Retirement is one of the major end goals for many of us. After putting in a few decades of hard work we hope to be able to break free from the daily grind and do what really makes us happy. That could be starting a new career, traveling the world, or simply enjoying a slower paced lifestyle. Whatever your idea of retirement is, there are plenty of roadblocks standing in your way.

In a perfect world you will have enough money set aside so that come retirement day you have absolutely nothing to worry about. You’re free to carry out your plans without the added stress of wondering whether or not you’ll have enough money to pay the bills. Unfortunately, most people don’t have this luxury. Instead, they come to the realization that they can’t afford to retire and end up spending the later years in their life unhappy because they have to either keep working or simply don’t have enough money to do any of the things they had hoped. Here are five reasons most people will retire broke and unhappy.

1. Not Saving Enough

Not saving enough has to top the list because let’s face it, not having enough money in retirement is the biggest problem. How much money do you really need to have saved up by retirement to fund your dreams? Well, according to a recent poll I took on the site most people feel they need between 1 and 3 million dollars saved by retirement. So, ask yourself where you stand. Are you on track? Do you have some catching up to do? Or do you feel there’s just no possible way to save up enough money by retirement? Even if you are behind in savings that doesn’t mean you should give up. You still have many years ahead of you to make a difference, and every little bit counts. One thing is for certain, and it’s that not having enough money saved for retirement will have a negative impact on your lifestyle down the road.

If you don’t have enough saved up for retirement a few things are certain:

• You may have to work longer.
• You may not be able to do the things in retirement you planned on.
• You may become a burden on your children.
• If you encounter serious health problems it could mean liquidating your assets and going on Medicaid.

If none of those things sound like fun you better start saving. Even if you’re in your 30s and haven’t put a penny aside for retirement it isn’t too late. Take advantage of your employer’s retirement plan such as a 401(k) or 403(b) if they offer one. This is the easiest way to get into the habit of saving since it comes right out of your paycheck and it’s pre-tax money. Even better, if they offer a match you need to at least save enough to get the match. That’s free money! This is the only time someone else will put money into your retirement account for you, so don’t miss out.

Beyond that you should set up your own retirement account such as a Traditional IRA or Roth IRA. It doesn’t matter if you can only afford to put a hundred dollars a month into your account, but you have to start somewhere. Even just $100/month over 30 years earning around 7% will put over $120,000 in your account. Sure, you won’t be able to live off just that, but you can’t tell me that having an extra $120,000 for retirement is a bad thing. So, start small, and start right now. Every little bit helps even if you are getting a late start when it comes to saving.

2. Making Poor Investment Choices

Did you know that you can be on track to save enough yet still find yourself in the poor house come retirement? Just ask all of the baby boomers who planned on retiring in the next few years and were invested too heavily in stocks. Their retirement plans were destroyed in a matter of months. Granted, we don’t have crystal balls and can’t predict what the markets will do, but you can follow some basic investing principals so that you’re not putting yourself at unnecessary risk.

Poor investment choices go both ways. You have those who might be far too aggressive and can’t whether a steep decline shortly before retirement, and you have those who invest far too conservatively from the start and come up short in the end. You need to strike a balance and adjust your investment strategy over time as you age and your needs change. There’s no magic portfolio that works for everyone, in all market conditions, all the time. But it’s up to you to understand what you’re investing in, what the risks are, and how those investments play a role in your long-term objectives.

Finally, don’t neglect fees. You can’t invest without fees, that’s just a fact of life. But in most cases you can limit how much you pay. It may not seem like much, but even choosing investments with 50 more basis points in annual fees could literally cost you over $100,000 by retirement. The sooner you make smart investment choices and understand the impact of fees, the longer your money has to grow so that it can adequately fund your retirement.

3. Neglecting Health Care

Want to retire broke and unhappy? Just ignore the impact that health care will have on your retirement. As a member of Generation X you may have seen this first hand with aging family members. Even when it looks like someone has set enough aside for a comfortable retirement it just takes one major health incident to derail everything. This country obviously has some flaws with its health care system, but that doesn’t mean you have to just take it.

Health care issues can ruin your retirement before it even starts. Did you know that disability is the number one reason for bankruptcy and foreclosure in this country? If you’re still working and rely on your income to pay the bills what happens if you get hurt or become disabled, either for a few years or permanently? In many cases people don’t have disability insurance and even if they qualify for Social Security Disability it isn’t enough to pay all the bills. Just a two year disability in your 30s could be enough to severely impact your retirement, especially if it causes a financial hardship such as bankruptcy or foreclosure. So, make sure you’re adequately protected even while working so that you don’t jeopardize your retirement.

An even bigger problem often comes in retirement. Our health is unpredictable for the most part. We don’t know what kind of health issues we will develop as we age, and depending on what it is and treatment required it could end up quickly draining your retirement fund. Don’t just assume that having Medicare and a Medicare supplement will do enough to cover most of your medical expenses. If you are in a situation where you need long-term care you’ll find that this isn’t covered by Medicare. And don’t be fooled by the name, but most long-term care stays are only a few years. But did you know that the average cost of a year of long-term care is upwards of $50,000 or more? Just needing a few years of care could quickly begin to wipe out your retirement nest egg. If you run out of money paying for this care you’ll either become a burden on your family while they try to pay for or provide the care. If they can’t keep up you’ll be faced with liquidating any assets you do have, and then will likely end up on Medicare. I don’t think anyone looks forward to that kind of retirement.

Finally, a little preventative health care goes a long way in helping you live a long and healthy retirement. Take some time while you’re young to make smart health choices today so that you’ll have a better chance of remaining healthy in retirement. Some good habits today could end up saving you hundreds of thousands in health care down the road.

4. Retiring Too Early

Raise your hand if you’d like to retire earlier rather than later. Stupid question, right? For most of us we’d love to retire a few years early and get a jump on doing the things we planned on in retirement while we’re still young and healthy. Unfortunately, early retirement is simply in the cards for most people. It really comes down to underestimating what just a few years of early retirement can cost financially. For example, say you and your spouse would like to retire at 62 instead of 65. Assuming you each earn $50,000 after taxes at your current job those three years of retiring early will cost you $300,000 in lost income. Even if you elected to begin drawing Social Security at 62 that isn’t going to come even close to replacing that income. If you have a pension, chances are taking it at 62 is also going to be a reduction in payout. So, depending on what your income needs are during those three years you could be draining your retirement account by a few hundred thousand. When you factor in the 20 or more years you still have in retirement that early retirement could significantly reduce how long your nest egg will last.

And it isn’t just about tapping into your retirement assets early. Let’s not forget about health insurance. You don’t qualify for Medicare until 65, so if you retire early where are your health benefits coming from? If you’re lucky enough to have a working spouse you might be able to get by using their plan, but what if you both want to retire early and you don’t have any retiree health benefits offered by your employer? Get ready to open your wallet and pay for an individual plan. This is a common oversight by many early retirees as they get dead set on retiring early and then underestimate the significant costs of health care until reaching age 65. This can be a costly mistake.

Retiring early is doable, but you have to plan well in advance for it. That means saving even more money and thinking about the impact of early retirement, both in terms of your nest egg and health care. If you rush into it like many people you could be giving up a significant chunk of your later retirement just to quit working a couple years early. Weigh your options carefully.

5. Lifestyle Creep

It’s just human nature that as you earn more money and become more successful you generally spend a little more money on the finer things in life. After all, isn’t that what it’s all about? You want to make more money so you can enjoy some of the fruits of your labor. It’s great to be able to buy things that improve your quality of life, but this lifestyle creep can go too far. It starts out with small stuff, but eventually it turns into a bigger house, nicer cars, and maybe even more elegant vacations. If your income goes up but your expenses also continue to go up the net result is often zero. You make more, spend more, but still don’t have enough left over to save more.

As you go through your career and begin making more money it’s important to keep your spending in check. You still might opt for a nicer car or a bigger house, but don’t let those things interfere with your ability to save. When you start making more money make sure you treat your retirement savings like any other expense. If you’re willing to spend 20% more on a new car payment you should be willing to put 20% more into your retirement account as well.

If you don’t increase your saving along with your other expenses you’re going to be in for a rude awakening upon retirement. What you’ve done is built up this more affluent lifestyle and when retirement comes you’re probably hoping to at least maintain a similar lifestyle but without going to work. If you haven’t been increasing your saving over the years to match the increase in lifestyle, guess what. You’re not going to have enough money to fund that retirement. Then you’ll probably find yourself unhappy in retirement since you had to reduce your lifestyle or try to continue that lifestyle and end up broke ten years into retirement. Neither of which is a situation you want to be in.

Will You Retire Broke and Unhappy?

Hopefully not, but as you can see, it’s pretty easy to do. While it’s easy to retire broke, it’s just as easy to start putting measure in place today to ensure it doesn’t happen to you. Start by saving more. Think you’re already saving enough? Think again. Even if you’re just getting started for the first time, every little bit helps. Now that you’re saving you need to make sure you’re investing it properly. Take some time to learn about your investments, understand what they are going to accomplish, and keep expenses low. Next, don’t underestimate health care costs both now and in retirement. Take steps today to make sure poor health won’t drain your retirement fund. If you want to retire early, make sure you plan for it. Early retirement requires additional savings and considerations when it comes to health care. And finally, don’t let lifestyle creep during your working years ruin your retirement. Keep spending in check and adjust your saving accordingly so there are no surprises in retirement.

If you can keep up with all of that you should be able to enjoy a wealthy, happy, and comfortable retirement.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

5 Reasons Why You Will Retire Broke and Unhappy

Coupons have been around forever, but it sometimes takes a economic crisis like we have today to get people to start using them. On the other hand, many people have been using coupons long before we entered a recession. So, where do you stand? Have you been a coupon user all along or has the recession led you to begin using them? Or do you simply find them not worth the trouble and don’t use them at all?

For me, I use coupons if I stumble across one that is for something I know I’ll need but rarely do I actively sit down and cut out coupons on a regular basis. For one, the only daily newspaper that we have delivered is the Wall Street Journal and you won’t find any coupons in there. Another prohibiting factor is that our grocery store doesn’t print their own in-store coupons. Instead, they just have some killer weekly sales and I typically just base my shopping around the sales. But one area we have really took to coupons is with baby items. Baby food, formula, diapers, etc. You just can’t go without coupons for those things, and most of the time you get those coupons sent directly to you in the mail.

That being said, I wonder where people go for coupons if they don’t get them in their weekly newspaper? Surely there are some online sites that have some, but I’ve never really paid much attention. So, if you want to share your coupon experiences in the poll and comments it could help people like me who wouldn’t mind using more coupons but just doesn’t know where to look.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Poll: Do You Use Coupons?

Secret shopping has been given a bad rap lately.  Websites that promise “to pay you to shop” and then make you jump through hoops or sign up for their sponsors’ offers have done damage to reputable companies like Strategic Reflections, Beyond Hello, and Jancyn, who are hired by businesses to evaluate the level of customer service that they receive when frequenting their stores or hiring their services.  In fact, secret shopping scams are so prevalent that the people who ordinarily seek out sources of side income find themselves wondering whether a company is legitimate or not.  This article serves as a primer for those interested in working as a secret shopper by dispelling the myths commonly associated with independent contracting.

FACT: Secret shopping is a real, reputable way to make extra money.

FACT: Secret shopping allows you to work around your busy schedule.

FACT: You are in control when you’re a secret shopper.  You can accept as few or as many shops as you want and make as much money as you want.

Although it seems too good to be true, companies all over the globe are looking for people just like you to provide honest, objective feedback about the level of service that you receive at the businesses that you frequent on a regular basis.  For a few minutes of your time, you can receive compensation for your efforts in the form of cash, free merchandise and services.  A viable form of self-employment, secret shopping has its share of benefits.

Completed at a leisurely pace, secret shopping can supplement your income or take the place of a full-time job.  Making use of your keen eye and observant nature, you can leave behind the nine-to-five grind and live the kind of life that you have always dreamed of.  That is, if you heed the advice given here.

Throughout this article, I will address the topic of secret shopping and provide tips that will not only make you money but ensure that your hard work and efforts aren’t wasted.

Secret shopping is a legitimate way to make a living.  With a little time and some carefully worded direction, you too, will be on the road to becoming a successful secret shopper.

What is Secret Shopping?

Secret shopping is an inexpensive way for companies to obtain accurate feedback on the people that they employ and the service that they provide.  Big corporations hire secret shopper companies to observe their businesses so that they can expose problem areas and address customer concerns.

Secret shopper companies then assign projects to various Independent Contractors throughout their area and give them a time frame to complete their work.  Project guidelines are either posted on the company website or sent to the shopper’s email account.  Upon receipt of the shop, the company then compensates the contractor for their time and any of the items that they were required to purchase.

Finding the Right Companies to Work For

Websites stating that you can “get paid to shop” often require a fee to use their services and be registered in their databases.  Do not consider working for a company that charges you!  There are plenty of companies willing to hire you for free.  Make sure to check out their websites:

Trendsource

Shoppers Inc.

Service Intelligence

About Face: World’s Premier Shopping Company

Jancyn

A simple web search will help you identify which websites are legit and which ones are not.  Remember your objective.  You are looking to increase your income not your expenses.  Do not pay a fee to access databases containing secret shopping company information.  Visit a free website like Walletboosters for an updated list instead.

Secrets to Success

Secret shopping is a wonderful way to earn income.  If your current job isn’t as flexible and you would like it to be or doesn’t pay enough, adding a couple of assignments a month will surely help you in the long run.  Working for more than one company will also give you better opportunities.  This is especially true if you live in larger cities where secret shoppers are abundant.

Keeping Track of Paydays

Paychecks are usually cut once a month but some companies pay more frequently.  It is helpful to learn what payday is for each company you work for.  Keep track of the shops that you have completed and the pay for each one in a notebook or on a calendar.  No one likes to work for free!

Also remember to have money up front to purchase items.  This may be a requirement for a shop. Most companies reimburse you for your purchases.  There are no exceptions to this rule.  If you don’t have $10 to spend on lunch or merchandise from time to time, this is not the job for you.

Making the Most Out of Phone Shops

Some shops pay really well while others pay considerably less.  Some shops must be done in person while others can be completed over the phone.  It is best to do a lot of phones shops if you have free long distance or a fixed rate phone service.  An exceptionally large phone bill will squelch any desire to do phone shops in the future.  If you are concerned about this, it may be best for you to purchase a prepaid calling card or use a service like Skype or the MagicJack.

Super Supplies That Will Aid You in the Process

Having a few inexpensive supplies on hand will help you in the long run.  Purchasing a cheap stopwatch is a necessity.  Do not forfeit your reputation by not completing a shop correctly.  It is better to earn less for a shop than nothing at all.

It is easy to get confused if you work for several companies.  Record the due date of each assignment on the calendar.  Also, make sure to list the shop’s fee and the company’s pay period on there as well.  Keeping your glove box stocked with extra pens and paper will eliminate confusion.  A pocket sized notepad that can be carried and written in discreetly is also a wonderful tool for you to have.

Owning a digital camera will give you an advantage because most companies require strict documentation of the things that you observe.  Photo shops often pay better than others because they do require more work.  The smaller your camera is, the easier it is to conceal.  Keeping your identity anonymous is crucial and one of the most important things to remember when secret shopping.  Never reveal yourself unless instructed to do so by the company that you are working for.

Every company has established its own criteria for assignments.  In order to fill their needs, you must carefully read the instructions for each shop before completing it.  Gather all the supplies you need before hand and pay attention to the time frame given to you to finish the shop.  If problems do arise, contact the scheduler immediately.  Remaining communicative with the company that you work for is an absolute necessity.  Reliable internet and phone service is a must if you wish to work in this profession.

Make Big Bucks Referring Friends

Not every shop will fit into your schedule.  That’s where your friends and family come in.  By referring those to the companies that you work for, you accomplish two things.  You give the people you’re the fondest of extra income and the companies that you work for will pay you a referral bonus for each eligible shopper that you sign up.  Referrals=extra income.  The more people that you refer, the greater the chance you have to make additional money.

A big push for companies to improve their procedures has caused the secret shopping industry to swell with opportunities.  With a few simple tools, these tips, and the desire to succeed, you, too, can start a career as a secret shopper today.

Charissa Arsaoui is a freelance writer for ChickSpeak, Buzzine, DisFUNKshion Magazine, Student Stuff, and a guest contributor for Wisebread.  She loves thrift related topics and can spot a bargain a mile away.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

How to Become a Successful Secret Shopper and Supplement Your Income

Plan Ahead to Avoid a Financial Holiday Hangover

Does this scenario sound familiar? You use credit cards to do your holiday shopping, promising yourself you’ll pay the debt off within two or three months. Six or eight months later (or more), you’re still paying, and those items that seemed like such bargains end up costing you 10 to 20% more than you thought thanks to the credit card interest.

For many Americans, this debt pattern is repeated year after year. Personal finance experts call this the “holiday hangover.” There are times when incurring credit card debt makes sense, but holiday gift-buying is not one of them. Using credit cards often leads to impulse spending, overspending, and increased debt.

A better approach is to save small amounts of money throughout the year in a special holiday gift fund. Make a list of all the people you’d like to give gifts to and how much you can afford to spend on each one, and then pay cash from the savings you’ve built up. When the cash is gone, you’re done shopping.

If you find it difficult to save money throughout the year you can join an old-fashioned Christmas Club, still offered by smaller community banks and credit unions. You put a small amount of money which is often deducted automatically from your paycheck, into a special Christmas Club account at your bank. The account usually earns interest at the regular savings account rate. In October, November, or December, the money gets transferred to your regular checking account and you’re ready to go shopping!

Don’t have a Christmas Club account where you bank? Don’t worry, it’s just as easy to create your own. If you want, you can simply open a new savings account at the bank and use that as your own Christmas Club account. You can set up direct deposit from your paycheck to fund the account or set up a recurring automatic money transfer into the account. But keeping the money in an easily accessible account at your bank can be tempting to dip into when money gets tight, so you might want to open a separate online savings account. By doing so you’re going to earn a little more interest and hopefully keep the money out of sight so it’s a little less tempting to tap into.

How to Avoid A Financial Holiday Hangover This Year

Here are four simple steps to help you stay out of debt this holiday season and avoid that financial holiday hangover.

1. Set spending limits.

Look at your monthly budget and figure out how much you can realistically afford to set aside towards holiday gift giving without going into debt. Your intentions may be good, but the reality is that most people have a depressing amount of debt after the holidays and are not able to pay it off in as timely a manner as they had hoped.

2. Make a list.

Follow Santa’s example. Make a list of all the people you need or want to buy gifts for, including small gifts for babysitters, teachers, newspaper deliverers, etc. These small gifts can add up and are often the cause of going over your gift budget. Include money you’ll spend on Christmas cards, postage, holiday parties, decorations, holiday entertainment, etc. Just like budgeting your household expenses, you need to budget for all of your holiday expenses.

3. Set a limit.

Decide how much you will spend on each person on your gift list, then add everything up and make sure it doesn’t exceed your overall spending limit. Try to allow a cushion for unexpected items or price fluctuations, but be firm on your limit. Sure, you might come across a last-minute gift you just need to have, but if you don’t stick to the limit the whole exercise is worthless.

4. Decide where to shop.

As important as deciding what you’re going to buy is deciding where you’re going to buy it. If you don’t wait until the last minute, you’ll have time to comparison shop. Prices fluctuate significantly from store to store and from one month to another. Stores start cutting prices 10 to 25% on holiday items like decorations, gifts, and winter clothing the week before Thanksgiving.. As Christmas approaches, some items are marked down as much as 40% but selections are limited. You’ll need to decide whether price or selection is more important to you and time your shopping accordingly.

Don’t neglect online retailers. Online shopping is very popular these days and there are plenty of deals to be found. In many cases you can even find low prices with free shipping. What’s better than taking care of your holiday shopping from the comfort of your home instead of fighting the crowds?

Follow these simple steps and you’ll avoid the nagging feeling that you’ve overspent on Christmas or other holiday gifts. You’ll also avoid the struggle to pay off the credit card bills for months to come. Instead you’ll feel in control and free of the dreaded financial holiday hangover.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Avoid a Financial Holiday Hangover This Year

It’s not even Thanksgiving yet, but the tax year is rapidly drawing to a close. In less than two months we’ll starting 2010 so if you’re planning on making some year-end tax moves, now is the time. Unfortunately, most people wait until their W-2s and 1099s start coming in before seriously thinking about taxes, but by then you’re left with very few options to correct the current tax year mistakes. By planning ahead you can get a jump on some things that could significantly improve your tax situation in just a few short months.

First-Time Homebuyer Tax Credit

This probably goes without saying, but if you bought a new home this year you’ll want to take a look at this generous tax credit. Originally, it was meant only for first-time buyers who haven’t owned a home in the past five years and closed on their purchase before December 1st. Those who qualified would receive a nice $8,000 credit. But Congress has extended and expanded this credit to include even more people, so you still may qualify for something even if you didn’t under the old plan.

The new rules took effect on Nov. 6. The provision is a true dollar-for-dollar tax credit of up to $8,000 for 10% of the cost of a home. The credit is also refundable, meaning that even if a buyer doesn’t owe $8,000 of tax, they can claim the full benefit and receive a refund check. The new law also authorizes a similar $6,500 credit for buyers who already own a home. It too is a refundable credit for 10% of the purchase price of a house costing no more than $800,000. To qualify the buyer has to have owned and lived in the same home for five of the eight years preceding the new home purchase, and the new home must become the buyer’s principal residence.

Now, don’t rush out and buy a home just for the sake of the credit, but think about any home purchase you already made this year or were planning on making. This is a huge opportunity if you happen to qualify and you want to make sure you’re getting everything available to you.

New Car Purchase Deduction

Did you know there’s also a tax deduction if you buy a new car before the end of 2009? It didn’t get as much attention as the homebuyer tax credit, but there’s still some money out there for you to take advantage of if you happened to buy a new car this year. Honestly, I think you can still save more money buying a used car vs. new, but this tax break can help take some of the bite out of that new car purchase. This allows you to deduct sales and excise taxes and other fees on as much as $49,500 of the purchase price.

Again, since we’re only talking about deducting the sales and excise taxes on the purchase don’t go and run out to buy a new car just to get the tax credit. But if you are already in the market for a car and planned on buying a new one anyway, just make sure you try and get it purchased before the end of the year so you can qualify for the tax break.

Charitable Gifts and Donations

If you haven’t given to charity yet this year you still have time. Remember that these gifts follow a calendar year so you need to make those donations before the January 1st. As the holidays approach it can be a crazy time and people often forget about making their donations until it’s too late. So, don’t wait, and start thinking about what you’ll donate this year. If you’ll be taking clothes or other items to a place like Goodwill or the Salvation Army, begin collecting those items now and take them in before the holiday rush. If you usually give money to one of the charities each year you should make a call and get the ball rolling on that to make sure it qualifies for this year’s taxes. As always, make sure you keep receipts for all of your donations!

Adjust Your Tax Withholding

Even though we only have a few weeks left in the year you can still make changes to your employer’s tax withholding. If you are in a situation where you’re expecting to owe the IRS money come April you still have some time to make a helpful change. You can change your W-4 exemptions and even opt to have additional taxes withheld between now and the end of the year. This added withholding could be enough to offset some of the taxes you’ll owe when it’s time to file. Not only that, but it’s a good idea to review your withholding and make sure you’re not having too much or not enough withheld for the coming year. No sense in giving Uncle Sam a free loan or putting added stress on you to come up with the money because you didn’t withhold enough.

Unemployment Benefits

If you’re like many Americans this year, you’ve been laid off or had a period of time where you received unemployment benefits. As you may know, these benefits are taxed. It stinks, I know, but there is some relief this year. Individuals are exempt up to the first $2,400 this year.

If you didn’t elect to have taxes withheld from your unemployment check you could be on the hook for making a payment to the IRS come spring. Even worse, if you have been collecting all year and haven’t been paying quarterly estimated taxes you may face an additional penalty. If you haven’t had taxes withheld from your unemployment checks you should use this time to calculate how much of that income is taxable and find out how much you might owe. Start saving that money in the coming months so that if you are hit with a tax bill in April it won’t come as a total shock.

Retirement Savings

Do you contribute to your company’s 401(k) plan? Great! You still have time to contribute even more to your plan before the year is up on a pre-tax basis. If you can afford to it might make sense to increase your deferrals for the remainder of the year to give you that extra boost. Not only does it save on taxes, but you’re doing yourself a favor by putting a little extra away for retirement as well.

Even if you don’t have a 401(k) there is still plenty of time to take advantage of some of the other retirement saving vehicles like IRAs. The best part is that you have until you file your taxes, up to April 15th, to make your IRA contributions for the tax year. That means you still have over five months to make these contributions! If you’re saving in a traditional IRA that gives you $5,000 (or $6,000 if age 50+) in a potential tax break if you make the full contribution.  For most people this equates to about $1,000 of tax savings. That’s nothing to sneeze at. And think about it, with so much time yet to make these contributions even if you haven’t contributed a dime yet this year you can still max out your IRA by saving $1,000 a month before the April deadline.

If you’re saving in a Roth IRA, you won’t be getting any tax break up front for your contributions, but you still have until April to get your 2009 contributions in. Remember, once that deadline passes you can’t go back in time and make contributions for that year. So, make sure you’re taking advantage of your IRA as much as possible. You’re retirement depends on it. If you haven’t even opened an IRA yet, don’t delay. You can open an account for free at any of the online brokerage companies like Zecco and TradeKing.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Start Making Year-End Tax Moves Now and Save Big Money

When it comes to making extra cash, the internet has a lot to offer its users.  Online auction sites provide members with a place to peddle goods and services and social media networks like Twitter and Facebook make it possible to self-promote with ease.  Those individuals with a knack for the written word can find legitimate, paid work-at-home opportunities online.  In fact, those writers wanting to gain exposure and line their pockets with cold hard cash may find the following five websites useful:

1. Demand Studios. Write instructional articles on a variety of topics including: Animals, Arts and Entertainment, Computers, Health and Fitness, Home and Gardening, Sports and Recreation, and Travel.  Paychecks are disbursed twice weekly to your PayPal account and top paying articles are worth $15 a piece.  You can also select revenue share articles which earn significantly more over the course of a year and pay out once monthly.
2. Textbroker. Anyone can write for Textbroker.  Search through their database of available topics and choose the one that best fits your interests and knowledge level.  Write the article, submit it, and elect a payout once your account has reached $10.  Payments occur bi-weekly and are sent to the PayPal account address registered on the site.
3. Quality Gal. Article topics are specific and require knowledge of hypertex, or linking back to educational and governmental websites.  Due to the amount of work involved, Quality Gal pays up to $12 for each article that is approved.  Once weekly, writers submit an invoice and QG submits payment via PayPal.
4. Content Current. Topics usually involve knowledge of Search Engine Optimization and require a specific word count.  Significantly lower in payment than other websites, Content Current offers writers routine work and the chance to participate in Forum Boosting.  Payments are received weekly through the writer’s PayPal account.
5. EDUBook. Unlike other websites, article topics are pre-assigned.  Each member receives four to five articles at a time.  Once that batch is completed, he or she can request additional assignments.  Pay is $5 an article or $25 a batch and compensation is received electronically through PayPal once a week.

Aspiring writers needn’t go broke pursuing their literary dreams. While companies like Demand Studios and Textbroker exist, they do not offer the big payout that feature writers are accustomed to.  They can, however, pay for groceries or generate enough extra money for a rainy day.  Whether you are looking for an additional source of income or researching opportunities to leave the rat race altogether, becoming an independent contractor and working for the aforementioned companies is a wise move in any economy.

Keep in mind that as you become a more established freelance writer you may find many writing opportunities by marketing your services directly on many of the blogging job boards or sites like Elance. But in order market your services you really need to have a solid portfolio of work to show prospective clients, so using the sites listed above are a great way to begin building your online writing portfolio.

Charissa Arsaoui is a freelance writer for ChickSpeak, Buzzine, DisFUNKshion Magazine, Student Stuff, and a guest contributor for Wisebread.  She loves thrift related topics and can spot a bargain a mile away.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

5 Freelance Writing Websites That Pay Frequently

Money trivia time. What was the highest value note ever printed by the U.S.? If you guessed $100,000, you’d be right, but not so fast. It wasn’t your typical bill. The highest-value bank note ever printed by the Bureau of Engraving and Printing was the $100,000 Gold Certificate, Series 1934. These notes were not circulated among the general public, but only issued for transactions between Federal Reserve banks and the U.S. Treasury.

A single note worth $100,000 seems like a lot, but do you know how much that was really worth back in 1934? You’d need to print a note today valued at nearly $1.6 million to match what $100,000 was worth in 1934. Wow! So, there’s a little trivia for you today. Now it’s time to increase your financial smarts by checking out these links from the past week.

Relocating To End Unemployment: Ten Things To Consider – Have you been laid off and can’t find work locally? You’re not alone. A lot of people have started looking elsewhere for work and that might mean relocation to a new area. Unfortunately, that’s a big decision that comes with a lot of financial issues to consider. Here’s what to keep in mind before making the leap.

Energy Gal’s Easy Homemade Hummus Recipe – Looking for a frugal and healthy snack recipe? Try hummus. Hummus is one of my absolute favorite snacks and this recipe is virtually identical to mine so I can vouch for its deliciousness.

Funding Your Child’s Post Secondary Education – With college costs continuing to rise how can a parent afford their child’s education? It might not be easy, but if you think ahead and take a few steps early you can put together a nice college fund.

How Our Consumer Debt Problems Got Out of Control – This whole financial crisis stems from people living beyond their means. Whether it was buying too much house or just racking up thousands in credit card debt, the inability to pay has led to a meltdown. So, just how did we get into this problem in the first place?

Should You Buy Life Insurance at an Early Age? – I get this question a lot, especially since I speak mostly to a younger generation. But at what age should you consider life insurance? It actually has less to do with age and more to do with who you have to support after you’re gone.

I-Bond Rate for November 2009 – May 2010 Is 3.36% – For a while there I-bonds weren’t even worth investing in with such low rates. Now, with the latest rate over 3% they have become an attractive alternative to CDs. Learn more about the current rates and how you can take advantage of them.

What is a Dividend Reinvestment Plan? – What is a dividend reinvestment plan (DRIP) and why would you want to use one? If you’re dealing with smaller amounts of money these can be a great way to invest in some companies. Learn more at My Dollar Plan.

College Savings Accounts for a Bad Economy – The economy still has a long ways to go before a full recovery, so what does that mean for college savings? Most people can hardly get by with their day-to-day expenses so saving for college seems impossible. Here are a few options that can lessen the burden.

First-Time Homebuyer Tax Credit Extended AND Expanded into 2010 – Good news about the extension and expansion of the homebuyer tax credit. The bad news is that we still got screwed. We just bought a house a little over a month ago and still won’t qualify for the first-time status or the existing and upgrade expansion. Thanks, government!

How Working Overseas Helps Your Career – Did you know that working overseas could help your career? I haven’t had a chance to work overseas, but I did spend a semester traveling Europe and studying over there in college. I must say, it was probably one of the best things I’ve ever done so I’m sure working overseas for a while could also have profound effects.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Friday Finance Findings for November 6th

In the discussion about income for life and annuities earlier this week a lot of interesting points were brought up. We all know that we need to save something for retirement, but just how much are people expecting to save? You hear all sorts of numbers thrown out there saying you need to have a million dollars by retirement, or save up ten times your annual pre-retirement income, and so on. But these are just broad assumptions and most people’s true needs are going to vary significantly.

So, have you thought about how much money you should have saved up by the time you retire? One way to figure this out is to work backwards. Instead of just shooting for a big number, start with the amount of income you’ll likely need to receive from your investments in retirement. From there, you can then calculate how much you need to have saved up so that you can sustain that income without depleting your nest egg. Here’s an interesting calculator that can do just that. It will take into account your age, expected retirement, expected rate of return and rate of inflation, and then ask you for how much money you’d like to receive each month from your investments. Then, it calculates how much you should try to save by retirement, both adjusted and non-adjusted for inflation.

According to my numbers, after factoring in inflation I need to save up between $5 and $6 million to reach my monthly income goal. Of course, this is based on an early retirement, assuming no pension, no Social Security, and high income since I plan on doing a lot of things in retirement that cost money instead of just sitting at home. It seems like a lot, but it could be doable. Granted, we’re not able to save enough each year to hit that target yet but it gives me a number to shoot for.

So, how much money do you need to retire? Were you shocked at the results?

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Poll: How Much Money Do You Feel You’ll Need to Save For Retirement?

It wasn’t long ago that employees were rewarded for their loyalty to a company with a pension. For you younger readers the word pension may seem like it’s from a foreign language. It’s true, and in recent years the classic pension plans have been dwindling. Pension plans had a very unique feature that most retirement plans today lack: income for life. That’s right, most pensions were set up to pay you each month for the rest of your life, regardless of how long you live.

That’s a great benefit, right? This feature is what made pensions so attractive. While the actual dollar amount might not be enough to enjoy a lifestyle of the rich and famous, the fact that you could depend on this check coming in the mail every single month for the rest of your life made up for that. For many retirees, after factoring in social security and pension payments there was little need for additional savings since these two gaurnteed monthly payments were sufficient for paying the bills. But with pensions going the way of the dinosaurs what options do younger generations have for creating income for life?

The Role of Annuities

You’re seeing more annuity advertisements these days targeting baby boomers. Insurance companies realize that especially in this economy many retiring baby boomers are wishing they had some form of guaranteed income if they don’t currently have a pension. While it’s true that annuities can in fact provide lifetime income it’s important to understand the different types of annuities, features, and drawbacks.

How Annuities Work

An annuity is a simple concept. Generally, you take a lump sum of money and deposit it into the annuity acount. Then, if you choose to annuitize it, you begin receiving a regular payment (monthly, quarterly, annually, etc) that continues for the rest of your life. As simple as that concept is to understand, these products are actually far more complex than this.

First, you have two different types of annuities: fixed and variable. A fixed annuity is pretty much just what it sounds like and it earns a fixed rate of interest. While the rate may be fixed, there are often situations where the rate can change. For instance, there may be a first year bonus rate that pays out higher interest, rates could change from year to year with a minimum or floor rate that it can’t go below, and so on. But what’s important to note is that this rate is really only important before you annuitize the money. That is, you can deposit the money into the annuity and it will sit there and earn tax-deferred interest at the specified rate. Once you annuitize it you lock in that guaranteed monthly/annual payment for life and the interest rate doesn’t matter. And typically, once you annuitize, there’s not backing out of that decision.

Next, you have the complicated variable annuity. Unlike a fixed annuity the variable annuity gives you different investment choices for your money prior to annuitizing. If you wanted, you could deposit money into the annuity and then invest it in any of the investment options available to you within the annuity. Think of it like a 401(k) plan where you have a handful of various mutual funds to choose from. The drawback here is that depending on how you invest your money you could experience a loss in value. This is why it’s called a variable annuity since the account value will vary depending on investment options and market conditions.

Fees and Riders

This is where annuities can end up hurting an investor. First, annuities aren’t free. You probably know by now that virtually any investment out there comes with some sort of fee. Some investments have low fees such as index funds and other funds may have front-end loads and high annual expenses of upwards of 2%. Annuities are no different. When it comes to fees the fixed annuity is the most transparent. You get a fixed rate of return on your money and that rate is already net of fees. The fees can easily be calculated with the documentation provided with the account.

When you start talking variable annuities there’s a potential to get raked over the coals with fees. First, you’re going to have the fee just for having the privelage of owning a variable annuity. This is the Mortality and Expense (M&E) fee that is charged annually. This fee pays for the insurance guarantee, commissions, selling, and administrative expenses of the contract. In general, these fees in a variable annuity will be charged as a percentage of the average value of the investment. The average M&E of a basic variable annuity contract is between 1-2%. On top of the M&E you also have your investment expenses. Since you’re typically investing in mutual funds you’ll also pay their annual expenses. These can often be between 1-2% as well. So, right out of the gate you could be paying upwards of 4% per year just for opening a variable  annuity!

We aren’t done with fees yet. Next, you have to worry about surrender fees. A surrender fee is a fee applied if you cash in before a set amount of time. In many cases the surrender period will be around seven years. What the annuity may do is charge you 1% for each year you take your money out early. So, if you withdraw the funds in the first year you’d be socked with a 7% penalty. Take it out after 6 years and still get hit with a 1% penalty. After holding the funds for 7 years you’d finally be free to take your money without paying a surrender fee. Surrender fees apply to both fixed and variable annuities.

You think we’re done with fees yet? Hardly. Now, we have to talk about riders. Riders are additional features that you can add to your annuity contract. Common riders can provide some additional guarantees. They might provide additional guaranteed income, protect against losses, increase payouts for inflation, or extend the death benefit. Obviously, these features cost extra. Riders often cost between 10 and 100 basis points (0.10% to 1.0%) per year. So, if you’re in a variable annuity already paying a 1.5% M&E, 1.5% fund expenses, and tack on riders that add 1% you’re paying 4% a year in fees.

Annuities Have Their Place

Annuities seem like a pretty bad deal after looking at all of the fees and restrictions discussed above, but they do have their place. For one, they really can provide guaranteed income for life. They are insurance contracts and once annuitiezed you’re going to get a payment for the rest of your life. For retirees who want this sort of safety they can be an attractive option.

But here’s the problem. Many so-called financial advisors and insurance agents sell annuities to people who still have many years before retirement. So, what happens is they convince someone to put their money into an annuity, either fixed or variable, and make a hard sell by promoting all of the guarantees. It’s one of the few instances in the world of finance where you can get away with offering a guarantee. So, they get someone who is say 50 years old to buy an annuity contract and then they spend the next 10 or 15 years paying these unnecessary fees before finally retiring.

There are very few reasons to invest in an annuity well before you’re thinking about annuitizing it. If it’s a fixed annuity, you’re playing the rate game. You might get a good rate right now, but how will that rate stack up in 5 years? And don’t forget, you have surrender charges to deal with that could prevent you from moving the money into something with a better rate. And if you’re looking at a variable annuity you’re subjecting yourself to high and unnecessary fees that can erode your earnings significantly in the years prior to annuitizing.

If you really do want a source of guaranteed income for life an annuity can do that, but you should consider an immediate annuity. This means you would only buy the annuity contract when you’re ready to start receiving those guaranteed payments immediately. This allows you to invest your money however you want in low-cost funds on your own and then when you need to begin receiving a fixed income from these investments you can immediately turn it into an annuity and make this happen. This way it doesn’t matter what the rate is on a fixed annuity or require you to negotiate high fees and poor investment options in a variable annuity.

Generating Your Own Income for Life

An annuity is just one way to generate income for life, but you can go about it on your own, too. As you approach retirement you’re probably starting to get a little more conservative with your investments. So, you’re investing more in things like bonds, CDs, and money market accounts. Essentially, after you’ve spent your working years accumulating that retirement nest egg you’re trying to preserve as much of that egg as possible while earning enough to at least keep pace with inflation.

Ideally, you will have created a portfolio large enough so that you can simply withdraw the interest generate each month, or at the very least, draw the interest and a small portion of your principal so that you won’t outlive your money. That is often easier said than done because it requires a few things to fall in place. First, you need to save enough during your working years to build up a portfolio large enough to sustain this withdrawal model. Second, you are at the mercy of the economy, interest rates, taxes, and investment performance. With so many unknowns it’s possible for even the best plan to be insufficient once retirement does arrive. But done right, you can create an investment portfolio that generates enough income that can provide you the money you need for the rest of your life.

That being said, annuities can still play an important role. Most of us, retirees included, will have some fixed expenses throughout our life. For some it’s a mortgage, and others it could be medical costs, groceries, or insurance premiums. Because there are some things that we’ll need to spend money on regardless one strategy is to use an annuity to take a portion of your nest egg and use that to generate some fixed income to cover the necessities while using the rest of your portfolio to tap into as needed to pay for the rest. This way you get some guarnteed income each month while still having control over the bulk of your money.

Start Planning For Income Now

Even if you have 30 years until retirement it’s a good idea to begin planning for how you’ll be generating income once you do retire. Sure, we have no idea what the future holds that far off, but begin thinking about your options and how important it is to have a guarnteed source of income. A lot of things will change, but if you’re aware of your options and know what to expect when it comes to generating income for life you can be better prepared to make the best decision with your money.

And finally, if you’re in you’re still a number of years away from retirement and are approached by someone trying to sell you an annuity just turn around. Tell them to give you a call when you’re 65 and actually getting ready to retire. Their sales pitch may sound great with all of the guarntees, but you know better. Annuitizing some of your money might make sense once you do retire, but until then, keep control of your investments and avoid making the insurance companies rich in the meantime.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

How to Earn Income for the Rest of Your Life: The Good, Bad, and Ugly of Annuities

Happy Halloween! Well, we technically still have one more day but it’s close enough. I’m not terribly excited about Halloween, but there is one thing happening this weekend that is going to be great, and that’s reverting from daylight saving time. You know why? It means one extra hour of sleep on Sunday! It’s a perfect time of year to squeeze in a little extra sleep too with it being so cold and dreary around these parts.

Unfortunately, there’s no sleeping when it comes to personal finance. Your bills don’t get put on hold and the stock market will continue to move whether you’re paying attention or not. So, this is no time to rest. You need to grab your finances by the horns and whip yourself into shape. Especially as we approach the holiday season it can be a stressful time when it comes to money in this recession. So here are some finance links that can help you improve your financial situation.

Take Advantage of Your Employer’s Open Enrollment Period – Fall is the typical open enrollment period for many employers. That means it’s time to decide on your various employer-provided benefits such as insurance. This isn’t a decision to take lightly, so make sure you make the most of this year’s open enrollment period.

Economically Shopping For Christmas Toys – It’s hard to get out of Christmas shopping, especially if you have kids. But even if you don’t have a lot of money this holiday season you don’t have to break the bank while trying to provide gifts to your children. Here are some tips to help you save on toys this year.

Money Management Software For The Desktop: YNAB 3 Review – Managing your money on the computer is pretty common these days. There are a number of different software platforms you can use, but an interesting product is You Need a Budget’s desktop edition. Here’s the skinny.

Should You Skip Your Required Minimum Distribution (RMD) in 2009? – Retirees have the option to skip their RMD this year. Even so, is that a good idea? Nickel breaks down the options.

What if You were Required to Share your Finances? – Think about that for a minute. What if you were required to share everything with the world about your finances? How would that change your behavior? What would it do to relationships?

What’s Your Currency? – Money is currency, right? Of course, but there’s more to it than that. Everyone feels a sense of accomplishment via different means. It’s not always about money for everyone. What’s your currency?

How to Keep a Customer Happy – How many times have you received poor customer service? Probably more times than you can count. It’s amazing how many businesses and sellers can upset a customer without even trying, but here are some ways you can keep a customer happy.

Earning Interest and Dividends on Someone Else’s Dime – When you deposit money in the bank you earn interest, right? Well, what if you could use someone else’s money and collect their interest? Learn how.

Understanding 1st Party and 3rd Party Collectors – Not all debt collectors are created equal. There are different types: 1st and 3rd party collectors. Learn what the differences are and what that means for you if someone is trying to collect a debt from you.

Is Ally Bank in Trouble? – Ally has some pretty good rates on online savings accounts and CDs right now. That alone isn’t a bad sign, but news came out about the financial woes of their parent company GMAC. Does this spell bad news for Ally Bank?

Variable Annuities Overview – I’ll be the first one to admit that I don’t like variable annuities. There are very few situations where a VA is a suitable investment yet they are sold to people every day. But don’t just take it from me. Here is a quick overview of how a variable annuity works. You can decide for yourself.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Friday Finance Findings for October 30th