How to Plan Your Retirement
Posted by admin in Retirement on November 17, 2011
Planning for your retirement is one of the most important things that you can do. You need to start planning early to ensure that once you do retire you have enough funds to last you through the rest of your life. You need to plan for unexpected expenses, any possible illnesses or emergencies that may occur and any changes in the economy. Having a SMSF (Self Managed Super Fund) is one way of making sure you are prepared for your retirement.
The early working years
It is never too early to start planning for your retirement. When you are 20 the last thing you are thinking of is your retirement, but between the years of 20 and 35 you need to start considering where you want to be in your later years. It is hard to imagine not being able to work but one day you won’t be able to, and there will come a time when you want to enjoy your later years and not have to work, so you need to start preparing early to have the necessary funds to allow you to retire comfortably. Firstly you need to avoid debt as much as possible. Get into the habit of not living beyond your means. Be careful with credit cards, car and personal loans. Understand the benefit of investing. Start investing your money early and then reinvest any earnings. Over 40 years you could turn $10,000 into $500,000. It is a good idea to take out income insurance as you never know when the unexpected can happen, like unemployment, injury or illness. It is likely that you will have industry superannuation, which your employer will have to make contributions to, but it pays to make voluntary contributions to it as well. You can also have your own SMSF.
The middle years
Once you are more established and have a family your needs change. You will need to provide for your family, particularly if something happens to you, so having life insurance can be a good idea. A good way to take the financial pressure off yourself when you retire is to make extra mortgage repayments. By paying just a bit extra each month this can significantly reduce the duration of your loan and save you thousands in interest. You should also consider long term investments, so it is a good idea to employ the help of a financial planner. If you have children you may also want to put money away in a special fund for school fees. Read the rest of this entry »
New SEC Rules Strengthen Money Market Funds
Posted by admin in Money Market on November 14, 2011
In 2008, investors feared the collapse of money market funds. The Securities and Exchange Commission (SEC) established new regulations to help stabilize the industry. Now, concerns about the European debt crisis are putting the regulations to the test.
Money market funds invest in short-term, high-quality securities such as commercial paper, certificates of deposit and government securities. The goal is to maintain a net asset value (NAV) of $1 per share, and many investors consider these funds as safe as cash. However, during the Great Recession, some investors lost confidence in the safety of money market funds because the market in which they transact dried up. Some were close to falling below a $1 NAV- referred to as “breaking the buck.” This became a reality for the Reserve Primary Fund. The fund was crippled by losses on debt it held from Lehman Brothers when Lehman filed for bankruptcy in September 2008. The fund’s NAV dropped to $0.97 per share, which was only the second time a money market fund had ever broken the buck. Redemption requests were suspended, and the fund began liquidating. As of July 2010, about 99 percent of the fund’s assets as of the day of the bankruptcy filing have been returned to investors, and the fund is still liquidating.
Following the collapse of the Reserve Primary Fund, investors removed more than $300 billion, or about 14 percent, from taxable prime money market funds, according to the Investment Company Institute. To calm investors’ fears, the U.S. Treasury created a temporary guarantee program. There appeared to be a real threat that the money market industry would have collapsed without that federal guarantee.
Since the onset of the European crisis in 2010, news about the exposure of money market funds to banks in the region – particularly in Portugal, Ireland, Italy, Greece and Spain – have investors wondering if a repeat of 2008 is on the horizon. A reported 14 percent of money market fund holdings are issued by foreign banks, a large portion of which are in Europe. With the nationalization of banks in Ireland, unemployment of over 20 percent in Spain, and governments across the region implementing austerity plans, European banks face a tough climate. Investors’ concerns are understandable.
However, the new regulations issued by the SEC in February 2010 have helped address many of the issues that plagued money market funds in 2008. Read the rest of this entry »
What You Need to Know About Inheritance Tax
What is the increased threshold?
Married couples and registered civil partners can effectively increase the threshold on their estate when the second of them dies – to a maximum of £650,000 in 2011/12. Their personal representatives must claim the unused Inheritance Tax threshold or “nil rate band” of the first spouse or civil partner so that it is available to set against the estate of the second spouse or civil partner.
Who is responsible for paying the tax?
Inheritance Tax is payable by different people in different circumstances. Usually, personal representatives pay it using funds from the estate of the deceased. Trustees are usually responsible for paying Inheritance Tax on assets in, or transferred into, a Trust. Sometimes people who have received gifts, or who inherit from the deceased, have to pay the Tax – but this is not common.
How do I find out if Inheritance Tax is payable?
To find out if the Tax is due on an estate, you must first value the estate. i.e. calculate the value of all assets owned at the date of death – including any property, possessions, money and investments – and deduct any debts owed, including household bills and funeral expenses.
The estate also includes the deceased’s share of any jointly owned assets and the value of any assets held in a trust from which they were entitled to income.
Any gifts that the deceased may have made in their lifetime should be reviewed to see if they are exempt and, if not, they must be included in the overall value of the estate.
What exemptions and reliefs are there?
Sometimes, even if your estate is over the threshold, you can pass on assets without having to pay the tax. Exemptions and reliefs include:- Read the rest of this entry »