Where are you Going to Live?

A budget allows you to keep your fingertips on what you are spending as opposed to what you want to spend. As such, a budget will change your spending habits and allow you to make comparisons from one month to the next. Make sure, however, that a portion of your monthly income goes toward savings. Raise your hand if you know what the average person spends on eating out. According to the U.S. Department of Labor, the average person spent $2,619 dining outside the house in 2009. How much did we spend on transportation?

The riskier the fund, the more money you stand to make — and lose. Annuities, which are sold by insurance companies, are popular for retirees who want to receive a steady income. The company can dole out payments on a monthly, quarterly or annual basis. You can even get a lump sum payment. Fixed annuities make guaranteed payouts. Although they might have fancy sounding names, annuities, money market accounts and CDs are different ways of investing. Annuities provide a nice tax shelter because the money you invest grows tax-deferred.

Located just outside Mobile, Ala., the small town of Prichard has seen its share of hard times. The story of Prichard is a cautionary tale of what could happen when retirement plans crash and burn. But nothing could compare to what happened when retired town employees, including the fire captain and police officers, stopped receiving their pension checks. The move forced many retired workers to reluctantly join the job market again. The retired fire marshal died; when his body was found, there was no electricity or running water in his house. The retired fire captain went to work as a security guard. Pension experts told the town that its retirement fund would run out of money by 2009. It did.

There are many tax advantages to an IRA. However, if you withdraw the money early, you have to pay a penalty and taxes. In a Roth IRA you pay the taxes now when rates are lower, not later when taxes are higher. In a tax-deferred IRA you don’t have to pay the taxes until you begin withdrawing the money when you retire. How this all works is very complicated. There are two main types of IRAs. The first is a tax-deferred IRA. The second is a Roth IRA.

If you take money out of your retirement accounts it will lessen the amount of money you have to invest. Budgets are wonderful planning tools that can give you a clear idea of what you own and what you owe. If you keep on top of how much money comes in and goes out, you won’t feel like you’re living paycheck to paycheck. A budget is also a means to reach your goals. As such, the return on those investments won’t be as great, which can crack your nest egg.

In most instances people don’t plan for their retirement. To help stave off economic ruin in retirement, or to make sure your golden years are comfortable, financial planners advise clients move fast to build their nest eggs. The key is to save. The retirement picture in the United States is bleak. Remember Enron? Its collapse in 2001 wiped out the retirement savings of thousands. In other cases, bad decision making or official malfeasance ruins their lives.