Wednesday, October 15, 2014

5 Elements of a Retirement Drawdown Plan

Having watched several relatives prepare for retirement, I’ve seen that it can be an exciting, yet somewhat scary process.  And there can be a variety of elements that go into preparing for retirement.  Signing up for Social Security and Medicare, determining how much expenses will be, ensuring that you have things to stay occupied, and figuring out whether you’ll have enough income to cover expenses are a few of the more major items that may crop up on that retirement to-do list.   
And ensuring that income is being derived in the correct amounts and from the proper sources can be key to a successful retirement. 

Fixed income
Maybe the most stable source of income for a retirement drawdown plan is that of fixed income.  Things like a pension or Social Security can make for very secure income streams, and while such payments could be subject to future reductions, they are typically more reliable than many other retirement income options.

Stock market investments
Stock market investments such as individual stocks, an IRA (Roth or regular), 401(k), or 403(b) can be a crucial element of a retirement drawdown plan.  However, it’s important to bear in mind that with stock market-based investments, while the returns can be good when the markets are up, the hits to your personal finances and retirement income can be severe when the market is down substantially.  The variability and risk involved in stock market investments may mean that its reliability as a retirement source of income may not be a strong as with things like cash or fixed income assets.

Cash can prove a valuable portion of a retirement income drawdown plan.  With cash in a savings, checking or money market account, you likely won’t have to worry about paying taxes on withdrawals or suffering delays waiting for funds to be distributed.  On the downside, such money may not earn much if anything in interest or dividends and will likely be “asleep” in such accounts until you choose to put it to work.

Earnings – both real and potential
Moving into retirement with some backup sources of income may not only alleviate financial strain, but decrease some of the stress over retirement finances.  Whether it’s current income from things like side jobs or hobbies like collecting or online selling that make you a little extra money, or it’s available income from things you already own that can be converted to cash, available earnings – both real and potential – can make for a nice financial reserve in retirement.

Having an extremely good handle on expenses can be another critical element to forming a retirement drawdown plan.  Just ensuring that you have stable income streams might not be enough if they don’t outweigh expenses.  Doing a tally of existing and potential expenses not just before retirement, but moving into and during your golden years can provide a better handle upon just how much you’ll need in income and from where those funds should derive.


The author is not a licensed financial professional.  This article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

Friday, October 3, 2014

Microjobs: A Strange Juxtaposition of Independence and Lack of Freedom

As a freelance writer who has bolstered his income over the years with a number of side jobs and work roles, I know just how important microjobs can be to the self-employed.  However, while the idea of microjobs might to some seem a wonderful way to free themselves from the normal work routine, they can at the same time find them to be a strange juxtaposition of independence and lack of freedom.

According to a article on the subject, “Odd-jobbers and freelancers are nothing new, of course, but modern microjobs are an outgrowth of digital technology that brings laborers and hirers together more efficiently than ever, often via smartphone.”

It goes on to note, “Yet for all the attention they’re getting, microjobs seem unlikely to solve pernicious problems such as low pay for many workers and a shortage of entry-level positions that allow college grads to put their education to good use. Plus, microjobs rarely come with benefits, and juggling a variety of part-time jobs requires more adept time-management than showing up at an office day after day.”

A role in which you’re the boss
As a holder of multiple microjobs, you might in some instances realize that you’re not just an employee now, you’re the boss.  While you might not own the company or companies for which you are working, as a freelancer, you could find yourself in charge of your hours, how hard you work, and how much time and energy you put into your endeavors.

While this can be a great thing in some ways, it also means that you may be assuming more responsibilities.  And it also means that while in a regular work role, you could find yourself going home at night and escaping your boss and work responsibilities, as your own boss, you never truly escape, which can at times be an aggravating situation.  Sitting on the couch watching television or trying to relax and hearing that voice in the back of your head nagging at you to “get back to work” could mean that even times when you’re attempting leisure activities are now ruined with the thoughts of work and work responsibilities.

More hats that you ever expected
While microjobs can provide independence from a regular job, you might find them binding in other ways, since now instead of just one work role to focus upon, you might have three, five, ten or more.  You could find yourself handling logistics, accounting, finance, marketing and advertising activities, sales, customer relations, information technology duties, and more.

This could work out in your favor or not.  It could be that now, rather than one boring work role, you’re able to spread your focus over multiple duties, finding that this is more interesting and that it keeps your mind busier and more occupied than before.  Or, it could be that rather than becoming really good at one sort of role and being able to get through the days on cruise control, you’re being pulled in eight or ten different directions at once, finding yourself frazzled and exhausted by the end of the day. 

Still tied to benefits
Sadly, in this day and age, and even with Obamacare supposedly there to “free us from our jobs”, many of us are still tied to employer-sponsored benefits.  And when working in the microjob environment, you may find that such benefits are sorely lacking.  But it’s not just health-related benefits that you could be on your own to find.  As a micro-jobber, you could be saddled with funding your own retirement plan, handling your own employment taxes, and dealing with similar benefits that might once have just seemed commonplace and were just a part of a “normal” job.

So before you jump on the microjob bandwagon, you might first want to consider whether it’s the right sort of work for you and that not everything might be as fantastically freeing as some people make it out to be.


The author is not a licensed financial professional or career advisor.  This article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.