but there is one thing people can be certain of -- we get old. So why do so few people buy long-term care insurance?

In part, it's because only about 20 to 30 percent of the U.S. population is optimally suited to benefit from such coverage, according to a recent study by Boston College's Center for Retirement Research (CRR). But there are compelling reasons to make long-term care insurance a key element in your retirement planning.

For one, long-term care is expensive. In 2012, the average annual cost for a nursing home was $81,030, and the average hourly rate for home health care was $21. Yet only about 13 percent of the population buys long-term care insurance, which could help defray these costs. In theory, if consumers were rational planners, they'd buy insurance to mitigate the risk of running through their retirement savings on care.

Long-term care is defined as assistance with the basic activities of daily living, such as dressing, eating, taking medications, showering and using the bathroom. So it isn't medical care. As a result, neither medical insurance policies nor Medicare pay for most long-term care expenses, although Medicare will pay for up to 100 days in a skilled nursing facility (SNF) following a hospital stay and some medical insurance policies cover a minimal amount of assistance.

Medicaid, on the other hand, is a program operated by the states that pays for long-term care for indigent citizens; it usually requires that an individual first draw down most of their financial assets in order to be eligible. The availability of Medicaid has been cited as one reason why people don't buy long-term care insurance.

The CRR study calculated a "willingness to pay" ratio that analyzed the percent of the population who could expect to benefit from a long-term care insurance policy to cover costs that aren't paid by Medicare or Medicaid. The CRR study took into account:

• The likelihood of ever needing nursing home care in a lifetime, estimated by the CRR as 44 percent of men and 58 percent of women who had attained aged 65.

• The duration of such care, estimated by the CRR as averaging 0.88 of a year for men and 1.37 of a year for women.

Using the CRR's methodology, 19 percent of men and 31 percent of women had a positive "willingness to pay" ratio. These ratios are higher than the 13 percent of the population that buys long-term care insurance, so there's still a significant coverage gap.

So what's the bottom line for you? Consider the possibility that you could one day face potentially ruinous long-term care expenses.

Notably, the people most vulnerable to this threat have substantial retirement savings, since they won't be eligible for Medicaid until their savings are exhausted. Women are particularly in danger, since wives tend to outlive husbands (This is illustrated by the fact that the CRR's willingness-to-pay ratio is much higher for women than for men.)

Everybody should have a strategy to address the threat of long-term care expenses, which can include some combination of the following:

• Hold home equity in reserve as a source that can be tapped in case long-term care is needed (which might argue against using a reserve mortgage to generate retirement income).

• Buy a long-term care insurance policy.

• Maintain a substantial investment reserve that isn't tapped to generate retirement income, or only use interest and dividends for retirement income and hold the principal in reserve for long-term care costs.

• Be aware of lower-cost alternatives to a nursing home, such as a residential care facility for the elderly.

• Be vigilant about taking care of your health to reduce the odds of eventually needing care.

• Move close to family who could potentially take care of you, but make sure they're willing and able to provide this care.

With respect to this latter point, be careful! The need to provide care for elderly parents often derails the career and retirement plans of older workers, most often women, who typically reduce their hours or quit their jobs to care for an elderly relative.

Studies like the CRR analysis look for logical reasons why people should or shouldn't buy long-term care insurance.

Ultimately, the most likely reason people aren't buying such insurance is that the perceived threat of long-term care is so far in the future that it's a lot easier to ignore it. People just hope that they won't need expensive long-term care. But hope is not a strategy.

Culled from CBC money watch