Financial

Someone starting their savings in their early 20s can save 10% of their income and have a sufficient nest egg, while someone starting in their 40s may have to bump that number up more towards 20%. This is all dependent on the time of your life that you choose to start, the size of your current nest egg, and the amount of money that you will need to retire comfortably.

It is always a good idea to contribute as much as possible to retirement plans, to take advantage of tax deferral and employer matches.

Generally people need around 80% of their pre-retirement income after they have retired for the first few years and then learn how to live on less. This will greatly depend on the expenses that you plan on having:

• Is the mortgage already paid off?
• Do you have car payments?
• Are you sending your children through school?

• Always trade through your brokerage firm.
• Never make purchases from phone solicitations offering the next hot stock.
• Never send personal checks to a sales rep, always to the company.
• Always receive your monthly statements to double check that everything is correct and that there are no irregular charges.
• If any sales representatives attempt anything that seems out of place, contact the branch manager of the company.

• How has this fund performed previously?
• Is there a load? What fees are associated?
• How often will they produce statements?
• What does the fund invest in?
• Are there any specific risks related to this investment?

• Don't invest emotionally. It is better to keep a moderate controlled approach to investing as opposed to constantly chasing the jackpot which can be dangerous.
• Don't trust tips. If you aren't the head of a large investment firm, by the time a tip reaches you, it is probably too late.
• Pay attention to your investments. Stay involved with what your investments are doing, don't rely solely on others helping you.
• Reevaluate. Your financial situation may change over the course of time, be sure that all of your investments are still appropriate.

• Single-Premium Annuity. This is where the investment is made all at once in a lump sum.
• Flexible-Premium Annuity. This annuity can be funded with a series of payments.
• Immediate Annuity. With this annuity, the payments begin back to the purchaser instantly.
• Deferred Annuity. Payments will be redistributed back to the purchaser many years later. This is usually used as a vehicle to let the money gestate tax deferred.
• Fixed Annuity. The company will invest your money into fixed investments such as bonds, and the principal is guaranteed for a minimum period of time.
• Variable Annuity. With a variable annuity you are able to invest in either stocks, bonds, or cash equivalents. The principal is not guaranteed with this annuity.

There are a few choices that you have when choosing to collect your annuity. Some people opt for a lump sum, even though it negates one of the major features of the annuity: payments until death.

The amount of the monthly payments that you receive depends on:

• The amount of money in your annuity contract
• The life expectancy of the annuitant
• The size of the minimum required payments (if any)
• Whether the payments continue after death or not

• Fixed Amount. With a fixed amount option, you will choose a monthly amount that you will receive until your annuity runs out. There is a possibility that your money may run out before you pass on, and also the chance that you may die before your money runs out. In that case, your beneficiary will receive your payments.
• Fixed Period. The company will pay you for a fixed amount of time. If you are waiting for a retirement payment from another investment, it may be a good idea to get this fixed money until you start to receive payment from another investment. Again, if you are to pass before the money is fully paid, the remainder will go to your beneficiary.
• Lifetime Or Straight Life. This plan will continue to pay you money until you die. This is the safest option to ensure that you receive payment until the day you die. Conversely, if you die early, there will be no payments to the beneficiary.
• Life With Period Certain. With this plan you will receive payments until death - and for a period afterwards, your beneficiary will receive payments too. The longer the period, the lower the monthly payment.
• Installment. This guarantees that if you die before you have exhausted your funds, the rest will be distributed to the beneficiary.
• Joint And Survivor. In this option the payments are made to the joint annuitants. In the event of one's passing, the other will continue to receive a lesser amount.

The tax rates will differ for qualified and non-qualified plans.

An annuity that is tax-qualified is one that funds a qualified retirement plan. When this qualified annuity is used it follows the same tax laws as these retirement vehicles, such as:

• Tax deferral during the gestation period
• The earnings will not be taxed until withdrawal

• Commissions. Check the broker commissions - even though the insurer is the one who gives you the annuity, the broker may make anywhere from 3 to 8% which can substantially cut into your money.
• The Company. Make sure that the company that you are buying the annuity from has a good track record. There is no agency (such as the SEC) that checks the procedures of these companies, so the reputation of the company is of the utmost importance.
• Compare and Contrast. Check the amount of payments that you will receive from different companies. This may vary greatly from company to company - however, do not judge solely based on these numbers. Keep in mind the legitimacy of the company.

• Commissions. If the commission is paid in a front-end load, this can reduce the amount of your initial investment. A no or low-load annuity contract is preferable.
• Penalties. The surrender charges usually only apply for the first 7 years, starting at 7% the first year, declining 1% per year until after the 7^th year, when these surrender charges no longer apply.

• Maintenance Fees
• Mortality Fees
• Investment Advisory Fees

A bond is simply a certificate which the borrower promises to repay within a certain time period. For the privilege of using the money, the government entity, municipality or company will agree to pay a certain amount of interest per year, usually an exact percentage of the amount loaned.

Bondholders do not own any part of the companies they lend to - they do not receive the benefits of dividends or the privilege to vote on company matters as stockholders would, and the success of the investment isn't related to that company's record in the market either. A bondholder is entitled to receive the amount that was agreed upon, as well as the principal of the bond.

Corporate bonds are generally issued in the denominations of $1000. This price is referred to as the face value of the bond - this is the amount that is agreed to be paid by the company at the time that it matures. Bond prices can differ from their face values, because the prices of the bonds are correlated to the current market rates. When these rates change, the value of the bond will as well. If one were to sell the bond before the time that it matures, the bond may be worth less than was initially paid. A callable bond is one that the issuer may choose to buy back at full face value before the maturity date.

There are three major features of bonds:

• Issuing Organization
• Maturity
• Quality

• Municipal bonds are offered by local governments, states and cities. The interest of these bonds is not subject to federal income tax, and if the bondholder lives in the jurisdiction of the governing authority, the interest is exempt from state and local tax. Because of all of these tax advantages, the interest rates paid on these bonds is usually lower than others.
• Like municipal bonds, the U.S. government also issues these securities. Since they are issued by the U.S. Government, they are considered to have the best safety of all bonds.
• Treasury bills can be bought through a broker or directly from the Federal Reserve.

All mutual funds distributions should be reported as income, whether you reinvest or not. Taxable distributions come in two forms, ordinary dividends and capital gains. The distributions of ordinary dividends represent the net earnings of the fund and are paid out periodically to the shareholders. Since these payments are considered to be dividends to you, they must be accounted for accordingly.

Capital Gain Distributions are the net gains of the sales of securities in the fund's portfolio and will be taxed at a different rate than that of ordinary dividends. Yearly, your mutual fund will send you a form, called the 1099-DIV, which will have a detailed breakdown of all of these.