Looking at exchange rates and its affect by the strength of the pound
More than likely the largest single factor that will affect demand for the pound is the economic health of the United Kingdom or how the market is expecting the UK economy to fare in the future.
Sterling is what is known as a free floating currency, so its exchange rate or its price in relation to another currency is determined purely by supply and demand. In simple terms the more the pound is in demand internationally, the stronger its exchange rate becomes.
Investors are likely to move savings away from weakening economies. The worsening of expectations for the UK economy during 2008 goes a long way to explaining sterling’s sharp decline.
Strength of the pound and its effects on the exchange rate. A higher interest rate will mean you will get a far better return on bonds and other Government securities, therefore this in turn will tend to attract financial capital from abroad. If currency markets expect the United Kingdom base rate to fall, the pound as a knock on effect will tend to grow weaker.
A currency is likely to weaken in order to correct a big trade deficit, which is unsustainable in the long-run, therefore making cheaper exports and imports much more expensive.
One of the effects for most families is an increase in the cost of travelling abroad. As a pound buys less of a foreign currency, hotels abroad, goods and services will become much costlier.
This will also mean that imported goods to the United Kingdom in turn will become dearer to consumers and to businesses that import raw materials or components as part of their production process. Meanwhile exporters who price their goods in sterling will benefit as their goods will become cheaper in overseas markets
Do You Understand The 401k Retirement Plan?
The 401k retirement plan has taken the corporate world by storm since 1979, primarily because of it’s affordability to employers. While pensions often sucked companies dry, 401k providers charge a small monthly administration fee (usually around $100) and this will give employers and employees many different investment options. After signing a contract, you allow a percentage of your income to be deducted and put into a special account where it can vest interest over the years and profit with the economy. Sometimes employers agree to match your contributions and your final pay-out could be doubled by the time you receive it.
What makes the 401k retirement plan different from other pensions is its flexibility and the amount of control you have over it. Some choices include: What percentage or flat monthly rate do you want to contribute? Also, where do you want to invest? Your employer will provide you with a list and you can choose between stocks, mutual funds, bonds, money market investments, company stock or any combination of the aforementioned. You may also select a financial adviser to make the choice for you. As with anything in life, there are risks. If your company goes bankrupt, you may lose a huge portion of your retirement savings, especially if you’ve invested heavily in company stocks. You may decide to take a more active role in where your money gets invested because some annuities may be losers, while others are winners. Generally, it’s recommended to diversify where your money goes so you don’t “put all your eggs into one basket.”
Check with your employer to see which 401k retirement plan you’re under. Either defined benefit or defined contribution. Under a defined benefit plan, your employer has control over the final pay-outs, which do not fluctuate as the market does, but instead are based upon your salary history and years employed. With a defined contribution plan, you’ll have more control over how much you put in and where it’s invested, but less guarantee on how much you get back.
When you leave a company, generally your 401k retirement plan remains active for the rest of your life. If you feel uncomfortable leaving your savings in the care of your ex-employer, or if your company charges a fee for leaving your account with them, you may rollover 401 k benefits into an Individual Retirement Account. Look into the rollover 401 k if you’re changing employers too. You’re allowed to draw on your 401k retirement plan after age 59 1/2 and you will then pay taxes on what you take out. Most plans have a minimum distribution requirement you must abide by, meaning that once you reach age 70 1/2, you’ll have to start to withdraw some of your money, unless of course, you’re still working. The only plan that is exempt from the minimum distribution rules is the Roth IRA. You may decide to take a crash course in investing and take a more active role to ensure maximum returns.
To learn more about the 401k retirement plan, you can purchase retirement planning software like Quickbooks, or investigate retirement planning services at places like Fidelity Financial. The best thing you can do is to invest wisely, diversifying where your money goes or devising a supplemental retirement plan in case your 401k or pension doesn’t turn out the way you had hoped.