Pension Management

A recent report from Key Retirement Solutions showed that one in four British people that are either retired or nearing retirement could be taking with them a mortgage of £31,000.

Mortgage debts among retirees are worth £98 billion collectively and with the average age of retirement now between 60 and 64, the figure is only going to go up.

The amount increases to over £37,000 each in the over 70s group with the average mortgage debt currently 27.5 per cent higher than in any other age group.

A spokesman at Key Retirement Solutions, said: “We are seeing increasing numbers of over-60’s coming to us with mortgage debt that they are struggling to manage and looking for a way to ease the burden of debt in retirement.

“With the rising trend in higher levels of borrowing, and fewer people saving for retirement, this could be a time-bomb waiting to hit the next few generations of pensioners even harder than we’re seeing now.

“Whilst this analysis is based upon those who have released equity from their home, if they are only partly reflective of pensioners as a whole, it has to be of huge concern to us all.”

After paying monthly bills such as council tax and utilities, this leaves the most disadvantaged with roughly £257 per month. After paying the average mortgage debt payment of £215 a month, the average pensioner is then left with just £42 left to live on.

So how can we ensure we are not paying off a mortgage into our retirement?

Struggling to pay off a mortgage once the kids have left home and leaving yourself with little money to live on in your 40s and 50s may sound like an easy way out.

The advantages to this solution is the emotional security of actually paying off your mortgage, owning your own property and relief from the anxiety of owing money.

This will also allow you to leave a debt free home as an inheritance and enable you to invest in other opportunities for the future. The money you save on mortgage payments could also be added to your pension fund.

While the idea of paying off a mortgage as quickly as possible seems most attractive, there are also some cons such as missing out on investment opportunities while you focus on putting all spare cash into your mortgage.

You can lose the opportunity to invest (although once the mortgage is paid off you could then do it) and build up a secure retirement nest egg. However, this is only if you have spare cash outside paying your mortgage repayments in the first place.

If you use your resources to pay off your mortgage, you’ll have less money to devote to growing your investments. But this drawback particularly applies if you have more than 10 years remaining before retirement.

Another disadvantage of paying off your mortgage is loss in tax savings. The interest on your mortgage is tax deductible and that could mean considerable savings for some homeowners.

When paying off your mortgage, at any stage of your life, you must always prepare for any changes in your life or financial situation that could effect not just how much you pay but how quickly it can be paid.

Everybody knows that banks are a major consumer lender, they represent over 70% of all consumer loans in the market. In fact, besides banks there are many other financial institutions that offer consumer loans in the market. Some of them offer cheaper interest rate to attract customers. It is your responsibility to find out so you can pay very little interest and save some money. In this article, we will discuss some major consumer lenders.1. BanksBanks borrow from depositors to lend to those who need money. They charge sufficient interest on the money they lend to pay interest to their depositors, normally with the spread (spread is the cost of operation and profit for bank shareholders) of 2-4% depending on the credit history and risk of the lenders.2. Trusta) Trust companies provide financial and trustee services to consumers and corporations such as consumer loans, mortgages, acts as trustee for corporation or private companies, or handling pension funds. b) In exchange for their services, trust companies charge an annual fee, usually 1% of total asset or fixed amount.c) It also provides service for individuals, such as handling both living trusts (established during a person’s life) and testamentary trusts (created by a will, on a person’s death).3. Small loan companiesSmall loan companies make small loans to consumers. The service charges and interest rate are usually higher than at banks or trust companies because most of the customers are higher risk borrowers, higher cost of processing small loans, and these companies must borrow from other sources.4. Insurance companiesInsurance companies can also issue loans made against life insurance policies that have cash values. Normally, it takes at least 2-5 years for cash-surrender values to build up enough to make the policyholder eligible for a loan. Some insurance companies give policy owners the right to borrow up 90% to 100% of the cash value as indicated in the insurance policy. Remember there is no time limit for repaying the loan and interest due will automatically be added to the loan.5. Credit unionsCredit unions originally created to offer services to low-income families whose only alternative was a loan shark by pooling the funds of members, money could be lent at reasonable rates to other members who needed to borrow. Some credit unions have become very large and compete efficiently with banks and trust companies in interest rates and services offered.You may also find some consumer loan brokers or agency acting on behalf of major banks, trust companies or private lenders for a service fee.I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:http://lifeanddisabitityinsuranceunderwriter.blogspot.com/http://financialinvesting09.blogspot.com/

http://personalfinance21.blogspot.com/

As we mentioned in previous articles we know that our government only represents about 30% of our retirement income. The company retirement pension plan offers another 30 % and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans. In order to protect yourself against inflation, interest rate, business and market risks in your investment portfolio, it is wise to understand current economic conditions, knowledge of investments, and diversification. In this article, we will discuss risk management.1. Life cycle riskIn fact, the amount of risk that will be acceptable will vary with the stage of the life cycle.Examples:a) A young person with no dependents will have a higher risk level than a middle-age person with a family.b) A retired couple requiring income to finance their life style every month tend to be more conservative than middle age people with a family.2. Employment riskGovernment employees have more income security than someone self-employed, someone working in a service industry that often lays off workers, or seasonal workers. It is wise to balance your risk if you doubt your job security, you may consider putting some savings in very low-risk debt securities in case of lay off.3. Diversify your investmentsDiversification is a basic principle in portfolio management that helps to reduce total risk by choosing securities of different types of investment vehicles (do not put all your eggs in one basket) so you spread your investment money over a variety of investments and adjust your investment according to your needs, life cycle, and economic conditions change.I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:http://lifeanddisabitityinsuranceunderwriter.blogspot.com/http://financialinvesting09.blogspot.com/

http://personalfinance20.blogspot.com/