Buying your first mutual fund may seem complicated and risky, but this is something you can do everything by yourself. This straightforward guide will walk you through the key steps to look for the right fund for your objectives.
1. Define your investment objective: before you buy a mutual fund, you need to understand why you are making this investment, when you expect to need the money and how risk tolerant you are—remembering that all mutual funds have risk, some much more than others.
2. Use a mutual fund screener: Yahoo! Offers a mutual fund screener (it.Ly/Khm6m3) that you can use for free to find a fund that suits your criteria. Without using a tool of this sort, you simply cannot find and review all of the available funds to study.
3. Match your objective to the fund: if you are a long investment horizon, that is, you won’t need the money back for a long time, you may be invited to take more risk by investing in a mutual fund that invests in growth stocks. If your investment horizon is very short, you would probably want to invest in a fund that invests in short term bonds or even a “money market” mutual fund that keeps your money liquid, trying never to put your capital at risk at all (in very rare circumstances, some money market investors have lost small fractions of their investments). In between these extremes, you may want to get a fund that invests in both stocks (or equities) and debt (bonds).
4. Consider the costs: mutual fund managers collect their money by charging investors of small fees to enter the fund and the money each year. The “lead” refers to the fee to enter the investment and the “expense ratio” refers to the annual cost. If is there involved in a fund with a 6% load and a 2% expense ratio, your fund will be required to generate an 8% annual return (tough to do) just for you to break even in the first year. Look for “no load” funds and funds with low expense ratios. Many of the lowest cost funds are “index” funds that don’t try to beat a market index. They just try to match it. Given that very few funds consistently beat the market, focusing on fees is an excellent way to keep your money growing.
5. Evaluate Risk: think your personal appetite for risk and screen mutual funds to find those that appeal to your sense of adventure or your fear of falling, as the case may be. Remember that risk is generally compared among funds of the same class. So a risky short term bond fund may be a safer bet than a “low risk” growth equity fund.
6. Investment: generally, you can invest directly with the fund itself by sending them money directly—visit the Fund’s website for instructions. If you plan to invest all of your money in one mutual fund, that’s the best way to be doing. If you plan to invest in multiple mutual funds over time, you may wish to open a brokerage account with Schwab, Fidelity or TD Ameritrade where you can invest in a variety of mutual funds easily.
Tuesday, February 24, 2015
How Do I Find A Trustworthy Financial Advisor?
Finding someone you can trust in any field can be an issue. Think about the person who does your hair; how long get into you been back to the same person? What would happen if she suddenly left town? You want to take an even higher level of trust and confidence in a financial advisor.
Here are some tips to help you find someone you trust:
1. There are plenty of different types of financial advisors—you’ll need more than one. You may already have an insurance agent for property and casualty, a separate agent for life insurance, an accountant who prepares your tax return, a stock broker who helps with your investments.
2. Check for self-interested responses. Ask all of your financial advisors a basic question, like, how much should I be saving every month for retirement. An advisor you shouldn’t trust will suggest investing with her before finding out how much you are contributing to your 401k and whether you could contribute more. An advisor you can trust, will first find out how much you are investing in your 401k each month, how much you have invested and how much your employer will match if you contribute more. Never invests with someone who doesn’t encourage you to invest first in your 401k.
3. Compare answers among team members. It is reasonable to solicit opinions on any financial subject from all of your advisors. Ask your accountant how much life insurance you need. She has relevant experience and training to give you feedback. Compare that to the answer you might get from your life insurance agent. If they both give you similar answers, that should reassure you. If they are completely dissimilar, keep asking until you determine the correct answer for you—and which advisors gave the best and worst responses.
4. Ask friends for referrals. Ask friends, especially those whose situations are similar to yours, to introduce you to advisors they trust. Ask why they trust their advisors. Ask them to compare them to other advisors they’ve had that they didn’t trust.
5. Beware of high fees. Much of the advice you really need should be low cost or available at virtually no charge. If do not leave an account with a large, discount brokerage like Schwab, Fidelity or TD Ameritrade, you can visit with an advisor in the office at no charge. They won’t do a healthy financial plan for you, but they will help you allocate your investments in a strategy that fits your risk tolerance and objectives. Your tax accountant can give you a lot of financial advice after completing your tax return and may be willing to offer advice for free—or cheap—after preparing your return—for a moderate fee.
6. Your employer can help. If your employer offers a 401k, and most do, you should be able to ask to see or speak with a financial advisor who can help you figure out how much to be saving for retirement and how to allocate your investments within the 401k—all at no charge. Be cautious about offers to manage the rest of your money for a fee. Focus on what she can and should do for you as a 401k participant for free.
As you can see, there is help all around you. Seeking out unbiased help can be a big help. Most financial advisors make money by having more of your money under management. Generally, you can have all the help you really need the big, discount brokers without paying high fees. Your CPA can be a really good judge of proposals that you don’t fully understand. Don’t ever invest a large amount of money without talking to someone knowledgeable about money who won’t make a commission or fee from your doing so. By performing the following elementary steps, you can get affordable, independent and reliable financial advice.
Here are some tips to help you find someone you trust:
1. There are plenty of different types of financial advisors—you’ll need more than one. You may already have an insurance agent for property and casualty, a separate agent for life insurance, an accountant who prepares your tax return, a stock broker who helps with your investments.
2. Check for self-interested responses. Ask all of your financial advisors a basic question, like, how much should I be saving every month for retirement. An advisor you shouldn’t trust will suggest investing with her before finding out how much you are contributing to your 401k and whether you could contribute more. An advisor you can trust, will first find out how much you are investing in your 401k each month, how much you have invested and how much your employer will match if you contribute more. Never invests with someone who doesn’t encourage you to invest first in your 401k.
3. Compare answers among team members. It is reasonable to solicit opinions on any financial subject from all of your advisors. Ask your accountant how much life insurance you need. She has relevant experience and training to give you feedback. Compare that to the answer you might get from your life insurance agent. If they both give you similar answers, that should reassure you. If they are completely dissimilar, keep asking until you determine the correct answer for you—and which advisors gave the best and worst responses.
4. Ask friends for referrals. Ask friends, especially those whose situations are similar to yours, to introduce you to advisors they trust. Ask why they trust their advisors. Ask them to compare them to other advisors they’ve had that they didn’t trust.
5. Beware of high fees. Much of the advice you really need should be low cost or available at virtually no charge. If do not leave an account with a large, discount brokerage like Schwab, Fidelity or TD Ameritrade, you can visit with an advisor in the office at no charge. They won’t do a healthy financial plan for you, but they will help you allocate your investments in a strategy that fits your risk tolerance and objectives. Your tax accountant can give you a lot of financial advice after completing your tax return and may be willing to offer advice for free—or cheap—after preparing your return—for a moderate fee.
6. Your employer can help. If your employer offers a 401k, and most do, you should be able to ask to see or speak with a financial advisor who can help you figure out how much to be saving for retirement and how to allocate your investments within the 401k—all at no charge. Be cautious about offers to manage the rest of your money for a fee. Focus on what she can and should do for you as a 401k participant for free.
As you can see, there is help all around you. Seeking out unbiased help can be a big help. Most financial advisors make money by having more of your money under management. Generally, you can have all the help you really need the big, discount brokers without paying high fees. Your CPA can be a really good judge of proposals that you don’t fully understand. Don’t ever invest a large amount of money without talking to someone knowledgeable about money who won’t make a commission or fee from your doing so. By performing the following elementary steps, you can get affordable, independent and reliable financial advice.
How To Invest Your First $5,000 For Retirement
So you’ve just accumulated $5,000 in your IRA and now you need in order to reverse it. It is not feasible, if not impossible to invest it directly into stocks and or bonds so you’ll want to invest in a mutual fund or ETF.
You could split your investment and invest in two or three funds, but if we presume that you will continue to make contributions to your retirement account and that those future investments can go into other funds, our goal for today is to help you choose your first mutual fund.
Let’s assess your situation.
You do over or under 50 years old? If you are older, you have somewhat less time to invest, making the risk of a reversal greater for you so you’d want to invest more conservatively. If you are younger—or much younger—you can and should tolerate a bit more risk.
How do you believe that about risk? Does the idea that you could check the value of your mutual fund at some point in the future and discover that its value has dropped to send you into a panic? Take care of the idea that it might be worth 20 percent more in a year excite you? Would know that your retirement savings are at risk keep you from sleeping at night?
If you conclude that you can tolerate investment risk well, then you should be considering mutual funds that get involved in stocks. Their values rise and fall more than funds that get involved in bonds, but over the long haul you should be expected to earn more in stocks than bonds. If you don’t tolerate risk well, you may want to do your first investment in a bond fund.
If you feel panicked about risk, please consider that without taking some risk, it is virtually impossible to rescue enough for retirement. Risk free returns don’t earn sufficient interest to keep pace with the value eroding impact of inflation. Money in the bank is better that no money at the bank, but it will be worth less tomorrow than it is today. To retire comfortably you need to go comfortable with moderate risk.
Morningstar is a private company that rates and categorizes mutual funds. There are dozens of categories (it.Ly/TUO79E). Your first mutual fund investment in your IRA could come from one of the following three categories:
Large Blend: A large blend fund invests in the stocks of large companies with a balance of growth and value investments (growth stocks are those projected to grow faster than the market and usually do not pay dividends and value stocks are those that are perceived to be trading below some other measure of value).
Moderate Allocation: A moderate allocation fund invests in both stocks and bonds, with more money invested in stocks than bonds. A portion of the money may also be allocated to cash. These funds expect to achieve some appreciation as well as to generate returns through dividends.
Long-Term Government Bond: These funds invest in treasury bonds that mature more than ten years in the future. Such bonds have no credit risk, that is no risk of not being performed to schedule, but as interest rates change, the value of the bonds will fluctuate.
Each of these fund categories would make a good chief fund for your retirement savings. They offer high expected returns—compared to what you can earn in a bank account. They are shown in order from most risky to least risky. You can decide which of these three best represents your risk tolerance depended on your individual situation.
Once you’ve decided upon a category, you’ll want to choose an unusual fund based primarily on the expenses. Your broker should give you a list of mutual funds you can purchase with no transaction fees. You’ll also want to choose a fund that doesn’t charge a “load” or upfront fee. You’ll also want to avoid marketing and distribution fees called 12b-1 fees. Finally, you’ll want to be for funds with low expense ratios. All of these fees must be disclosed so you can figure out which fund is best for you.
Your broker should provide a screener to allow you to choose a mutual fund that suits your criteria. You may also try the Yahoo (it.Ly/Khm6m3) mutual fund screener.
With that, you’re all set to make your first mutual fund investment in your IRA.
You could split your investment and invest in two or three funds, but if we presume that you will continue to make contributions to your retirement account and that those future investments can go into other funds, our goal for today is to help you choose your first mutual fund.
Let’s assess your situation.
You do over or under 50 years old? If you are older, you have somewhat less time to invest, making the risk of a reversal greater for you so you’d want to invest more conservatively. If you are younger—or much younger—you can and should tolerate a bit more risk.
How do you believe that about risk? Does the idea that you could check the value of your mutual fund at some point in the future and discover that its value has dropped to send you into a panic? Take care of the idea that it might be worth 20 percent more in a year excite you? Would know that your retirement savings are at risk keep you from sleeping at night?
If you conclude that you can tolerate investment risk well, then you should be considering mutual funds that get involved in stocks. Their values rise and fall more than funds that get involved in bonds, but over the long haul you should be expected to earn more in stocks than bonds. If you don’t tolerate risk well, you may want to do your first investment in a bond fund.
If you feel panicked about risk, please consider that without taking some risk, it is virtually impossible to rescue enough for retirement. Risk free returns don’t earn sufficient interest to keep pace with the value eroding impact of inflation. Money in the bank is better that no money at the bank, but it will be worth less tomorrow than it is today. To retire comfortably you need to go comfortable with moderate risk.
Morningstar is a private company that rates and categorizes mutual funds. There are dozens of categories (it.Ly/TUO79E). Your first mutual fund investment in your IRA could come from one of the following three categories:
Large Blend: A large blend fund invests in the stocks of large companies with a balance of growth and value investments (growth stocks are those projected to grow faster than the market and usually do not pay dividends and value stocks are those that are perceived to be trading below some other measure of value).
Moderate Allocation: A moderate allocation fund invests in both stocks and bonds, with more money invested in stocks than bonds. A portion of the money may also be allocated to cash. These funds expect to achieve some appreciation as well as to generate returns through dividends.
Long-Term Government Bond: These funds invest in treasury bonds that mature more than ten years in the future. Such bonds have no credit risk, that is no risk of not being performed to schedule, but as interest rates change, the value of the bonds will fluctuate.
Each of these fund categories would make a good chief fund for your retirement savings. They offer high expected returns—compared to what you can earn in a bank account. They are shown in order from most risky to least risky. You can decide which of these three best represents your risk tolerance depended on your individual situation.
Once you’ve decided upon a category, you’ll want to choose an unusual fund based primarily on the expenses. Your broker should give you a list of mutual funds you can purchase with no transaction fees. You’ll also want to choose a fund that doesn’t charge a “load” or upfront fee. You’ll also want to avoid marketing and distribution fees called 12b-1 fees. Finally, you’ll want to be for funds with low expense ratios. All of these fees must be disclosed so you can figure out which fund is best for you.
Your broker should provide a screener to allow you to choose a mutual fund that suits your criteria. You may also try the Yahoo (it.Ly/Khm6m3) mutual fund screener.
With that, you’re all set to make your first mutual fund investment in your IRA.
How To Invest $1 Million For Retirement
It may sound absurd to you, but by the time you retire you may need to know how to invest $1 million—or some substantial amount close to that. Talk about a problem you want to have, right?
If you save 10% of your income from every job you ever have and work for forty or more years, you may find that your IRA holds ten to fifteen times your income. Depending on income, that could easily put your savings at over $1 million. If you are young now, let this be motivation. Consistent investing will leave you with over $1 million in your retirement account.
Now, let’s talk about what to do with it:
Allocation: The first key principle to observe is the idea of asset allocation. You’ll wish to allocate your million into three smaller piles. One pile is for this reason that stocks. Another pile is for bonds. Another pile is just for cash. If you are just starting retirement you may want to distribute about 30 to 40 percent to the stock pile, 40 to 60 percent of bonds and 10 to 20 percent in cash. The more is there involved in stocks, the greater risk and greater return you can expect. Cash is risk free, so if you are conservative you’ll wish to obtain more cash and less put into stocks. For retirees, bonds represent the central pillar of your investment program as they generate income you can spend.
Diversification: Do not put your entire stock allocation into one or two stocks. Don’t invest it all in twelve different stocks all from the same industry. Market prices assets as part of a portfolio; when you concentrate your investments you take the risk that no one is paying you to take. Seeking a wide range of stocks is called diversification. You should do the same with bonds, too.
Funds: The easiest way to get diversification is by buying mutual funds or ETFs (Exchange Traded Funds—always known as ETFs). Funds go for dozens of different stocks or bonds, providing good diversification. Each fund is a target. It is a big idea to buy funds with a variety of different objectives. With $1 million you may want to invest in as many as ten separate funds, you may want to use this list of Morningstar fund categories(it.Ly/TUO79E) as a guide for the types of funds you includes. This example would provide an allocation of 40% stocks, 50% bonds and 10% cash.
1. Small Growth: Funds that invest in small, growing companies
2. Sector-Real Estate: Funds that invest in real estate related assets, including REITs
3. Mid-Cap Blend: Funds that invest in mid-size companies, including both growth stocks and value stocks
4. Large Value: Funds that invest in large companies viewed to be undervalued
5. Multi-Sector Bond: Funds that invest in government bonds, foreign bonds, and high yield bonds (junk bonds)
6. Long-Term Bond: Funds that invest in long term corporate bonds
7. Intermediate Term Bond: These funds invest in corporate bond maturing in less than ten years.
8. Short Term Bond: These funds invest in short term corporate bonds.
9. Short Government Bond: These funds invest in short term Treasury Bonds.
10. Money Market: these funds have very low yields. However, your cash is safe here.
There are numerous separate funds available for each category. Seek out funds with no load, no commission through your broker and low expense ratios. All of these factors can be easily screened with almost any “mutual fund screener” (search that phrase on the Internet to locate one).
Here’s the kicker: The same basic rules for investing apply to any amount of money. You may simply want to reduce the number of funds you invest in if you have significantly less than $100,000. You’ll want the diversification and allocation benefits of having at least five funds once you have $10,000 in your retirement account.
If you save 10% of your income from every job you ever have and work for forty or more years, you may find that your IRA holds ten to fifteen times your income. Depending on income, that could easily put your savings at over $1 million. If you are young now, let this be motivation. Consistent investing will leave you with over $1 million in your retirement account.
Now, let’s talk about what to do with it:
Allocation: The first key principle to observe is the idea of asset allocation. You’ll wish to allocate your million into three smaller piles. One pile is for this reason that stocks. Another pile is for bonds. Another pile is just for cash. If you are just starting retirement you may want to distribute about 30 to 40 percent to the stock pile, 40 to 60 percent of bonds and 10 to 20 percent in cash. The more is there involved in stocks, the greater risk and greater return you can expect. Cash is risk free, so if you are conservative you’ll wish to obtain more cash and less put into stocks. For retirees, bonds represent the central pillar of your investment program as they generate income you can spend.
Diversification: Do not put your entire stock allocation into one or two stocks. Don’t invest it all in twelve different stocks all from the same industry. Market prices assets as part of a portfolio; when you concentrate your investments you take the risk that no one is paying you to take. Seeking a wide range of stocks is called diversification. You should do the same with bonds, too.
Funds: The easiest way to get diversification is by buying mutual funds or ETFs (Exchange Traded Funds—always known as ETFs). Funds go for dozens of different stocks or bonds, providing good diversification. Each fund is a target. It is a big idea to buy funds with a variety of different objectives. With $1 million you may want to invest in as many as ten separate funds, you may want to use this list of Morningstar fund categories(it.Ly/TUO79E) as a guide for the types of funds you includes. This example would provide an allocation of 40% stocks, 50% bonds and 10% cash.
1. Small Growth: Funds that invest in small, growing companies
2. Sector-Real Estate: Funds that invest in real estate related assets, including REITs
3. Mid-Cap Blend: Funds that invest in mid-size companies, including both growth stocks and value stocks
4. Large Value: Funds that invest in large companies viewed to be undervalued
5. Multi-Sector Bond: Funds that invest in government bonds, foreign bonds, and high yield bonds (junk bonds)
6. Long-Term Bond: Funds that invest in long term corporate bonds
7. Intermediate Term Bond: These funds invest in corporate bond maturing in less than ten years.
8. Short Term Bond: These funds invest in short term corporate bonds.
9. Short Government Bond: These funds invest in short term Treasury Bonds.
10. Money Market: these funds have very low yields. However, your cash is safe here.
There are numerous separate funds available for each category. Seek out funds with no load, no commission through your broker and low expense ratios. All of these factors can be easily screened with almost any “mutual fund screener” (search that phrase on the Internet to locate one).
Here’s the kicker: The same basic rules for investing apply to any amount of money. You may simply want to reduce the number of funds you invest in if you have significantly less than $100,000. You’ll want the diversification and allocation benefits of having at least five funds once you have $10,000 in your retirement account.
Investing 101 For The True Novice
If you are the way many people in America, the very idea of investing is scary because it all sounds too complicated. Good news: you can get it! Everything you really have to know is part of this short article.
Money in savings accounts and certificates of deposit does not generate enough return to provide income in retirement or enough growth over time to help prepare much for retirement. Making additional investments could be a wise choice.
Just a few key words will help you understand all you need to know to start making sound investment decisions:
Stocks: Stock in a company is a unit or share of ownership in that company. Hence, investors often say things like. “I own Ford and IBM, ” by which they simply mean that they own shares of stock in those companies. Stock prices come up and down quite randomly in the short run, but do tend upward over long periods of time. The price you pay for the stock and the price at which you sell the stock are ever so slightly different—you pay a bit more to buy and get a bit less when you sell. Market makers take the difference. You’ll also pay a commission to purchase and sell stocks. Stock prices can go all the way to zero. There is no limit to how high a stock price can go. Some companies pay dividends to all the shareholders (the people who own the stock) and some don’t.
Bonds: Bonds are loans from companies and governments to investors who purchase the loans called bonds. Typically, a bond pays interest but no principal over extended periods of time—at least five years and often up to 30 or more years. At the end of the bond’s life (at maturity), the principal is given. Usually, bonds are emitted with a face value of $1,000 but you are often required to purchase more than one at a time. The bond market is much bigger than the stock market but it gets less attention because the prices of bonds—which do move—move less dramatically than stock prices, giving folks less to speak of. Total investment return on bonds tends to be a little lower than the total return on stocks over very prolonged periods of time because bonds tend to be a bit less risky—but no bonds are truly risk free! (You can even lose money on U.S. Treasury Bonds if interest rates rise and you have to sell them.)
Mutual Funds: Mutual Funds is professionally managed pools of money that invest in stocks of and/or bonds. The professional managers charge a fee but they do all the hard work of researching the investments, deciding when to buy and sell shares and even meeting with the management of the companies that they invest in.
Mutual funds are a critical tool for novices to be used to start investing. Numerous mutual funds enable you to make small, monthly purchases so you can begin with almost nothing and build significantly over time. Choosing a mutual fund can be daunting, however.
To simplify the process, consider opening an account with a large brokerage firm like Schwab, Fidelity or TD Ameritrade (you may simply wish to choose based on which has the nearest office). All offer unique mutual funds that you can invest in without fees and they have people who can allow you to choose. You already know all you need to know to get started so get to it.
Money in savings accounts and certificates of deposit does not generate enough return to provide income in retirement or enough growth over time to help prepare much for retirement. Making additional investments could be a wise choice.
Just a few key words will help you understand all you need to know to start making sound investment decisions:
Stocks: Stock in a company is a unit or share of ownership in that company. Hence, investors often say things like. “I own Ford and IBM, ” by which they simply mean that they own shares of stock in those companies. Stock prices come up and down quite randomly in the short run, but do tend upward over long periods of time. The price you pay for the stock and the price at which you sell the stock are ever so slightly different—you pay a bit more to buy and get a bit less when you sell. Market makers take the difference. You’ll also pay a commission to purchase and sell stocks. Stock prices can go all the way to zero. There is no limit to how high a stock price can go. Some companies pay dividends to all the shareholders (the people who own the stock) and some don’t.
Bonds: Bonds are loans from companies and governments to investors who purchase the loans called bonds. Typically, a bond pays interest but no principal over extended periods of time—at least five years and often up to 30 or more years. At the end of the bond’s life (at maturity), the principal is given. Usually, bonds are emitted with a face value of $1,000 but you are often required to purchase more than one at a time. The bond market is much bigger than the stock market but it gets less attention because the prices of bonds—which do move—move less dramatically than stock prices, giving folks less to speak of. Total investment return on bonds tends to be a little lower than the total return on stocks over very prolonged periods of time because bonds tend to be a bit less risky—but no bonds are truly risk free! (You can even lose money on U.S. Treasury Bonds if interest rates rise and you have to sell them.)
Mutual Funds: Mutual Funds is professionally managed pools of money that invest in stocks of and/or bonds. The professional managers charge a fee but they do all the hard work of researching the investments, deciding when to buy and sell shares and even meeting with the management of the companies that they invest in.
Mutual funds are a critical tool for novices to be used to start investing. Numerous mutual funds enable you to make small, monthly purchases so you can begin with almost nothing and build significantly over time. Choosing a mutual fund can be daunting, however.
To simplify the process, consider opening an account with a large brokerage firm like Schwab, Fidelity or TD Ameritrade (you may simply wish to choose based on which has the nearest office). All offer unique mutual funds that you can invest in without fees and they have people who can allow you to choose. You already know all you need to know to get started so get to it.
Monday, February 23, 2015
$1 Million Won’t Make You Rich In Retirement
I get some good news and some bad news. First the good news: If you are young and committed to saving for retirement, chances are good that you will retire with $1 million or more in retirement savings. Now the bad news: that won’t make you rich.
This matters. If you are saving enough to accumulate $1 million in your retirement expecting that it will make you prosperous, you will be sorely disappointed to learn in thirty years that it may only be enough for you to make a living.
Inflation: much of the returns, the nominal returns you see on your financial statements, will be eroded by inflation. Your real returns—returns adjusted for inflation—will be much smaller. Assuming just 3 percent inflation, the $1 million you have in your account in thirty years will likely spend much more like having $411,000 today. Not bad, right? But it isn’t enough to make you rich by American standards.
Social Security: It is fairly clear from recent discussions in Washington that social security will not go away as many have claimed. That said, complex formulas used to measure and adjust social security for inflation are likely to change, resulting in smaller benefits. You will likely have to be expected that you are seventy to get the benefits as well. Thirty years from now if collective security has been lagging real inflation, it could easily be providing only 75 percent of the economic value to retire seniors then as now. That means, you’ll need to go more of your income from your savings and investments than current retirees to enjoy the same retirement.
Save: As you can see, if you want to have a comfortable—or better—retirement, you need to be consistently contributing to your retirement savings. You can be doing this through your employer through a 401k or by opening an IRA. The advantage of a 401k is that the contribution to your savings happens before you see the cash and are only trying to spend it. Both IRAs and 401ks offer tax benefits that make them much better vehicles for retirement savings than regular accounts.
Investment: Once you have money in your savings account, you need to invest wisely, taking neither too much nor too little risk. Some are only trying to protect their savings by keeping it in the bank where it is FDIC insured and can never go down in value. That also guarantees that your investments won’t grow as fast as inflation. Every dollar invested that way will be worth less—even with interest—than it was when you put it in the bank. Investing wildly in stocks, options and other exotic instruments can be equally destructive. Individual investors often fail to match market returns when running their own investments. You can hire professionals to administer money affordable by using mutual funds and ETFs (exchange traded funds).
If you start your retirement savings with the right understanding of the impacts of the decades that will pass between now and your retirement, you are most likely to invest well in the future and have a safe and comfortable retirement.
This matters. If you are saving enough to accumulate $1 million in your retirement expecting that it will make you prosperous, you will be sorely disappointed to learn in thirty years that it may only be enough for you to make a living.
Inflation: much of the returns, the nominal returns you see on your financial statements, will be eroded by inflation. Your real returns—returns adjusted for inflation—will be much smaller. Assuming just 3 percent inflation, the $1 million you have in your account in thirty years will likely spend much more like having $411,000 today. Not bad, right? But it isn’t enough to make you rich by American standards.
Social Security: It is fairly clear from recent discussions in Washington that social security will not go away as many have claimed. That said, complex formulas used to measure and adjust social security for inflation are likely to change, resulting in smaller benefits. You will likely have to be expected that you are seventy to get the benefits as well. Thirty years from now if collective security has been lagging real inflation, it could easily be providing only 75 percent of the economic value to retire seniors then as now. That means, you’ll need to go more of your income from your savings and investments than current retirees to enjoy the same retirement.
Save: As you can see, if you want to have a comfortable—or better—retirement, you need to be consistently contributing to your retirement savings. You can be doing this through your employer through a 401k or by opening an IRA. The advantage of a 401k is that the contribution to your savings happens before you see the cash and are only trying to spend it. Both IRAs and 401ks offer tax benefits that make them much better vehicles for retirement savings than regular accounts.
Investment: Once you have money in your savings account, you need to invest wisely, taking neither too much nor too little risk. Some are only trying to protect their savings by keeping it in the bank where it is FDIC insured and can never go down in value. That also guarantees that your investments won’t grow as fast as inflation. Every dollar invested that way will be worth less—even with interest—than it was when you put it in the bank. Investing wildly in stocks, options and other exotic instruments can be equally destructive. Individual investors often fail to match market returns when running their own investments. You can hire professionals to administer money affordable by using mutual funds and ETFs (exchange traded funds).
If you start your retirement savings with the right understanding of the impacts of the decades that will pass between now and your retirement, you are most likely to invest well in the future and have a safe and comfortable retirement.
Are You On Track And Ready To Retire Now?
Congratulations on a long and successful career. It sounds like you think you have ready to retire. Let’s take a moment to look at your financial picture to make sure you’re good and ready.
A Home: One key for a happy retirement is to have a mortgage and rent-free place to live. If your home is completely paid off, you’re in decent shape for retirement. If you own a home with lots of equity, but that is not paid off, talk to a financial advisor about using some of your savings to pay off the mortgage—providing you with a guaranteed return on your investment that beats any other investment with a bona fide guaranteed return. You may also consider the possibility of sell your home and using the proceeds to buy a smaller home or condo where you and your spouse can live. If you have little or no home equity or don’t own a home at all, you’ll need much more savings and may be given to purchase a place to stretch your retirement.
Credit Card Debt: Going into retirement, you should have no credit card debt. If you have credit card debt that you can’t pay off with your savings, you aren’t equipped for retirement financially.
Retirement: Optimally, you should have ten to fifteen times your earned income in your retirement savings. That, combined with social security, should give you a secure retirement. If your savings, after paying off the mortgage, are meaningfully less than tenfold your income you should learn more from a financial planner regarding your preparation. If you have modest savings and are hoping that I can live on social security, you should probably consider working longer (unless you’re already well past age 70). Of delaying retirement, your social security benefit rises, making it easier for you to retire later. Furthermore, you may be able save a bit toward retirement. Retiring on just social security is more feasible if you own a home that is given off.
College Savings: Let’s presume that you have no more college funding obligations to your children. If do not leave some money left in your college savings account, perhaps it can be a blessing to your grandchildren.
Car: The car you drive in retirement is unimportant financially. You should be unable to obtain a car loan, however. In retirement, interest should be exclusively an one-way street: you collect it from others. You don’t pay for it.
There are a number of models for retirement, from living between the beach and the golf course in Hawaii, to live in subsidized government housing. There are happy retirees—and unhappy curmudgeons—at every economic level. By getting yourself completely out of debt for retirement, you can reduce your worries and settle in easily to a lifestyle you’ll are in a position to maintain as long as your health allows.
A Home: One key for a happy retirement is to have a mortgage and rent-free place to live. If your home is completely paid off, you’re in decent shape for retirement. If you own a home with lots of equity, but that is not paid off, talk to a financial advisor about using some of your savings to pay off the mortgage—providing you with a guaranteed return on your investment that beats any other investment with a bona fide guaranteed return. You may also consider the possibility of sell your home and using the proceeds to buy a smaller home or condo where you and your spouse can live. If you have little or no home equity or don’t own a home at all, you’ll need much more savings and may be given to purchase a place to stretch your retirement.
Credit Card Debt: Going into retirement, you should have no credit card debt. If you have credit card debt that you can’t pay off with your savings, you aren’t equipped for retirement financially.
Retirement: Optimally, you should have ten to fifteen times your earned income in your retirement savings. That, combined with social security, should give you a secure retirement. If your savings, after paying off the mortgage, are meaningfully less than tenfold your income you should learn more from a financial planner regarding your preparation. If you have modest savings and are hoping that I can live on social security, you should probably consider working longer (unless you’re already well past age 70). Of delaying retirement, your social security benefit rises, making it easier for you to retire later. Furthermore, you may be able save a bit toward retirement. Retiring on just social security is more feasible if you own a home that is given off.
College Savings: Let’s presume that you have no more college funding obligations to your children. If do not leave some money left in your college savings account, perhaps it can be a blessing to your grandchildren.
Car: The car you drive in retirement is unimportant financially. You should be unable to obtain a car loan, however. In retirement, interest should be exclusively an one-way street: you collect it from others. You don’t pay for it.
There are a number of models for retirement, from living between the beach and the golf course in Hawaii, to live in subsidized government housing. There are happy retirees—and unhappy curmudgeons—at every economic level. By getting yourself completely out of debt for retirement, you can reduce your worries and settle in easily to a lifestyle you’ll are in a position to maintain as long as your health allows.
Are You On Track At Age 55? Complete This Financial Scorecard
By the time you arrive at your mid-fifties, you’ve done a lot in life. You’ve likely launched a few kids into adulthood and now are starting to focus on retirement. This quick scorecard can help you quickly determine whether you’re on track for the retirement you want.
A Home: You should own a home. While it isn’t a great investment—and for that reason you shouldn’t have too much of your net worth caught up in a home—being to have your own in retirement will be key. At this point, you would hope that i can have fewer than ten years left on your mortgage. If you have anything fewer than fifteen and are planning to work until age seventy anyway, you’re fine. If you’ve got a spacious new home with a spacious green mortgage, that may be putting your retirement plans at risk.
Credit Card Debt: At your age, credit card debt should be a distant memory. Cards should pay in full each month, with credit cards serving as a simple transaction tool and not a financing source.
Retirement: In your retirement savings, you would optimally have accumulated almost ten times your current income, setting you up nicely for an early retirement. You’re in okay shape, however, if you have four or five times your current income in savings—you still have ten years to go. If you have significantly less than four times your current income in savings, you’ll want to increase your efforts at saving for retirement, and perhaps look at delaying retirement until you are closer to 70 rather than retiring at 65, giving you more time to save and for your savings to compound.
College savings: It’s likely that you have put your kids through college by now (angels sing halleluiah in the background). If not, I’m guessing you tested a little quiet on the retirement measure above; it’s hard to pay for college and set aside retirement. Your remaining children are liable in college now or will be soon. You know what it is costing and how that compares to your savings and income. The fundamental question is who will fund what’s left to pay for college impact your retirement.
Car: It never has been important what you drive. What remains influential, however, is that you not drive a car that needs to borrow the money. At your age, you should have the means to pay cash for a car and the wisdom not to do too often.
In your mid-fifties, your primary concern should be saving for retirement—unless you are still paying for your kids to go through college. Managing the conflict between these two eminent goals is part of the great financial challenges families face. You need to be cautious about allowing your generous sense of obligation to your children destroy your retirement—there isn’t ample time left for you to accumulate the sorts of resources you’ll need in retirement. Unless your retirement needs to be fully funded, is careful not to expand the family entitlement programs for your younger children. If state universities were reliable enough for the older ones, don’t feel compelled by anyone to be paid in respect of the younger ones to attend an Ivy League school. Stick to your plan so you can enjoy your grandchildren in retirement.
A Home: You should own a home. While it isn’t a great investment—and for that reason you shouldn’t have too much of your net worth caught up in a home—being to have your own in retirement will be key. At this point, you would hope that i can have fewer than ten years left on your mortgage. If you have anything fewer than fifteen and are planning to work until age seventy anyway, you’re fine. If you’ve got a spacious new home with a spacious green mortgage, that may be putting your retirement plans at risk.
Credit Card Debt: At your age, credit card debt should be a distant memory. Cards should pay in full each month, with credit cards serving as a simple transaction tool and not a financing source.
Retirement: In your retirement savings, you would optimally have accumulated almost ten times your current income, setting you up nicely for an early retirement. You’re in okay shape, however, if you have four or five times your current income in savings—you still have ten years to go. If you have significantly less than four times your current income in savings, you’ll want to increase your efforts at saving for retirement, and perhaps look at delaying retirement until you are closer to 70 rather than retiring at 65, giving you more time to save and for your savings to compound.
College savings: It’s likely that you have put your kids through college by now (angels sing halleluiah in the background). If not, I’m guessing you tested a little quiet on the retirement measure above; it’s hard to pay for college and set aside retirement. Your remaining children are liable in college now or will be soon. You know what it is costing and how that compares to your savings and income. The fundamental question is who will fund what’s left to pay for college impact your retirement.
Car: It never has been important what you drive. What remains influential, however, is that you not drive a car that needs to borrow the money. At your age, you should have the means to pay cash for a car and the wisdom not to do too often.
In your mid-fifties, your primary concern should be saving for retirement—unless you are still paying for your kids to go through college. Managing the conflict between these two eminent goals is part of the great financial challenges families face. You need to be cautious about allowing your generous sense of obligation to your children destroy your retirement—there isn’t ample time left for you to accumulate the sorts of resources you’ll need in retirement. Unless your retirement needs to be fully funded, is careful not to expand the family entitlement programs for your younger children. If state universities were reliable enough for the older ones, don’t feel compelled by anyone to be paid in respect of the younger ones to attend an Ivy League school. Stick to your plan so you can enjoy your grandchildren in retirement.
Are You On Track At Age 40? Complete This Financial Scorecard
So, you’re turning 40 and you want to look at if you’re on track financially. There is a lot to consider, but let’s walk through some key measurements together and see how you’re doing.
A Home: At this point in your life, you’d like to own a home for your family. You may not seem to have a lot of equity in the home yet, but you should be a homeowner. If you are still renting, optimally you’d be saving for a down payment, so that you can go into a home. Homes are not the right world’s best investments. They go up and down in value and generally don’t go up too fast. That said, they offer you a place to live and tend to make families more stable.
Credit Card Debt: Early in your family’s history it was likely tough sledding. Credit cards may have played a significant role in equipping the home. Those days, if they was wrong with you, should be passed. You should have your credit cards paid off at the end of every month.
Retirement: Retirement is relatively easy and still a long way off. Optimally, at this point in your career you’d have been saving for retirement since your mid-twenties and you’d have something like 2 to 3 times your current income in your retirement accounts. If you have even one year’s income in your retirement account, you’re in pretty good shape. That should grow and ultimately represent about one third of your retirement savings. Your future contributions will fund the rest. If you have less than one year’s income in your retirement savings account, you’ll need to go serious. You’ll need to be saving more than ten percent of your income for the next twenty-five years to create a nest egg that will feed you through your retirement. You may have an obligation to think about pushing retirement to age 70.
College Savings: At your age, you may have some young teenagers starting to think about college. Four years at Princeton will cost about $200,000 today—more when she starts college. If your student will be forced to live, attend the local community college for two years and then finish at a local four-year college. The total tuition bill could be one-tenth the Princeton cost. There are college options at every spot between those two extremes. For a thirteen-year-old, you’d hope to have about $6,300 for every $10,000 you’ll expect to need for her college plans. For a five-year-old, you’d want to have about $1,950 per $10,000 you hope to be able to need. You can roughly guess how much you’d need for kids of other pages by extrapolating from these reference points.
Car: The car you drive is not important in the least. The relative merits of minivans versus sport utility vehicles are someone else’s purview. Carrying out that doesn’t have a car payment is, however, important. If you’re driving a car with a car payment it suggests that you’re spending too much money on your cars and therefore, not enough on the items listed above. Take excellent care of your car so it will last a long time. Focus on saving and avoiding debt.
Having assessed your situation, you likely find that you are making a success of some areas and not well enough in others. That’s normal. You may be in a position to shift your emphasis from the areas where you’re doing well to those where you’re not doing so well. If you didn’t show up well on any measure, you may have experienced a setback of some kind. Shake it off. Start fresh and you’ll be in okay shape. If you’re doing well in every area, you should be writing about financial planning for families!
A Home: At this point in your life, you’d like to own a home for your family. You may not seem to have a lot of equity in the home yet, but you should be a homeowner. If you are still renting, optimally you’d be saving for a down payment, so that you can go into a home. Homes are not the right world’s best investments. They go up and down in value and generally don’t go up too fast. That said, they offer you a place to live and tend to make families more stable.
Credit Card Debt: Early in your family’s history it was likely tough sledding. Credit cards may have played a significant role in equipping the home. Those days, if they was wrong with you, should be passed. You should have your credit cards paid off at the end of every month.
Retirement: Retirement is relatively easy and still a long way off. Optimally, at this point in your career you’d have been saving for retirement since your mid-twenties and you’d have something like 2 to 3 times your current income in your retirement accounts. If you have even one year’s income in your retirement account, you’re in pretty good shape. That should grow and ultimately represent about one third of your retirement savings. Your future contributions will fund the rest. If you have less than one year’s income in your retirement savings account, you’ll need to go serious. You’ll need to be saving more than ten percent of your income for the next twenty-five years to create a nest egg that will feed you through your retirement. You may have an obligation to think about pushing retirement to age 70.
College Savings: At your age, you may have some young teenagers starting to think about college. Four years at Princeton will cost about $200,000 today—more when she starts college. If your student will be forced to live, attend the local community college for two years and then finish at a local four-year college. The total tuition bill could be one-tenth the Princeton cost. There are college options at every spot between those two extremes. For a thirteen-year-old, you’d hope to have about $6,300 for every $10,000 you’ll expect to need for her college plans. For a five-year-old, you’d want to have about $1,950 per $10,000 you hope to be able to need. You can roughly guess how much you’d need for kids of other pages by extrapolating from these reference points.
Car: The car you drive is not important in the least. The relative merits of minivans versus sport utility vehicles are someone else’s purview. Carrying out that doesn’t have a car payment is, however, important. If you’re driving a car with a car payment it suggests that you’re spending too much money on your cars and therefore, not enough on the items listed above. Take excellent care of your car so it will last a long time. Focus on saving and avoiding debt.
Having assessed your situation, you likely find that you are making a success of some areas and not well enough in others. That’s normal. You may be in a position to shift your emphasis from the areas where you’re doing well to those where you’re not doing so well. If you didn’t show up well on any measure, you may have experienced a setback of some kind. Shake it off. Start fresh and you’ll be in okay shape. If you’re doing well in every area, you should be writing about financial planning for families!
Are You On Track At Age 30? Complete This Financial Scorecard
For your thirtieth birthday, do yourself a favor and sit down with your spouse for a financial assessment. While it is a good idea to see where you are each year and how you’ve progressed since the prior year, once a decade or so, it is a good idea to assess yourself not just against your past self, but against a more objective standard.
Take five minutes and see you you’re doing in some key financial areas:
A Home: At age 30, it is now time to buy a home. If you’ve done so already, congratulations. That puts you ahead of the pack. If you haven’t purchased a home, do you, have money ready for a down payment? You should be ready soon. If you get a significant portion of your down payment, saved, you’re in good shape and on track financially. If you don’t yet own a home and don’t have the money for a down payment, you’re a bit behind the curve. Getting into a home should be a priority for you over the next few years.
Credit Card Debt: You are at peak credit card spending age. You haven’t had a chance to build a big net worth. You don’t likely have lots of savings and so the temptation to acquire the stuff you want using a credit card feel overwhelming. If you are paying back your credit card balances each month, you’re ahead of the curve. If you have some small balances, totaling less than 10 percent of your annual household income, you’re in archetypal form for your age—work to emerge from your credit card debt as soon as possible. If your credit card debt has gotten away from you, you need to do fixing that situation your highest priority. It can overwhelm you financially and leave you perpetually struggling.
Retirement: Optimally, you’d have about half your annual income in retirement savings. If you do, you are on course for a retirement without worries and maybe even an early start to retirement. At your age, if you haven’t began to contribute to your retirement plan, you are taken. There are plenty of fiscal pressures on you now, but the money you contribute now will multiply about tenfold before you retire. Every year you wish to contribute will put greater pressure on your retirement savings later. Wait too long, and your retirement could really be impaired.
College Savings: If you have kids or plan to have kids, you need to be saving for their education. Presuming you have two young children, you should have several thousand dollars in the college fund already. You remember well how expensive college was and the cost is continuing to grow faster than the general inflation rate. If you give your kids to have the same opportunity you had to attend college, you’ll want to be saving. Paying for three or four kids to attend Ivy League schools could easily cost $1 million by the time they all finish. Just getting three or four kids through community college and a local four-year school will likely approach $100,000. If you are contributing about $58 per month for 18 years for each child, you should have the minimum required for the local state school college education.
Car: It is easy to focus on the sort of car you drive, the brand, the age, the model. Nothing could matter less to your financial future. The key is to drive a car you can afford to own without a loan. If you have a car payment now, promise yourself and your spouse that it will be the ultimate. Use your savings judiciously for car purchases, drive your cars for a long time and take good care of them so they last. By driving cheaper cars, driving them for a long time and avoiding interest charges on debt, you’ll save thousands and thousands of dollars over your lifetime that can better be invested in a home, college savings and retirement planning.
Don’t be discouraged. There is perhaps no time in life more frustrating financially than your early thirties. Your career likely hasn’t fully developed; if you own a home, it likely doesn’t seem to have a lot of equity in it, yet; your savings plans are likely ineffective and, perhaps, nonexistent. Don’t be discouraged by your situation; do what you can and if you’re patient, time will turn small investments into considerable savings, small home equity into substantial home equity and big debts into small ones.
Take five minutes and see you you’re doing in some key financial areas:
A Home: At age 30, it is now time to buy a home. If you’ve done so already, congratulations. That puts you ahead of the pack. If you haven’t purchased a home, do you, have money ready for a down payment? You should be ready soon. If you get a significant portion of your down payment, saved, you’re in good shape and on track financially. If you don’t yet own a home and don’t have the money for a down payment, you’re a bit behind the curve. Getting into a home should be a priority for you over the next few years.
Credit Card Debt: You are at peak credit card spending age. You haven’t had a chance to build a big net worth. You don’t likely have lots of savings and so the temptation to acquire the stuff you want using a credit card feel overwhelming. If you are paying back your credit card balances each month, you’re ahead of the curve. If you have some small balances, totaling less than 10 percent of your annual household income, you’re in archetypal form for your age—work to emerge from your credit card debt as soon as possible. If your credit card debt has gotten away from you, you need to do fixing that situation your highest priority. It can overwhelm you financially and leave you perpetually struggling.
Retirement: Optimally, you’d have about half your annual income in retirement savings. If you do, you are on course for a retirement without worries and maybe even an early start to retirement. At your age, if you haven’t began to contribute to your retirement plan, you are taken. There are plenty of fiscal pressures on you now, but the money you contribute now will multiply about tenfold before you retire. Every year you wish to contribute will put greater pressure on your retirement savings later. Wait too long, and your retirement could really be impaired.
College Savings: If you have kids or plan to have kids, you need to be saving for their education. Presuming you have two young children, you should have several thousand dollars in the college fund already. You remember well how expensive college was and the cost is continuing to grow faster than the general inflation rate. If you give your kids to have the same opportunity you had to attend college, you’ll want to be saving. Paying for three or four kids to attend Ivy League schools could easily cost $1 million by the time they all finish. Just getting three or four kids through community college and a local four-year school will likely approach $100,000. If you are contributing about $58 per month for 18 years for each child, you should have the minimum required for the local state school college education.
Car: It is easy to focus on the sort of car you drive, the brand, the age, the model. Nothing could matter less to your financial future. The key is to drive a car you can afford to own without a loan. If you have a car payment now, promise yourself and your spouse that it will be the ultimate. Use your savings judiciously for car purchases, drive your cars for a long time and take good care of them so they last. By driving cheaper cars, driving them for a long time and avoiding interest charges on debt, you’ll save thousands and thousands of dollars over your lifetime that can better be invested in a home, college savings and retirement planning.
Don’t be discouraged. There is perhaps no time in life more frustrating financially than your early thirties. Your career likely hasn’t fully developed; if you own a home, it likely doesn’t seem to have a lot of equity in it, yet; your savings plans are likely ineffective and, perhaps, nonexistent. Don’t be discouraged by your situation; do what you can and if you’re patient, time will turn small investments into considerable savings, small home equity into substantial home equity and big debts into small ones.
Ok. When Do I Really Need To Start Saving For Retirement?
So, you haven’t started saving seriously for retirement and you’d do not like the idea when you honestly need to start save. The best and most honest answer to that question is today. No matter how old you are, the challenge to save enough for a safe, secure and comfortable retirement is such that you cannot wait that long.
You’ll need a lot of money. If you are currently under the age of the age of 45, you will likely want to accumulate more than $1 million at retirement. Even though you have 20 or more years to ensure that, it will take saving a lot of money along the way to arrive there. You can’t just save 10% of your income for the last ten years of your career and are fed up with retirement. The math simply doesn’t work. If you are shorter than 45, you may not need $1 million to have the sort of retirement you want, but you’ll need a lot more money than you think.
Use the power of compounding. A dollar contributed to your retirement savings 40 years before you retire will become almost $15 when you retire if you invest at a reasonable 7% rate of return. That’s the power of compounding returns. Thirty years out and the contribution will grow to barely more than half that much. Twenty years: $3.87. Ten years: $1.97. As you can see, the money you save early in your career has much more power than the money you save later.
Consider how much you save. If you start saving for retirement consistently 40 years before you retire, you may be able to accumulate enough for retirement by saving as little as 6% of your salary. If you wait until you have just 30 years of retirements, you’ll want to save 10%. If you are called upon to have had 20 years, you may be unable to accumulate as much by saving 20% as you could have a decade earlier with 10%. If you wait until ten years before, it will be almost impossible to rescue enough to retire in the same way you could have retired otherwise. Saving 40% of your income for the last ten years would accumulate less than contributing 6% for 40 years.
Social Security will dwindle. For folks who retired before the turn of the millennium in America, social security will be a key portion of their retirement. The benefit is taken will be indexed for inflation and they will not likely notice a sizable decline in the purchasing power of their benefits while they are alive. Those who are retiring now will likely notice that their benefits don’t buy as much in twenty years as they do now—the government is such as to change the formula used to index benefits to inflation with the result that the benefits will grow more slowly. That will impact even more theatrical people who will be retiring twenty years from now. Their retirement benefit will potentially start later and ultimately pay only 75% as much per year—adjusted for inflation—as current retirees now receive. The conclusion is, of course, that retirement savings are greater for future retirees than they were for current retirees.
No matter how mature you take or when you are expected to retire, you will be better off if you start saving for retirement today.
You’ll need a lot of money. If you are currently under the age of the age of 45, you will likely want to accumulate more than $1 million at retirement. Even though you have 20 or more years to ensure that, it will take saving a lot of money along the way to arrive there. You can’t just save 10% of your income for the last ten years of your career and are fed up with retirement. The math simply doesn’t work. If you are shorter than 45, you may not need $1 million to have the sort of retirement you want, but you’ll need a lot more money than you think.
Use the power of compounding. A dollar contributed to your retirement savings 40 years before you retire will become almost $15 when you retire if you invest at a reasonable 7% rate of return. That’s the power of compounding returns. Thirty years out and the contribution will grow to barely more than half that much. Twenty years: $3.87. Ten years: $1.97. As you can see, the money you save early in your career has much more power than the money you save later.
Consider how much you save. If you start saving for retirement consistently 40 years before you retire, you may be able to accumulate enough for retirement by saving as little as 6% of your salary. If you wait until you have just 30 years of retirements, you’ll want to save 10%. If you are called upon to have had 20 years, you may be unable to accumulate as much by saving 20% as you could have a decade earlier with 10%. If you wait until ten years before, it will be almost impossible to rescue enough to retire in the same way you could have retired otherwise. Saving 40% of your income for the last ten years would accumulate less than contributing 6% for 40 years.
Social Security will dwindle. For folks who retired before the turn of the millennium in America, social security will be a key portion of their retirement. The benefit is taken will be indexed for inflation and they will not likely notice a sizable decline in the purchasing power of their benefits while they are alive. Those who are retiring now will likely notice that their benefits don’t buy as much in twenty years as they do now—the government is such as to change the formula used to index benefits to inflation with the result that the benefits will grow more slowly. That will impact even more theatrical people who will be retiring twenty years from now. Their retirement benefit will potentially start later and ultimately pay only 75% as much per year—adjusted for inflation—as current retirees now receive. The conclusion is, of course, that retirement savings are greater for future retirees than they were for current retirees.
No matter how mature you take or when you are expected to retire, you will be better off if you start saving for retirement today.
How Can I Stretch My Retirement Dollars?
If your retirement savings isn’t as big as you’d hoped, or isn’t lasting as long as you had expected, here are some tips to help you stretch your retirement dollars:
1. Live Near Your Kids: If your children are inclined to help and live in a place that wouldn’t be terrible, you may find that being near your children and grandchildren can actually save you money—especially when your ability to do things for yourself diminishes. If your kids help you avoid costly time in assisted living, you may be money ahead.
2. Downsize: If you own your home, you may want to sell it and move to smaller quarters. If you are just starting retirement and likely have decades to go, you can get a smaller place. If you are mid-retirement, you may just want to get the proceeds from the sale to rent more modest quarters.
3. Move to Lower Cost City: Especially if you can’t afford to live near your children, you may be placed on moving to a retirement friendly, low cost community like Arlington, Texas; De Moines, Iowa; or Port Charlotte, Florida. (see a longer list atU.S. News & World Report (it.Ly/cDAeKt-RRB- These examples all feature senior friendly communities, with high quality health care, low cost activities and a low cost of living. Why not live somewhere fun and inexpensive if you can’t be the grandkids?
4. Care with cars: Reducing spending on cars should be comfortable in retirement. Most retirees drive less than they did before they retired. You can be easily by with one car and you won’t need in order to replace it as often because you won’t put as many miles on it. Don’t let old habits dictate when you purchase a car; carry out as long as it lasts. Take care of your car so it lasts a long time.
5. Think a Second Career: If you are still healthy enough to work, consider launching a second career. A study cited by U.S. News (it.Ly/ia4vh4) suggests that there are increasing career opportunities for seniors and that many are beneficial enough to enjoy working. Many of the jobs are in “health care, education, government, and social assistance jobs, ” depending on the research. The nature of these jobs is the fact that they offer a sense of fulfillment you may not have had when you were working on your first career.
Retirement is a challenge for the current generation of retirees, which include a larger proportion of people who retired principally relying on savings in a 401k or IRA rather than on traditional pension plans. If you are seeking to make ends meet, these ideas may help you enjoy a happier and more fulfilling retirement.
1. Live Near Your Kids: If your children are inclined to help and live in a place that wouldn’t be terrible, you may find that being near your children and grandchildren can actually save you money—especially when your ability to do things for yourself diminishes. If your kids help you avoid costly time in assisted living, you may be money ahead.
2. Downsize: If you own your home, you may want to sell it and move to smaller quarters. If you are just starting retirement and likely have decades to go, you can get a smaller place. If you are mid-retirement, you may just want to get the proceeds from the sale to rent more modest quarters.
3. Move to Lower Cost City: Especially if you can’t afford to live near your children, you may be placed on moving to a retirement friendly, low cost community like Arlington, Texas; De Moines, Iowa; or Port Charlotte, Florida. (see a longer list atU.S. News & World Report (it.Ly/cDAeKt-RRB- These examples all feature senior friendly communities, with high quality health care, low cost activities and a low cost of living. Why not live somewhere fun and inexpensive if you can’t be the grandkids?
4. Care with cars: Reducing spending on cars should be comfortable in retirement. Most retirees drive less than they did before they retired. You can be easily by with one car and you won’t need in order to replace it as often because you won’t put as many miles on it. Don’t let old habits dictate when you purchase a car; carry out as long as it lasts. Take care of your car so it lasts a long time.
5. Think a Second Career: If you are still healthy enough to work, consider launching a second career. A study cited by U.S. News (it.Ly/ia4vh4) suggests that there are increasing career opportunities for seniors and that many are beneficial enough to enjoy working. Many of the jobs are in “health care, education, government, and social assistance jobs, ” depending on the research. The nature of these jobs is the fact that they offer a sense of fulfillment you may not have had when you were working on your first career.
Retirement is a challenge for the current generation of retirees, which include a larger proportion of people who retired principally relying on savings in a 401k or IRA rather than on traditional pension plans. If you are seeking to make ends meet, these ideas may help you enjoy a happier and more fulfilling retirement.
Sunday, February 22, 2015
How to Get the Most Out of Your 401K Plan
For most people retiring in the future, a 401k plan will be the financial key to retirement. Here are some tips to help you ensure that you’re getting the most out of your plan.
1. Never misses the match. If you are not contributing enough to gain the employer match in your 401k today, stop reading now and call your HR department to start contributing at least the minimum required for the full company match today. Never passes up free money!
2. Contribute more than you’d like. Retirement for most people will last a long time, perhaps longer than you’d like. To be prepared, you’ve got to contribute more than you’d like to a 401K. With the help of a financial advisor—your employer should give you access to one—you can determine the degree to which you need to be saving each month.
3. Money saved today is useful to more than money will save tomorrow. Every day you help your 401k, is current that you are giving up the investment returns on the savings. Those who plan ahead will spend money they earned on the money they saved; those who are placed in a position to plan will have only their own money to spend—and painfully little of that.
4. Be consistent. Everyone encounters problems from time to time that put pressure on the budget. Do what you can to treat your retirement savings as too sacred to use in solving typical problems. Don’t cut down your contribution one month or one quarter with plans to contribute extra later. You won’t likely ever make it up. Be disciplined year after year.
5. Consist of two stocks and bond funds. As you manage your investments in your 401k, make sure to include funds that invest in stocks and bonds. Investing in five to seven distinct over the long haul is generally wiser than investing in just one or two. Be thoughtful about asset allocation among stocks, bonds and cash. For retirement, generally you’ll want most of your money in stocks and bonds and just a bit of cash. Before your 50th birthday, you may not have to maintain any cash—keeps it all in stocks and bonds, which earn more on average.
6. Educate yourself. If you’re not a financial expert today, it is unlikely that you’ll be an expert tomorrow. If you consistently attend employee education meetings about the 401k and read the business pages of the newspaper, you’ll become knowledgeable enough to ensure that better decisions. The sooner, the better.
7. Be patient. When you start contributing to your 401k at $100 per paycheck, it takes a while for that to become $1,000; longer still to become $10,000 and $100,00If you consistently contribute 10% of your income for your entire career, you could accumulate the better part of $1 million. Be patient. It takes time.
By performing the following simple guidelines, you’ll be much better prepared for retirement. Retirement takes a lot of money; those who plan well will have what they need.
1. Never misses the match. If you are not contributing enough to gain the employer match in your 401k today, stop reading now and call your HR department to start contributing at least the minimum required for the full company match today. Never passes up free money!
2. Contribute more than you’d like. Retirement for most people will last a long time, perhaps longer than you’d like. To be prepared, you’ve got to contribute more than you’d like to a 401K. With the help of a financial advisor—your employer should give you access to one—you can determine the degree to which you need to be saving each month.
3. Money saved today is useful to more than money will save tomorrow. Every day you help your 401k, is current that you are giving up the investment returns on the savings. Those who plan ahead will spend money they earned on the money they saved; those who are placed in a position to plan will have only their own money to spend—and painfully little of that.
4. Be consistent. Everyone encounters problems from time to time that put pressure on the budget. Do what you can to treat your retirement savings as too sacred to use in solving typical problems. Don’t cut down your contribution one month or one quarter with plans to contribute extra later. You won’t likely ever make it up. Be disciplined year after year.
5. Consist of two stocks and bond funds. As you manage your investments in your 401k, make sure to include funds that invest in stocks and bonds. Investing in five to seven distinct over the long haul is generally wiser than investing in just one or two. Be thoughtful about asset allocation among stocks, bonds and cash. For retirement, generally you’ll want most of your money in stocks and bonds and just a bit of cash. Before your 50th birthday, you may not have to maintain any cash—keeps it all in stocks and bonds, which earn more on average.
6. Educate yourself. If you’re not a financial expert today, it is unlikely that you’ll be an expert tomorrow. If you consistently attend employee education meetings about the 401k and read the business pages of the newspaper, you’ll become knowledgeable enough to ensure that better decisions. The sooner, the better.
7. Be patient. When you start contributing to your 401k at $100 per paycheck, it takes a while for that to become $1,000; longer still to become $10,000 and $100,00If you consistently contribute 10% of your income for your entire career, you could accumulate the better part of $1 million. Be patient. It takes time.
By performing the following simple guidelines, you’ll be much better prepared for retirement. Retirement takes a lot of money; those who plan well will have what they need.
Is There A Trail Of Forgotten 401Ks Behind You?
Almost all employers offer a 401k or similar plan. Many employers enable you to be eligible for the 401k from the first day and some will enroll you automatically. If do not leave stuck looking back at five different employers over the years behind you, there may be five distinct 401k accounts sitting out there. Let’s get this organized!
Once you leave an employer, the company can force you out of the 401k by sending you a check, but they can’t force you to continue to maintain the plan. Staying is no problem except that you create this trail behind you with one plan after another, each with relatively small balances. A 401k may not be a great place to leave your money, as the fees are typically higher than they would be in an IRA.
Follow this plan to obtain yourself organized.
1. Draw up a list of your past employers. The IRS designs 401ks such that you are generally not eligible until you turn 21, so you don’t begin to your list with your high school jobs. Anywhere you’ve worked since your 21st birthday should be on the list.
2. Call human resources. For company on the list, call human resources and ask if they can assist you in determining if there is a 401k balance being held on your behalf. If the company sent you a check for your balance, perhaps years ago, you may have forgotten. It is good to check to confirm that there isn’t money out there for you.
3. Gather the statements. Your employer should direct you to the company that manages the 401k. The company can change that from time to time so it may be not the same financial firm that handled it when you worked there. Using your social security number and birthdate, you can likely get the firm to provide you with a statement showing how much you take into the account. Gather all of the statements from all of your previous 401ks. If you contributed regularly over 15 years, you may find that the sum of all your accounts now equals a couple of years of your current income, depending upon how you invested the money.
4. Open an IRA. If you already get an IRA, you can skip this step. You will want open an account with a stock brokerage. Unless you have a lot and lots of money, I recommend a discount brokerage like Charles Schwab, Fidelity Investments or TD Ameritrade. Choosing one may be simply determining which one has the closest office. Or you can have it online.
5. Transfer the 401ks. Now that your new IRA is open, you’ll want to transfer all of the 401k assets to your IRA. Your broker can handle most of the work if you fill out a form—in person or online—providing them with the account details from the 401k statements you gathered.
6. Invest wisely. Inside the 401k, the company likely restricted your investments rather narrowly, forcing you to be invested no more than moderate risk in mutual funds. In your brokerage account you’ll have the full gamut of options, but you’ll want to remain fairly cautious, investing in five to seven separate no-load, commission free mutual funds with different strategies. Some should be stock funds and others should be bond funds. When you’re young, most should be stock funds; as you get older, more investments should go into bonds.
By following this strategy, you get the big benefit of having control of your savings and investments. You’d hate to forget about one of those obsolete accounts and miss out on what that value can cover during retirement. If you’re wise and thoughtful, you should be located in a position to reduce the fees you’re paying. Thereby increasing your potential returns. Best of all, you can sleep at night knowing where all of your money is sleeping.
Once you leave an employer, the company can force you out of the 401k by sending you a check, but they can’t force you to continue to maintain the plan. Staying is no problem except that you create this trail behind you with one plan after another, each with relatively small balances. A 401k may not be a great place to leave your money, as the fees are typically higher than they would be in an IRA.
Follow this plan to obtain yourself organized.
1. Draw up a list of your past employers. The IRS designs 401ks such that you are generally not eligible until you turn 21, so you don’t begin to your list with your high school jobs. Anywhere you’ve worked since your 21st birthday should be on the list.
2. Call human resources. For company on the list, call human resources and ask if they can assist you in determining if there is a 401k balance being held on your behalf. If the company sent you a check for your balance, perhaps years ago, you may have forgotten. It is good to check to confirm that there isn’t money out there for you.
3. Gather the statements. Your employer should direct you to the company that manages the 401k. The company can change that from time to time so it may be not the same financial firm that handled it when you worked there. Using your social security number and birthdate, you can likely get the firm to provide you with a statement showing how much you take into the account. Gather all of the statements from all of your previous 401ks. If you contributed regularly over 15 years, you may find that the sum of all your accounts now equals a couple of years of your current income, depending upon how you invested the money.
4. Open an IRA. If you already get an IRA, you can skip this step. You will want open an account with a stock brokerage. Unless you have a lot and lots of money, I recommend a discount brokerage like Charles Schwab, Fidelity Investments or TD Ameritrade. Choosing one may be simply determining which one has the closest office. Or you can have it online.
5. Transfer the 401ks. Now that your new IRA is open, you’ll want to transfer all of the 401k assets to your IRA. Your broker can handle most of the work if you fill out a form—in person or online—providing them with the account details from the 401k statements you gathered.
6. Invest wisely. Inside the 401k, the company likely restricted your investments rather narrowly, forcing you to be invested no more than moderate risk in mutual funds. In your brokerage account you’ll have the full gamut of options, but you’ll want to remain fairly cautious, investing in five to seven separate no-load, commission free mutual funds with different strategies. Some should be stock funds and others should be bond funds. When you’re young, most should be stock funds; as you get older, more investments should go into bonds.
By following this strategy, you get the big benefit of having control of your savings and investments. You’d hate to forget about one of those obsolete accounts and miss out on what that value can cover during retirement. If you’re wise and thoughtful, you should be located in a position to reduce the fees you’re paying. Thereby increasing your potential returns. Best of all, you can sleep at night knowing where all of your money is sleeping.
The Kids Are Gone, But I’m Just Ten Years From Retirement With Almost No Savings. Help!
Good news! With the kids out of the house and on their own, you can focus more time and money on preparing for retirement. You can’t catch up with ten years for what you should have accomplished so over the last thirty years, but you can make retirement a reality.
Follow these tips for a fast track retirement:
1. Scale back the vision. Without a retirement fund at age 55, you can’t have saved enough to securely maintain the lifestyle you’ve had in retirement. Focus not on your dream retirement, but what is realistic. By preparing for a more modest lifestyle, you can significantly reduce the income required in order to fill the gap between social security and the lifestyle you want.
2. Save at least 20% of your income. Even saving 20% of your income, won’t be large enough to fund the retirement you want in just ten years. There just isn’t time for investment returns to compound and do much of the work for you. You’ll have to really sacrifice to make retirement possible.
3. Plan to be a part of the proper home for retirement. If you had several children, you may discover that your home is greater, perhaps much larger, than you is a need to. Sell your spacious home and buy a small home suitable for retirement (no stairs). Make sure you have to decrease or eliminate your mortgage when you move. If you can’t eliminate it, take out a ten year mortgage so that your home is given off when you retire. If you rent now, endeavour to purchase a home you can afford with a ten-year mortgage.
4. No more car loans. If do not leave a car loan now, congratulations! It’s your former one. Don’t ever buy a car again with a loan. Using a loan is more expensive and offers you a false sense of what you can afford. If you do away with $200,000 in your retirement savings, you’d almost certainly never spend $30,000 of it one day in a new car. If go through the money, you’re doing the same thing (except that you’re spending $31,500 instead).
5. Review your balance sheet. Your balance sheet or list of assets and liabilities may hold some surprises. Review it carefully. Look for assets that can be converted to cash to reduce any outstanding debts. With advice from your CPA, use those assets now to stop the interest on the debt from working against your retirement plans.
By taking these five simple (but potentially painful) steps, you can set yourself up to retirement, even if that hasn’t been a high priority in your planning so far. If you roll into retirement with a home you own free and clear, and no other debt, your need for income is lowered. Combining what you save over the next ten years to produce income from your social security will allow you to enjoy a safe and secure retirement.
Follow these tips for a fast track retirement:
1. Scale back the vision. Without a retirement fund at age 55, you can’t have saved enough to securely maintain the lifestyle you’ve had in retirement. Focus not on your dream retirement, but what is realistic. By preparing for a more modest lifestyle, you can significantly reduce the income required in order to fill the gap between social security and the lifestyle you want.
2. Save at least 20% of your income. Even saving 20% of your income, won’t be large enough to fund the retirement you want in just ten years. There just isn’t time for investment returns to compound and do much of the work for you. You’ll have to really sacrifice to make retirement possible.
3. Plan to be a part of the proper home for retirement. If you had several children, you may discover that your home is greater, perhaps much larger, than you is a need to. Sell your spacious home and buy a small home suitable for retirement (no stairs). Make sure you have to decrease or eliminate your mortgage when you move. If you can’t eliminate it, take out a ten year mortgage so that your home is given off when you retire. If you rent now, endeavour to purchase a home you can afford with a ten-year mortgage.
4. No more car loans. If do not leave a car loan now, congratulations! It’s your former one. Don’t ever buy a car again with a loan. Using a loan is more expensive and offers you a false sense of what you can afford. If you do away with $200,000 in your retirement savings, you’d almost certainly never spend $30,000 of it one day in a new car. If go through the money, you’re doing the same thing (except that you’re spending $31,500 instead).
5. Review your balance sheet. Your balance sheet or list of assets and liabilities may hold some surprises. Review it carefully. Look for assets that can be converted to cash to reduce any outstanding debts. With advice from your CPA, use those assets now to stop the interest on the debt from working against your retirement plans.
By taking these five simple (but potentially painful) steps, you can set yourself up to retirement, even if that hasn’t been a high priority in your planning so far. If you roll into retirement with a home you own free and clear, and no other debt, your need for income is lowered. Combining what you save over the next ten years to produce income from your social security will allow you to enjoy a safe and secure retirement.
How Do I Save Enough For My Dream Retirement?
Finding out how much to save each month for retirement is a difficult question even when a financial planner sits down with you and knows your situation. Not understanding your situation makes the problem virtually impossible. In order to answer the question, we’ll create a hypothetical example and give you some guidance on how to adjust the answer if the hypothetical example doesn’t fit.
If you are a couple, both age 35, planning to retire at age 70 and live until you’re both 95, with a household income of $80,000 per year, no retirement savings started and would like to have your home paid off and have $70,000 per year of income (adjusted for inflation) throughout your retirement, effectively allowing you to enjoy a higher standard of living in retirement than you will enjoy before then, here are some keys:
1. Save more than 10% of your income. Ignoring the need to save for your children’s college, for a car and anything else you want, you’ll need to save at least 10% of your income just for retirement. (Be sure to save the other things, too!)
2. Shelter your retirement savings from tax. Your retirement savings are allocated to either a 401k or an IRA where the taxes on interest, dividends and gains are deferred until retirement. If you contribute exclusively to “Roth” type accounts, you can allow for saving a bit less as you’ll be paying no income tax in retirement on your retirement savings.
3. Buy a home. If you don’t already own a home, buy one within the next five years so that you can have enough completely paid off before you retire at age 70. Select a home where you can stay for your entire lives, if possible.
4. Invest in stocks and bonds (using mutual funds). Given your retirement plans, CDs and savings accounts at banks won’t generate enough return on your investments. Recognize, however, that additional investments are under a greater risk of loss and your retirement plans could be dashed by an unforeseen financial crisis.
The math in these assumptions assumes a 4.5% real rate of return. Sounds low, right? Not really. Ten year Treasury Bonds yield less than 2% as I write this and inflation is running at close to 3%, meaning that investments in Treasury Bonds today have a negative expected real return—you’ll buy less with the proceeds from the Treasury Bond in ten years than you could buy with the cash today.
Note that this plan only provides your target income until you are 95. After that point, you’d is under an obligation to sell your home. Once the proceeds from the sale run out, you’d be living on social security (but that would not likely happen until you were almost 100 years old. Of course, if you end your retirement in the customary fashion (by kicking the bucket) before then, you’ll leave a little nest egg for your heirs.
If you would like to retire in less than 35 years, you should be saving much more for retirement. If your household income is greater than the cap on the Social Security tax (about $110,000) and all from one spouse, you’ll need to save more because social security will be kicking in proportionally less for you in retirement. If you have more time to retirement than 35 years, you can save bit less. If your dream retirement is a little bit more modest than the example, you can also save a bit less. No one, however, should count on social security to have an adequate retirement. At a minimum, intend to have your home paid off before retiring.
If you are a couple, both age 35, planning to retire at age 70 and live until you’re both 95, with a household income of $80,000 per year, no retirement savings started and would like to have your home paid off and have $70,000 per year of income (adjusted for inflation) throughout your retirement, effectively allowing you to enjoy a higher standard of living in retirement than you will enjoy before then, here are some keys:
1. Save more than 10% of your income. Ignoring the need to save for your children’s college, for a car and anything else you want, you’ll need to save at least 10% of your income just for retirement. (Be sure to save the other things, too!)
2. Shelter your retirement savings from tax. Your retirement savings are allocated to either a 401k or an IRA where the taxes on interest, dividends and gains are deferred until retirement. If you contribute exclusively to “Roth” type accounts, you can allow for saving a bit less as you’ll be paying no income tax in retirement on your retirement savings.
3. Buy a home. If you don’t already own a home, buy one within the next five years so that you can have enough completely paid off before you retire at age 70. Select a home where you can stay for your entire lives, if possible.
4. Invest in stocks and bonds (using mutual funds). Given your retirement plans, CDs and savings accounts at banks won’t generate enough return on your investments. Recognize, however, that additional investments are under a greater risk of loss and your retirement plans could be dashed by an unforeseen financial crisis.
The math in these assumptions assumes a 4.5% real rate of return. Sounds low, right? Not really. Ten year Treasury Bonds yield less than 2% as I write this and inflation is running at close to 3%, meaning that investments in Treasury Bonds today have a negative expected real return—you’ll buy less with the proceeds from the Treasury Bond in ten years than you could buy with the cash today.
Note that this plan only provides your target income until you are 95. After that point, you’d is under an obligation to sell your home. Once the proceeds from the sale run out, you’d be living on social security (but that would not likely happen until you were almost 100 years old. Of course, if you end your retirement in the customary fashion (by kicking the bucket) before then, you’ll leave a little nest egg for your heirs.
If you would like to retire in less than 35 years, you should be saving much more for retirement. If your household income is greater than the cap on the Social Security tax (about $110,000) and all from one spouse, you’ll need to save more because social security will be kicking in proportionally less for you in retirement. If you have more time to retirement than 35 years, you can save bit less. If your dream retirement is a little bit more modest than the example, you can also save a bit less. No one, however, should count on social security to have an adequate retirement. At a minimum, intend to have your home paid off before retiring.
What Sort Of Retirement Will Social Security Alone Provide?
If you are facing
retirement with the prospect of living solely on social security, there is
tailored to get nervous.
Social security benefits are dependent on what you’ve paid in to the
system. The less you make, the less you’ve paid in and the less you’ll receive
benefits.
You can obtain an estimate of your future benefits from the Social
Security Administration website (usa. Gov). Your benefits will be to a great
extent a function of your ten best income years, adjusted for inflation.
The income will be approximately 25 to 50% of your income, depending
upon a variety of factors. If that is your sole source of income, your tax
burden will be light so you can expect to able to spend most of that money on
your living expenses.
You will have the option as you approach retirement of retiring
early with a reduced benefit or later and receiving a larger benefit.
Generally, your benefit increases only until age 70; thereafter, you get no
increase associated with not accepting your payments.
Medicare will cover your hospital stays fairly well, but your
medication won’t be covered unless you enroll in a special drug plan. Even
then, your medications won’t be covered 100%. Healthcare will likely eat up a
fair chunk of your social security income. Even if you are healthy now before
retirement, it is unlikely that you will finish retirement in the same
condition.
If you do your home paid for and can live rent free, your social
security income will go farther. On the other hand, if you have a mortgage or
don’t own your home, social security may not provide sufficient income for you
to rent a place to live, cover all of your medical expenses and leave you with
enough money for food and clothing. Having a car would almost be now a man with
no the problem.
Many communities provide subsidized housing options for people on
fixed incomes. In my community, for instance, public housing for seniors is now
available at a cost of one third of a retiree’s income, making it affordable. A
senior receiving just $600 per month, pays rent of just $200. In that
situation, Medicaid picks up more of the medical expenses so much of the
remaining $400 per month can be utilized to food and incidentals.
Living in collective security alone in most communities in America
is possible but not pleasant.
If you own your home without a mortgage, your social security will
go farther. A reverse mortgage could pay you additional amounts each
month—borrowed against the value of your home—making your life more
comfortable.
If you still have any time before you retire, focus first on getting
your mortgage paid off so that when you retire you have a free place to live
together. Any savings you can set aside before you retire will bring real
comfort over the years. Be judicious with your savings to ensure that they are
surviving as long as possible.
If you have more than ten years to retire, make a comprehensive plan
to own a home debt free and have at least two year’s income saved up. With a
home and that many savings, your retirement will be very different from one
relying entirely on shared security.
Retirement Won’t Just Happen—You Have To Make It Happen
Early in our adult lives it is difficult to focus on something so far away as retirement. If you’re young and healthy, now is now time to start planning and setting aside retirement.
Many who launched careers in the middle of the last century went to work for one company, stayed 30 years and retired with a nice pension. Federal Government kicked in some social security benefits and incomes in retirement looked much like they did during their working years. Retirement lasted only ten or fifteen years on average and there were no problems.
If you’re yet to celebrate your 40th birthday, you are likely in a very singular situation. You’ll likely change employers much more often. There will be no pension and social security benefits will almost certainly represent a lower percentage of your income during retirement than it was for people who retired before 2000.
Added to that the fact that you are such as to live a very long time. If you take care of yourself, you could easily live to be 100 years old. You probably already knew that. Did you think about the fact that if you are able to be 100 and you retire at 65, you’ll need enough money to live for 35 years without a job? You may not be 35 years old yet! That’s a long time to go without a job.
You’re thinking i need a lot of money. Optimally, you’ll end up with a nest egg so big the number would scare you. You may really need to have more than a $1 million when you retire (depending on inflation and the lifestyle you want). It is virtually impossible to rescue up the sort of money you’ll need in the last ten or even 15 years of your career, no matter how well you’re doing then.
That means that you need to go sober right now. If you’re not contributing generously to your company’s 401k plan, start today. Stop reading, call human resources to set it up, then finish reading this article.
Even if you are contributing to your 401k, you may not be contributing enough. Talk to a financial professional to understand how much you’ll really need to retire when you’d like. If you can’t contribute to a 401k because your employer doesn’t offer one, is sure to contribute to an IRA. If you or your spouse don’t have an earned income, investment for him, too, in an IRA.
Don’t cop out and tell me you’ll never retire because you really like to work. I’m not believing in it. If you are permitted to be 102, I don’t believe you’ll work up until the end. You may even genuinely want to work until you’re 102, but I don’t know numerous people that age who are still working at all, let alone earning anything like what they did in their prime. Ultimately, retirement will be required on you even if you don’t want to retire.
Be ready or be sorry!
Many who launched careers in the middle of the last century went to work for one company, stayed 30 years and retired with a nice pension. Federal Government kicked in some social security benefits and incomes in retirement looked much like they did during their working years. Retirement lasted only ten or fifteen years on average and there were no problems.
If you’re yet to celebrate your 40th birthday, you are likely in a very singular situation. You’ll likely change employers much more often. There will be no pension and social security benefits will almost certainly represent a lower percentage of your income during retirement than it was for people who retired before 2000.
Added to that the fact that you are such as to live a very long time. If you take care of yourself, you could easily live to be 100 years old. You probably already knew that. Did you think about the fact that if you are able to be 100 and you retire at 65, you’ll need enough money to live for 35 years without a job? You may not be 35 years old yet! That’s a long time to go without a job.
You’re thinking i need a lot of money. Optimally, you’ll end up with a nest egg so big the number would scare you. You may really need to have more than a $1 million when you retire (depending on inflation and the lifestyle you want). It is virtually impossible to rescue up the sort of money you’ll need in the last ten or even 15 years of your career, no matter how well you’re doing then.
That means that you need to go sober right now. If you’re not contributing generously to your company’s 401k plan, start today. Stop reading, call human resources to set it up, then finish reading this article.
Even if you are contributing to your 401k, you may not be contributing enough. Talk to a financial professional to understand how much you’ll really need to retire when you’d like. If you can’t contribute to a 401k because your employer doesn’t offer one, is sure to contribute to an IRA. If you or your spouse don’t have an earned income, investment for him, too, in an IRA.
Don’t cop out and tell me you’ll never retire because you really like to work. I’m not believing in it. If you are permitted to be 102, I don’t believe you’ll work up until the end. You may even genuinely want to work until you’re 102, but I don’t know numerous people that age who are still working at all, let alone earning anything like what they did in their prime. Ultimately, retirement will be required on you even if you don’t want to retire.
Be ready or be sorry!
Thursday, February 19, 2015
Why Should You Contribute To Your 401K?
Before reacting to the question, why contribute to your 401k, let’s first answer the question. What is a 401k?
A 401k is a retirement savings plan with associated tax benefits provided by your employer. A 401k is only an account into which you, principally, and your employer (perhaps) secondarily both contribute.
The money that you contribute is always yours and can never be forfeited due to a change in your employment status. You can, however, lose money on investments, but leaving your job won’t cause you to lose your hard earned money.
There is for two types of 401k accounts, “traditional” and “Roth.” Many, but not all, employers offer both.
1. Traditional: Traditional 401k accounts offer a tax deduction for contributions. Withdrawals will be taxed when withdrew during retirement.
2. Roth: Roth 401k accounts do not offer a tax deduction for contributions, but the withdrawals during retirement are not taxed at all.
While many people get excited about the idea of the Roth—no income tax during retirement—the value of that difference is confined to the difference in tax rate between now and retirement. If you have low enough income—or enough children—that you pay little or no tax on your income now, then it makes perfect sense for you to assist with the Roth type account. If you have high income as some do at the pinnacle of their careers, it may make more sense to contribute to a traditional account to shelter income in the high tax year and pay tax in retirement when income may drop you into a lower tax bracket.
The fundamental reason is to assist in your 401k, regardless of which account type you choose, is to save money for your retirement. Investment returns for the current generation are liable to be lower than in the previous generation, meaning that we’ll need to invest more than our parents to have the same sort of retirement. More than ever, we need to use the benefit of what the financial world calls “compound returns.” That simply means, we need to go to the benefit of the interest on the interest piling up over the years to predict our retirement.
The secondary factor to assist in your 401k is that your employer is probably needing to get to contribute to the account. If you contribute $1,000 this year, your employer will likely give you another $500 to $1,000 as well. The money contributed by your employer is typically subject to vesting, meaning that if you leave within a defined period of time, you’ll lose the money the company contributed on your behalf and the earnings on it. Still, that means that you could get a raise just for contributing to your 401k—which you should do anyway. It’s basically free money. Never miss out on free money!
A 401k is a retirement savings plan with associated tax benefits provided by your employer. A 401k is only an account into which you, principally, and your employer (perhaps) secondarily both contribute.
The money that you contribute is always yours and can never be forfeited due to a change in your employment status. You can, however, lose money on investments, but leaving your job won’t cause you to lose your hard earned money.
There is for two types of 401k accounts, “traditional” and “Roth.” Many, but not all, employers offer both.
1. Traditional: Traditional 401k accounts offer a tax deduction for contributions. Withdrawals will be taxed when withdrew during retirement.
2. Roth: Roth 401k accounts do not offer a tax deduction for contributions, but the withdrawals during retirement are not taxed at all.
While many people get excited about the idea of the Roth—no income tax during retirement—the value of that difference is confined to the difference in tax rate between now and retirement. If you have low enough income—or enough children—that you pay little or no tax on your income now, then it makes perfect sense for you to assist with the Roth type account. If you have high income as some do at the pinnacle of their careers, it may make more sense to contribute to a traditional account to shelter income in the high tax year and pay tax in retirement when income may drop you into a lower tax bracket.
The fundamental reason is to assist in your 401k, regardless of which account type you choose, is to save money for your retirement. Investment returns for the current generation are liable to be lower than in the previous generation, meaning that we’ll need to invest more than our parents to have the same sort of retirement. More than ever, we need to use the benefit of what the financial world calls “compound returns.” That simply means, we need to go to the benefit of the interest on the interest piling up over the years to predict our retirement.
The secondary factor to assist in your 401k is that your employer is probably needing to get to contribute to the account. If you contribute $1,000 this year, your employer will likely give you another $500 to $1,000 as well. The money contributed by your employer is typically subject to vesting, meaning that if you leave within a defined period of time, you’ll lose the money the company contributed on your behalf and the earnings on it. Still, that means that you could get a raise just for contributing to your 401k—which you should do anyway. It’s basically free money. Never miss out on free money!
How To Choose Between A Roth IRA Or A Traditional IRA
There is no
absolute right or wrong answer to choose between a Roth IRA and a Traditional
IRA. But there are some things you should think about that may alter your
decision from one year to the next.
Bear in mind that the same tax rules apply to traditional and Roth
401ks as well as IRAs. By way of reminder, contributions to a traditional plan
are deductible in the year of the contribution (reducing your current year tax)
and withdrawals during retirement are taxed at your then current tax rate for
all other taxes deferred. Contributions to a Roth plan are not tax deductible,
but the withdrawals are never taxed if held until retirement.
The guiding principle is that you want to avoid the bigger tax. If
you think your tax rate this year is larger than your tax rate in retirement,
you’ll want to contribute to the traditional plan. On the other hand, if you
consider you’ll have a higher rate in retirement than you will this year, you’ll
want to contribute to the Roth plan.
As a general rule, you’ll want to contribute to the traditional
plans in years where you pay an unusually high tax rate (say, you get a big
bonus or exercise stock options). You’ll want to contribute to the Roth plans
for years, you have an unusually low tax rate (business losses, the gap in
employment, etc.).
For many years, however, there will be no unique tax situation. By
splitting your contributions between the two plans, you’ll create some
flexibility during retirement. By using some money from the Roth each year in
retirement, you may be able to effectively reduce the tax rate on the money you
have an obligation to withdraw from the traditional IRA.
Of course, some people believe that the national debt will force
future tax rates to be much higher than current rates. If you expect to have
the same taxable income in retirement that you have now, it would be a great
idea to invest in the Roth IRA as a hedge against those potentially higher tax
rates.
On the other hand, while tax rates are likely to be somewhat higher
in the future, most people won’t save enough to have the same income in
retirement that they have during their working years. You may be in that
situation. Your retirement income could leave you in a lower tax bracket than
you’re in today—even if tax rates in general are higher.
For instance, many people today are located in the 28 percent tax
bracket; numerous are also taxed in the 15 percent tax bracket. Even if those
brackets move from 28 and 15 to 31 and 18 percent respectively, if your income
drops you to the lower tax bracket in retirement, you’ll have been better off
contributing to the traditional plan and getting the 28% deductions all those
years and then paying the 18% tax.
In conclusion, you need to assess your situation each year to see if
there is a reality or circumstance that dictates a switch from your overall
strategy. If outcomes you are unclear, the safest bet is tantamount to split
your contributions between the two plans.
How Do I Make Sense Of Retirement Savings Plans?
If you don’t have the retirement savings you want, one of the barriers you face is likely to be understanding all of the crazy. Nonsense terms you think you need to understand just to open an account.
There are really just four key words to understand the retirement planning arena. That’s it. Four:
IRA: Individual Retirement Arrangements more commonly called IRA’s is accounts defined by the Internal Revenue Service (IRS) as having special status that excludes the income on the account from your taxable income each year (in some cases, only until you retire). You can open an IRA with virtually any bank, credit union, or brokerage.
401k: A 401k is much like an IRA, except that your employer opens the account and holds the money for you. You have the option of contributing some of your income into the 401k (you can’t be forced to participate) and the income from the investments in the 401k is excluded from your income at least until retirement.
Traditional: Both IRAs and 401ks come in two varieties. The first of which is called “traditional” because it was invented first. A traditional IRA or 401k is one in which your contributions to the account can be deducted from your current year’s income on your tax return. In other words, if you contribute $5,000 in 2012, that $5,000 will be deducted from your taxable income, reducing the tax you pay this year. Furthermore, you’ll pay no tax on any income earned in the account until you withdraw it for retirement income after age 59 1/2. When you withdraw it during retirement, you’ll pay tax on it then.
Roth: Again, both IRAs and 401ks come in the “Roth” variety. Roth variety accounts make the money in the account never, ever subject to tax, provided that it stays in the account until you retire. The catch is that there is no tax deduction for the year of your contribution, making it more difficult to get started.
If you have a 401k at work but don’t think you’re saving enough, you can simply contribute more to your 401k. Very few people bump up against federal limits on contributions to a 401k. You don’t need to have an IRA, too.
If you don’t have a 401k, go to virtually any financial institution and open an IRA. If you are likely to have more than $10,000 within a year, go to a stock brokerage like Schwab, Fidelity or TD Ameritrade. If it will take a few years, just get started at your local bank or credit union.
Traditional or Roth? If you pay a very low tax rate now, go with the Roth as your future income will likely be taxed at a higher rate and the deduction isn’t worth much this year. If you are taxed at a very high rate (congratulations, you earn a lot). You’ll likely want to contribute to traditional accounts. Still have questions? Your tax accountant and the folks at the bank or brokerage can help. Go sees them.
There are really just four key words to understand the retirement planning arena. That’s it. Four:
IRA: Individual Retirement Arrangements more commonly called IRA’s is accounts defined by the Internal Revenue Service (IRS) as having special status that excludes the income on the account from your taxable income each year (in some cases, only until you retire). You can open an IRA with virtually any bank, credit union, or brokerage.
401k: A 401k is much like an IRA, except that your employer opens the account and holds the money for you. You have the option of contributing some of your income into the 401k (you can’t be forced to participate) and the income from the investments in the 401k is excluded from your income at least until retirement.
Traditional: Both IRAs and 401ks come in two varieties. The first of which is called “traditional” because it was invented first. A traditional IRA or 401k is one in which your contributions to the account can be deducted from your current year’s income on your tax return. In other words, if you contribute $5,000 in 2012, that $5,000 will be deducted from your taxable income, reducing the tax you pay this year. Furthermore, you’ll pay no tax on any income earned in the account until you withdraw it for retirement income after age 59 1/2. When you withdraw it during retirement, you’ll pay tax on it then.
Roth: Again, both IRAs and 401ks come in the “Roth” variety. Roth variety accounts make the money in the account never, ever subject to tax, provided that it stays in the account until you retire. The catch is that there is no tax deduction for the year of your contribution, making it more difficult to get started.
If you have a 401k at work but don’t think you’re saving enough, you can simply contribute more to your 401k. Very few people bump up against federal limits on contributions to a 401k. You don’t need to have an IRA, too.
If you don’t have a 401k, go to virtually any financial institution and open an IRA. If you are likely to have more than $10,000 within a year, go to a stock brokerage like Schwab, Fidelity or TD Ameritrade. If it will take a few years, just get started at your local bank or credit union.
Traditional or Roth? If you pay a very low tax rate now, go with the Roth as your future income will likely be taxed at a higher rate and the deduction isn’t worth much this year. If you are taxed at a very high rate (congratulations, you earn a lot). You’ll likely want to contribute to traditional accounts. Still have questions? Your tax accountant and the folks at the bank or brokerage can help. Go sees them.
What Will $1 Million Buy In 2042?
If you’re young, as you begin providing for retirement, you may quickly recognize that you will accumulate over $1 million by the time you retire. That may seem like a great deal of money. You’ll be a millionaire after all. Before do not leave too excited about a lavish retirement, let’s look at what $1 million will likely buy in 2042.
Let’s assume inflation runs at 3 percent per year on average.
Car: In 2012, a typical new car costs about $30,000. In 2042, that will likely have risen to about $72,000. Already, you’re probably starting to feel less wealthy.
Housing: A fairly typical American home today would cost about $200,000 in many markets. In 2042, you can expect that home to cost just over $485,000, eating up about half of your $1 million. That suggests that you’ll want to make your home free and clear of a mortgage in addition to get a substantial retirement savings account—otherwise your retirement savings won’t be very substantial. A rental payment of $1,500 today will likely be about $3,600 in 2042.
Income: What you most want your retirement savings to provide is income. It is virtually impossible to know how much income $1 million will provide—it will change every year and unless you invest very conservatively there will be some years the money actually declines in value—before you spend any. That said, there are three ways to consider the income you’ll earn from $1 million.
Conservative Growth: If you’d like to know that you could live indefinitely on your investments with the income growing with inflation, you’d want to spend less than your savings generate each year. If you assume that you will on average earn 7 percent each year, and you’ll want to keep 3 percent of the renovated so your income grows each year with inflation, then you only get to spend 4 percent of the balance, meaning your $1 million will provide just $40,000 of income each year. The good news is, under this set of assumptions, it will grow until you die and you’ll leave a nice lump of money to your children. In 2042, however, $40,000 will feel like earning less than $17,000 per year. (perhaps added to your social security benefits it will be enough—but not likely).
All the income: As an alternative, you might wish to spend the entire $70,000 your income generates each year. Coupled with your social security, maybe that would serve as a comfortable income. Over time, however, inflation will erode the value of the $70,000 (which will fluctuate each year, but will not grow).
Eating the Golden Goose: As a final alternative, you can propose spending the earnings and some of the principal each year. If you know how long you’ll live, this is a grand plan. (The problem is that no one knows how long she’ll live.) If you assume you’ll live for 20 years after you will retire in 2042, your $1 million will provide you with over $94,000 per year. The value of that income will erode slowly over the twenty years—enough for you to stress. At the end of the twenty years, you’ll be flat broke if you’re still alive.
It is discouraging—probably even depressing—to think about how much money life will cost in retirement. Social Security is almost certain to be funded at a lower level (the likely mechanisms for reducing benefits will be pushing retirement to start later in life and indexing benefits to inflation using a formula that will result in lower benefits over time than the formula in use today.)
Choose now not to get discouraged by these facts; choose to empower yourself by saving more money each month so that your retirement can be what you dream and not what you fear. The choice is yours.
Let’s assume inflation runs at 3 percent per year on average.
Car: In 2012, a typical new car costs about $30,000. In 2042, that will likely have risen to about $72,000. Already, you’re probably starting to feel less wealthy.
Housing: A fairly typical American home today would cost about $200,000 in many markets. In 2042, you can expect that home to cost just over $485,000, eating up about half of your $1 million. That suggests that you’ll want to make your home free and clear of a mortgage in addition to get a substantial retirement savings account—otherwise your retirement savings won’t be very substantial. A rental payment of $1,500 today will likely be about $3,600 in 2042.
Income: What you most want your retirement savings to provide is income. It is virtually impossible to know how much income $1 million will provide—it will change every year and unless you invest very conservatively there will be some years the money actually declines in value—before you spend any. That said, there are three ways to consider the income you’ll earn from $1 million.
Conservative Growth: If you’d like to know that you could live indefinitely on your investments with the income growing with inflation, you’d want to spend less than your savings generate each year. If you assume that you will on average earn 7 percent each year, and you’ll want to keep 3 percent of the renovated so your income grows each year with inflation, then you only get to spend 4 percent of the balance, meaning your $1 million will provide just $40,000 of income each year. The good news is, under this set of assumptions, it will grow until you die and you’ll leave a nice lump of money to your children. In 2042, however, $40,000 will feel like earning less than $17,000 per year. (perhaps added to your social security benefits it will be enough—but not likely).
All the income: As an alternative, you might wish to spend the entire $70,000 your income generates each year. Coupled with your social security, maybe that would serve as a comfortable income. Over time, however, inflation will erode the value of the $70,000 (which will fluctuate each year, but will not grow).
Eating the Golden Goose: As a final alternative, you can propose spending the earnings and some of the principal each year. If you know how long you’ll live, this is a grand plan. (The problem is that no one knows how long she’ll live.) If you assume you’ll live for 20 years after you will retire in 2042, your $1 million will provide you with over $94,000 per year. The value of that income will erode slowly over the twenty years—enough for you to stress. At the end of the twenty years, you’ll be flat broke if you’re still alive.
It is discouraging—probably even depressing—to think about how much money life will cost in retirement. Social Security is almost certain to be funded at a lower level (the likely mechanisms for reducing benefits will be pushing retirement to start later in life and indexing benefits to inflation using a formula that will result in lower benefits over time than the formula in use today.)
Choose now not to get discouraged by these facts; choose to empower yourself by saving more money each month so that your retirement can be what you dream and not what you fear. The choice is yours.
Funding College Without Savings Or Debt
If your financial situation has been such that you haven’t been able to save for your child’s college education and you always want to prevent student loans, college is still an option. The following is a plan to help you help your student finish college on the cheap.
1. Living at home: For most students who attend in-state schools, the cost of room and board away from home with Mom and Dad exceeds the cost of tuition. If you have decided to host your student at home—as long as she stays in school with acceptable grades—you’ll be making a huge contribution to her education without increasing your costs at all.
2. Tax credits: American Opportunity tax credit provides a tax credit to couples filing joint tax returns with incomes under $160,000 per year. The tax credit provides up to $2,500 in refunded taxes for up to four years per student. The Lifetime Learning tax credit provides another $2,000 without limits on duration. These tax credits may cover substantially all of the tuition cost for full-time enrollment in a local community college. If not all of the cost, it will certainly close the funding gap considerably.
3. Scholarships: Many scholarships are needs based, meaning that your student can get some scholarships without being academically gifted. Instead, if your student is characterized by a host of seemingly random criteria (family heritage, parents’ employment, where your student attended high school, etc.) your student may qualify for a scholarship. Plan to apply for 12 to 15 scholarships to help close the funding gap; expect to get two or three small scholarships.
4. Six-Year Plan: If completing school in four years is impossible even with the steps taken above, consider a six-year plan. By studying half-time three semesters per year (including summer), your student can complete about two-thirds of an academic year for each year, enabling her to finish in six years. This will significantly reduce the cost and allow her to work at least half-time, permitting her to pay for school costs not covered by the above plan.
5. Employer Help: Some employers will fund 100% of college tuition for their full-time employees. Countless people have completed their undergraduate education while working full-time. (I did.) A generic program is a tuition reimbursement program that essentially requires the student to be paid for the first semester out of pocket and thereafter reimburses students provided their grades are above a threshold. A student loan could be used to finance the first semester and could be paid off with the final reimbursement.
As you can see, it is not only possible, it is practical for your children to complete college, even if you don’t have a college savings plan. It requires extra time, patience and extra hard work, but lots of people have it. The value of a college education is too great to pass it up simply because the challenge of paying for that education looks daunting.
1. Living at home: For most students who attend in-state schools, the cost of room and board away from home with Mom and Dad exceeds the cost of tuition. If you have decided to host your student at home—as long as she stays in school with acceptable grades—you’ll be making a huge contribution to her education without increasing your costs at all.
2. Tax credits: American Opportunity tax credit provides a tax credit to couples filing joint tax returns with incomes under $160,000 per year. The tax credit provides up to $2,500 in refunded taxes for up to four years per student. The Lifetime Learning tax credit provides another $2,000 without limits on duration. These tax credits may cover substantially all of the tuition cost for full-time enrollment in a local community college. If not all of the cost, it will certainly close the funding gap considerably.
3. Scholarships: Many scholarships are needs based, meaning that your student can get some scholarships without being academically gifted. Instead, if your student is characterized by a host of seemingly random criteria (family heritage, parents’ employment, where your student attended high school, etc.) your student may qualify for a scholarship. Plan to apply for 12 to 15 scholarships to help close the funding gap; expect to get two or three small scholarships.
4. Six-Year Plan: If completing school in four years is impossible even with the steps taken above, consider a six-year plan. By studying half-time three semesters per year (including summer), your student can complete about two-thirds of an academic year for each year, enabling her to finish in six years. This will significantly reduce the cost and allow her to work at least half-time, permitting her to pay for school costs not covered by the above plan.
5. Employer Help: Some employers will fund 100% of college tuition for their full-time employees. Countless people have completed their undergraduate education while working full-time. (I did.) A generic program is a tuition reimbursement program that essentially requires the student to be paid for the first semester out of pocket and thereafter reimburses students provided their grades are above a threshold. A student loan could be used to finance the first semester and could be paid off with the final reimbursement.
As you can see, it is not only possible, it is practical for your children to complete college, even if you don’t have a college savings plan. It requires extra time, patience and extra hard work, but lots of people have it. The value of a college education is too great to pass it up simply because the challenge of paying for that education looks daunting.
Eight Tips For Getting Eight Kids Through College
If you have eight children and want to get them through college, you’ve got your work does for you. Here are gone eight tips to allow you to get your big brood through college.
1. Start Early: Your entire effort at getting your kids through college needs to start early. You can’t wait. If you are even thinking about getting a lot of kids, you should be thinking about college early and often.
2. Save What You Can: Save all you can for your children’s education. Saving will be difficult and unless you’re the CEO of a Fortune 500 company (if you are, I’m flattered that you’re reading my article—congratulations) you probably won’t be able to save enough for all eight kids to go to Princeton. In fact, you won’t likely to save enough to be paid for their tuition to a local state university. Just because you can’t pay for their entire schooling doesn’t mean that you shouldn’t be saving. Save whatever you can. Target at least $29 per month per child from the time they’re born; that will give you $10,000 per kid when they graduate from high school. Not enough, but it’s $10,000 more than nothing!
3. 529 Plans (1.usa.gov/TMOupT): Be sure to put your savings into a 529 Plan (this is a state or school sponsored savings plan that allows your savings to grow tax free and is not taxed when withdrawn if the money is used for qualified education expenses. You have a duty to designate a beneficiary, but you can change the beneficiary easily and without penalty.
4. Share the Load: You will need to share the load for educating your children with them. Encourage your kids to work and save their money for college, too. They may manage to save as much as you do here, doubling the cash available for college at the time of their graduation. They can also work part-time during college and Summers, giving them the opportunity to pay for more of their school.
5. Scholarships: Encourage your children to obtain good grades. If even a few of your children get fat academic scholarships, that may help finance the other kids, too. Numerous scholarships are need based; with eight kids, you may qualify even if you are a real nice job. Some scholarships are neither needs-based nor academically focused. Encourage your students to apply for at least a dozen different scholarships. Every little bit helps.
6. Tax Credits (1. Usa. Gov/O9gfnj): The American Opportunity Credit and the Lifetime Learning Credit provide meaningful help to whomever is paying for the education expenses. The credits are less partially refundable, meaning that you can arrive at least part of the credit even if you paid no income tax. Beyond the tax credits, the qualified expenses are also deductible.
7. Live at Home: I can only imagine that you’re eager to get the kids out of the nest, but if you keep them at home through college, that will effectively eliminate a huge cost. Just does not forget to make them do their chores.
8. Don’t Give Up: By doing any of the above, you can make a college education attainable for all eight of your children. There may be no more important to their future quality of life than getting a good college education. So keep encouraging them and keep saving.
If a family with eight children can afford college for all eight of their children, you are almost certainly even more likely to pull it off. These tips apply largely to families with any number of kids, from 1 to 15.
1. Start Early: Your entire effort at getting your kids through college needs to start early. You can’t wait. If you are even thinking about getting a lot of kids, you should be thinking about college early and often.
2. Save What You Can: Save all you can for your children’s education. Saving will be difficult and unless you’re the CEO of a Fortune 500 company (if you are, I’m flattered that you’re reading my article—congratulations) you probably won’t be able to save enough for all eight kids to go to Princeton. In fact, you won’t likely to save enough to be paid for their tuition to a local state university. Just because you can’t pay for their entire schooling doesn’t mean that you shouldn’t be saving. Save whatever you can. Target at least $29 per month per child from the time they’re born; that will give you $10,000 per kid when they graduate from high school. Not enough, but it’s $10,000 more than nothing!
3. 529 Plans (1.usa.gov/TMOupT): Be sure to put your savings into a 529 Plan (this is a state or school sponsored savings plan that allows your savings to grow tax free and is not taxed when withdrawn if the money is used for qualified education expenses. You have a duty to designate a beneficiary, but you can change the beneficiary easily and without penalty.
4. Share the Load: You will need to share the load for educating your children with them. Encourage your kids to work and save their money for college, too. They may manage to save as much as you do here, doubling the cash available for college at the time of their graduation. They can also work part-time during college and Summers, giving them the opportunity to pay for more of their school.
5. Scholarships: Encourage your children to obtain good grades. If even a few of your children get fat academic scholarships, that may help finance the other kids, too. Numerous scholarships are need based; with eight kids, you may qualify even if you are a real nice job. Some scholarships are neither needs-based nor academically focused. Encourage your students to apply for at least a dozen different scholarships. Every little bit helps.
6. Tax Credits (1. Usa. Gov/O9gfnj): The American Opportunity Credit and the Lifetime Learning Credit provide meaningful help to whomever is paying for the education expenses. The credits are less partially refundable, meaning that you can arrive at least part of the credit even if you paid no income tax. Beyond the tax credits, the qualified expenses are also deductible.
7. Live at Home: I can only imagine that you’re eager to get the kids out of the nest, but if you keep them at home through college, that will effectively eliminate a huge cost. Just does not forget to make them do their chores.
8. Don’t Give Up: By doing any of the above, you can make a college education attainable for all eight of your children. There may be no more important to their future quality of life than getting a good college education. So keep encouraging them and keep saving.
If a family with eight children can afford college for all eight of their children, you are almost certainly even more likely to pull it off. These tips apply largely to families with any number of kids, from 1 to 15.
Wednesday, February 18, 2015
How Will I Ever Pay For My Children’s College Education?
To a four-year college education at schools like Princeton expected to reach $300,000 for children born today, saving up to send multiple children to college is frightening. It is possible; here’s how:
1. Decide what your responsibility is. Before you can start a savings program, you have to decide what your responsibility will be. Will you pay extra for your children to attend any school they want, at any cost, regardless of their grades? Will college be entirely their liability (if so, you can quit reading now)? If you’re like most parents, you’ll find somewhere on that scale that represents your approach to be paid in respect of college. My parents told me they’d pay tuition at the local college and let me are forced to live. Going where else, they’d kick in that much tuition. I went to the state school and lived at home—then got an Ivy League MBA.
2. Start saving. Presuming that you plan to help your children pay for college (you are still reading), the key step is expected to commence saving as soon as possible. The earlier you save and the more you save early the more the money will do the job.
3. Open a 529 Plan. A 529 Plan is a tax deferred savings plan for education expenses. If you don’t have one and you have kids, open one today. If you intend to have kids but don’t have them yet, consider it. It’s almost never too early to begin saving.
4. Get your students involved. From the earliest days, help your children to understand your commitment to their education and what you want from them. Encourage them to save their own money for college, firming their commitment to going at the same time you share the burden.
5. Help your students apply for scholarships. There are very sorts of scholarships, many of which are neither need dependent not merit-based. Using the internet and coaching from financial aid offices, apply for at least a dozen scholarships. Even if you get only a few, the effort will need to be well worth it. For instance, my wife and I are funding a scholarship for students who attended inner-city grade school where my wife taught school for ten years.
6. Make use of tax credits. The U.S. Government provides tax credits for people who pay for college. If you’re paying, you get the credits. Be sure that you understand how to claim the American Opportunity Credit and the Hope Credit, which can help to cover thousands of dollars of educational expenses each year.
7. Use student loans sparingly. Student loans cannot make a payment in bankruptcy. They will hang over you or your student for years to come here. It is hard for an 18-year-old to see how painful that will be. Help your students avoid student debt when possible.
8. Be wise. Princeton and Harvard—and perhaps other schools—charges students from low-income households absolutely nothing to attend. If the student is admitted on a needs-blind basis, there is no cost to participate in. Even the living expenses are covered. Approximately 20% of the students at those schools reportedly attend on that basis. For families with incomes above the minimum threshold, the family’s fiscal responsibility is stepped so as to be affordable.
By following these basic steps, you can build and execute a plan that will assure that your children get a college education without breaking you beforehand or burdening them with a life of student loan payments.
1. Decide what your responsibility is. Before you can start a savings program, you have to decide what your responsibility will be. Will you pay extra for your children to attend any school they want, at any cost, regardless of their grades? Will college be entirely their liability (if so, you can quit reading now)? If you’re like most parents, you’ll find somewhere on that scale that represents your approach to be paid in respect of college. My parents told me they’d pay tuition at the local college and let me are forced to live. Going where else, they’d kick in that much tuition. I went to the state school and lived at home—then got an Ivy League MBA.
2. Start saving. Presuming that you plan to help your children pay for college (you are still reading), the key step is expected to commence saving as soon as possible. The earlier you save and the more you save early the more the money will do the job.
3. Open a 529 Plan. A 529 Plan is a tax deferred savings plan for education expenses. If you don’t have one and you have kids, open one today. If you intend to have kids but don’t have them yet, consider it. It’s almost never too early to begin saving.
4. Get your students involved. From the earliest days, help your children to understand your commitment to their education and what you want from them. Encourage them to save their own money for college, firming their commitment to going at the same time you share the burden.
5. Help your students apply for scholarships. There are very sorts of scholarships, many of which are neither need dependent not merit-based. Using the internet and coaching from financial aid offices, apply for at least a dozen scholarships. Even if you get only a few, the effort will need to be well worth it. For instance, my wife and I are funding a scholarship for students who attended inner-city grade school where my wife taught school for ten years.
6. Make use of tax credits. The U.S. Government provides tax credits for people who pay for college. If you’re paying, you get the credits. Be sure that you understand how to claim the American Opportunity Credit and the Hope Credit, which can help to cover thousands of dollars of educational expenses each year.
7. Use student loans sparingly. Student loans cannot make a payment in bankruptcy. They will hang over you or your student for years to come here. It is hard for an 18-year-old to see how painful that will be. Help your students avoid student debt when possible.
8. Be wise. Princeton and Harvard—and perhaps other schools—charges students from low-income households absolutely nothing to attend. If the student is admitted on a needs-blind basis, there is no cost to participate in. Even the living expenses are covered. Approximately 20% of the students at those schools reportedly attend on that basis. For families with incomes above the minimum threshold, the family’s fiscal responsibility is stepped so as to be affordable.
By following these basic steps, you can build and execute a plan that will assure that your children get a college education without breaking you beforehand or burdening them with a life of student loan payments.
What Is A 529 Plan And How Does It Work?
A “529 Plan” (1. Usa. Gov/TMOupT) is a savings plan established by a state or a colleague to assist families save for college expenses. The plan has tax benefits that allow the savings you contribute for your child’s college education to grow faster and go farther. The name, 529, makes reference to the section of the Internal Revenue Code that established them in 1996.
Tax Benefits: A 529 Plan offers two primary tax benefits. First, the income from investments in the plan is not covered by tax while they are in the plan.
Furthermore, if the money in the account is used to qualify for educational expenses, the income can be withdrawn without paying any income tax. Bear in mind that the cost of a college education for children born in 2012 could reach $300,000, the interest collected on an account of that size would be significant—meaning that the tax benefits could be large.
Savings v. Prepaid Tuition: There are two kinds of 529 plans. Some are savings plans that enable you to invest and earn a return with the accumulated savings available for use for college expenses at any school in the country. Prepaid tuition plans are offered by states and colleges, enabling you to contribute money that effectively grows at the rate of inflation for college education at that school or in that state. Given that the cost of a college degree has been growing faster than overall inflation for the previous generation, it seems possible that the Prepaid tuition plans offer higher returns. The drawback is that the accounts can be used toward tuition in the state that offered the plan—or at the school that offered the plan. If you’re certain you know your student will attend school in your state or even at a particular school. You could consider the prepaid tuition plans there. Otherwise, go with the savings type plan. You can invest in any state’s plan—, you don’t have to choose your own state’s plan. Do not forget to shop around.
Qualified Educational Expenses (it.ly/U5yTOy): You can spend the money in a plan for tuition, housing (if the student is attending school at least half time), fees imposed by the school, books up to the cost budgeted by the school and for computer equipment used in education. No, that doesn’t include an Xbox.
Beneficiary: When you open the account for your child (it.Ly/Uv12Q9), you’ll have to designate your child as a beneficiary. There is not any penalty for later deciding to give the money to another one of your children; you simply change the beneficiary. If the original beneficiary doesn’t use all the money and you do not have any other children, you can change the beneficiary to be a niece or nephew or to the parents of your nieces and nephews (your siblings).
Non-education distributions: If you distribute the excess funds other than for college expenses, all of the income on the distributed value will be subject to tax and a 10% penalty.
As you can see, there are some significant benefits to 529 plans but there are some hazards. The risks are small if you have a number of children intending to attend college. Do not forget to compare plans in a variety of states before you start investing.
Tax Benefits: A 529 Plan offers two primary tax benefits. First, the income from investments in the plan is not covered by tax while they are in the plan.
Furthermore, if the money in the account is used to qualify for educational expenses, the income can be withdrawn without paying any income tax. Bear in mind that the cost of a college education for children born in 2012 could reach $300,000, the interest collected on an account of that size would be significant—meaning that the tax benefits could be large.
Savings v. Prepaid Tuition: There are two kinds of 529 plans. Some are savings plans that enable you to invest and earn a return with the accumulated savings available for use for college expenses at any school in the country. Prepaid tuition plans are offered by states and colleges, enabling you to contribute money that effectively grows at the rate of inflation for college education at that school or in that state. Given that the cost of a college degree has been growing faster than overall inflation for the previous generation, it seems possible that the Prepaid tuition plans offer higher returns. The drawback is that the accounts can be used toward tuition in the state that offered the plan—or at the school that offered the plan. If you’re certain you know your student will attend school in your state or even at a particular school. You could consider the prepaid tuition plans there. Otherwise, go with the savings type plan. You can invest in any state’s plan—, you don’t have to choose your own state’s plan. Do not forget to shop around.
Qualified Educational Expenses (it.ly/U5yTOy): You can spend the money in a plan for tuition, housing (if the student is attending school at least half time), fees imposed by the school, books up to the cost budgeted by the school and for computer equipment used in education. No, that doesn’t include an Xbox.
Beneficiary: When you open the account for your child (it.Ly/Uv12Q9), you’ll have to designate your child as a beneficiary. There is not any penalty for later deciding to give the money to another one of your children; you simply change the beneficiary. If the original beneficiary doesn’t use all the money and you do not have any other children, you can change the beneficiary to be a niece or nephew or to the parents of your nieces and nephews (your siblings).
Non-education distributions: If you distribute the excess funds other than for college expenses, all of the income on the distributed value will be subject to tax and a 10% penalty.
As you can see, there are some significant benefits to 529 plans but there are some hazards. The risks are small if you have a number of children intending to attend college. Do not forget to compare plans in a variety of states before you start investing.
Set Up Your Child’s College Fund When She’s A Newborn
The only time is better that at birth to start a college fund is when you got married and agreed that kids. If that didn’t happen, now that she’s born, let’s get serious and figure out a way to get the college fund started.
Even if you don’t set money aside for college, your child can still go to school, but her options will be much more limited (unless she has exceptional grades). You can give her many more options with small contributions to a college fund over time. If you want to be certain she can go to any school in the world where she’s admitted, prepare yourself.
For every $10,000 you would like to have available to help your baby pay for college at her 18th birthday, you’ll need to save about $29 per month (assumes a 5% return, which you can earn in many mutual funds that invest in medium term corporate bonds). Need to bear in mind, that inflation in college tuition has been running well ahead of the broader inflation rate for the last two generations. It would be foolish to plan on that changing.
It is difficult to know how much money you’d need, but near the upper limit, you can reasonably expect to pay about $300,000 for an Ivy League education in 18 years, meaning that you’d want to be saving about 30 x $29 or about $870 every month.
You may, instead, always want to plan on your baby living at home and participating in a local college. By eliminating room and board as an expense, you reduce the need dramatically. Depending on the school and your state, you may need to be able to cover four years of tuition, books and fees for about $50,000. That would be necessary save only 5 x $29 or about $145 every month.
If you can’t save that much, save what you can. Even savings of $58 per month for the next 18 years would give you about $20,000. If you combine that with living at home, needs-based scholarships, summer and part-time jobs, you can do whatever you may be able to find your baby’s college education without student loans.
Don’t fall into the trap of imagining that you can or will borrow whatever is needed to find your baby’s schooling when the day comes. While this may be true that you can, the impact may be that you saddle your baby with debt that robs her of the benefits of a college education for most of her career or you end up with a debt that could rob you of a healthy retirement.
If you need in order to borrow a bit to close the gap between your savings, other resources (grants and scholarships, summer and part-time employment) and the cost of the education, that’s okay. Borrowing 10 to 20 percent of the cost should neither ruin your retirement or your baby’s life. Think of student loans as the way to close the gap if there is the only alternative. Don’t let student loans become the way you pay for college.
By starting a savings plan, when your baby is formed, you can give your baby better options for her college education when she is 18.
Even if you don’t set money aside for college, your child can still go to school, but her options will be much more limited (unless she has exceptional grades). You can give her many more options with small contributions to a college fund over time. If you want to be certain she can go to any school in the world where she’s admitted, prepare yourself.
For every $10,000 you would like to have available to help your baby pay for college at her 18th birthday, you’ll need to save about $29 per month (assumes a 5% return, which you can earn in many mutual funds that invest in medium term corporate bonds). Need to bear in mind, that inflation in college tuition has been running well ahead of the broader inflation rate for the last two generations. It would be foolish to plan on that changing.
It is difficult to know how much money you’d need, but near the upper limit, you can reasonably expect to pay about $300,000 for an Ivy League education in 18 years, meaning that you’d want to be saving about 30 x $29 or about $870 every month.
You may, instead, always want to plan on your baby living at home and participating in a local college. By eliminating room and board as an expense, you reduce the need dramatically. Depending on the school and your state, you may need to be able to cover four years of tuition, books and fees for about $50,000. That would be necessary save only 5 x $29 or about $145 every month.
If you can’t save that much, save what you can. Even savings of $58 per month for the next 18 years would give you about $20,000. If you combine that with living at home, needs-based scholarships, summer and part-time jobs, you can do whatever you may be able to find your baby’s college education without student loans.
Don’t fall into the trap of imagining that you can or will borrow whatever is needed to find your baby’s schooling when the day comes. While this may be true that you can, the impact may be that you saddle your baby with debt that robs her of the benefits of a college education for most of her career or you end up with a debt that could rob you of a healthy retirement.
If you need in order to borrow a bit to close the gap between your savings, other resources (grants and scholarships, summer and part-time employment) and the cost of the education, that’s okay. Borrowing 10 to 20 percent of the cost should neither ruin your retirement or your baby’s life. Think of student loans as the way to close the gap if there is the only alternative. Don’t let student loans become the way you pay for college.
By starting a savings plan, when your baby is formed, you can give your baby better options for her college education when she is 18.
Top Ten Degrees For Financially Successful Careers
A recent study (bet.Ley /zy5xQU) funded by the Bill and Melinda Gates Foundation conducted by professors at Georgetown University measured unemployment rates and salaries by major. Some of the data are surprising.
I’ve ranked the then best degrees based on the average wage for an experienced college graduate, being done data.
1. Engineering: Experienced engineering graduates earn an average of $81,000 per year and experience just 4.9% unemployment. Those with graduate degrees average $100,000 per year and just 3.4% are unemployed.
2. Computers and Mathematics: Majors from these fields are earning $76,000 per year with the benefit of experience. They experience 5.6% unemployment.
3. Architecture: Experienced graduates earn an average of $64,000 per year but a remarkable 9.2% of skilled graduates are unemployed. Those with graduate degrees don’t do much better, making an average of just $71,000 per year with 7.7% unemployment.
4. Health. Knowledgeable people in health fields with undergraduate degrees make an average of $63,000 per year; just 2.2% are unemployed—the lowest rate of unemployment in any field in the study.
5. Business. Skilled people with business degrees earn an average of $63,000 (the same as the health graduates) but they are more than twice as likely to be jobless, with 5.3% of knowledgeable graduates out of work.
6. Science-Life/Physical: Experienced science graduates carry out an average of $60,000 with 4.7% of their being unemployed.
7. Social Science. Social science degrees increase earning potential for skilled people up to $60,000 (the same as for science grads) with 5.7% unemployment.
8. Law and Public Policy. Those with undergraduate degrees in law and public policy who have experience are proceeding with an average of $55,000 per year and experience unemployment of just 4.5%.
9. Communications and Journalism. Skilled people with degrees in communications and journalism earn an average of $54,000; they experience 6.0% unemployment.
10. Agriculture and Natural Resources. With an average salary of $50,000 per year and unemployment of just 3.5%, experienced workers within these fields round out our top ten.
As a reference point for the bottom of the scale, experienced education majors have the lowest average salary at $43,000 per year with 3.9% unemployment.
Wage for fresh graduates tend to be significantly lower and unemployment rates for recent graduates are much higher, with unemployment rates for recent graduates topping 10% for contemporary architecture and fine arts graduates. Fresh graduates in education and health to get the lowest unemployment rates. The lowest average salaries for recent graduates are located in psychology and social work, recreation and arts.
Skilled workers were defined as those age 30 to 54; fresh graduates were those ages 22 to 26. Graduate degree holders were restricted to those age 30 to 54.
No field rivals are engineering for average earnings, being dependent on the study. Computers and mathematics come closest, but graduate engineers make fully ten percent more than graduate degree holders from computers and mathematics.
The data indicate that there are substantial economic differences among these diverse fields. You—and your children—should choose wisely.
I’ve ranked the then best degrees based on the average wage for an experienced college graduate, being done data.
1. Engineering: Experienced engineering graduates earn an average of $81,000 per year and experience just 4.9% unemployment. Those with graduate degrees average $100,000 per year and just 3.4% are unemployed.
2. Computers and Mathematics: Majors from these fields are earning $76,000 per year with the benefit of experience. They experience 5.6% unemployment.
3. Architecture: Experienced graduates earn an average of $64,000 per year but a remarkable 9.2% of skilled graduates are unemployed. Those with graduate degrees don’t do much better, making an average of just $71,000 per year with 7.7% unemployment.
4. Health. Knowledgeable people in health fields with undergraduate degrees make an average of $63,000 per year; just 2.2% are unemployed—the lowest rate of unemployment in any field in the study.
5. Business. Skilled people with business degrees earn an average of $63,000 (the same as the health graduates) but they are more than twice as likely to be jobless, with 5.3% of knowledgeable graduates out of work.
6. Science-Life/Physical: Experienced science graduates carry out an average of $60,000 with 4.7% of their being unemployed.
7. Social Science. Social science degrees increase earning potential for skilled people up to $60,000 (the same as for science grads) with 5.7% unemployment.
8. Law and Public Policy. Those with undergraduate degrees in law and public policy who have experience are proceeding with an average of $55,000 per year and experience unemployment of just 4.5%.
9. Communications and Journalism. Skilled people with degrees in communications and journalism earn an average of $54,000; they experience 6.0% unemployment.
10. Agriculture and Natural Resources. With an average salary of $50,000 per year and unemployment of just 3.5%, experienced workers within these fields round out our top ten.
As a reference point for the bottom of the scale, experienced education majors have the lowest average salary at $43,000 per year with 3.9% unemployment.
Wage for fresh graduates tend to be significantly lower and unemployment rates for recent graduates are much higher, with unemployment rates for recent graduates topping 10% for contemporary architecture and fine arts graduates. Fresh graduates in education and health to get the lowest unemployment rates. The lowest average salaries for recent graduates are located in psychology and social work, recreation and arts.
Skilled workers were defined as those age 30 to 54; fresh graduates were those ages 22 to 26. Graduate degree holders were restricted to those age 30 to 54.
No field rivals are engineering for average earnings, being dependent on the study. Computers and mathematics come closest, but graduate engineers make fully ten percent more than graduate degree holders from computers and mathematics.
The data indicate that there are substantial economic differences among these diverse fields. You—and your children—should choose wisely.
Eight Reasons That A College Education Is Necessary
It has never been more expensive to get a college education in America; here’s why:
1. The average yearly income of an adult high school graduate is $31,000 per year, little more than half that of someone with a four-year college degree earning an average of $57,000 according to the U.S. Statistical Abstract. Those who don’t finish high school fare even worse, earning an average of just $20,000 per year. People who earn advanced degrees earn much more than four-year college grads.
2. Unemployment is higher for people with less education. The unemployment rate for college graduates was about 60% lower in 2011 than for those who had not finished here high school and almost 50% lower than for high school graduates.
3. The world is under a surplus of unskilled labor. There are billions of people in the world who lack a college education and who are willing to work together. Many are prepared to work hard for shockingly little but do it in order to feed their families. Work that can be taken by unskilled labor abroad puts greater pressure wage rates even in the United States because of globalization.
4. The world is under the age of a shortage of engineers. Around the world, schools are ramping up to educate engineers of all types as demand for this type of skill set is especially penetrating.
5. College degrees in any field remain valuable. Regardless of your field, a college degree will set you apart from people who do not have any college degree. If you need a job—any job—and you’re competing for a job in retail and you have a four-year degree in political science or psychology against someone without a college degree, the odds are on your favor.
6. You just might learn a lesson. There is actually a lot to refer to the intrinsic value of knowledge. Much of what you can learn in college you can learn elsewhere, but just think about this: how many people who didn’t go to college have learned as much about their field as someone who did? You’ll recognize that very few people ever learn as much outside of college as they would with it.
7. College is fun. Really and truly, college is a great experience for most people. Those who don’t like it would almost certainly have enjoyed a unique college experience had they found it. Seek out thoughtfully the true college experience for you!
8. It’s never too late. If you are more important than 50, it may be too late to get much financial return on a college education, but virtually all of the additional benefits may still apply.
Before you exit the bank, to get a college education, consider a few things. Some colleges and universities are extremely expensive. Some are exceptionally modest and will not change your income potential. Most Americans, however, have access to relatively affordable college tuition at state schools. Community colleges are often downright cheap, offer quality education that prepares students well to finish a four-year degree at a university.
1. The average yearly income of an adult high school graduate is $31,000 per year, little more than half that of someone with a four-year college degree earning an average of $57,000 according to the U.S. Statistical Abstract. Those who don’t finish high school fare even worse, earning an average of just $20,000 per year. People who earn advanced degrees earn much more than four-year college grads.
2. Unemployment is higher for people with less education. The unemployment rate for college graduates was about 60% lower in 2011 than for those who had not finished here high school and almost 50% lower than for high school graduates.
3. The world is under a surplus of unskilled labor. There are billions of people in the world who lack a college education and who are willing to work together. Many are prepared to work hard for shockingly little but do it in order to feed their families. Work that can be taken by unskilled labor abroad puts greater pressure wage rates even in the United States because of globalization.
4. The world is under the age of a shortage of engineers. Around the world, schools are ramping up to educate engineers of all types as demand for this type of skill set is especially penetrating.
5. College degrees in any field remain valuable. Regardless of your field, a college degree will set you apart from people who do not have any college degree. If you need a job—any job—and you’re competing for a job in retail and you have a four-year degree in political science or psychology against someone without a college degree, the odds are on your favor.
6. You just might learn a lesson. There is actually a lot to refer to the intrinsic value of knowledge. Much of what you can learn in college you can learn elsewhere, but just think about this: how many people who didn’t go to college have learned as much about their field as someone who did? You’ll recognize that very few people ever learn as much outside of college as they would with it.
7. College is fun. Really and truly, college is a great experience for most people. Those who don’t like it would almost certainly have enjoyed a unique college experience had they found it. Seek out thoughtfully the true college experience for you!
8. It’s never too late. If you are more important than 50, it may be too late to get much financial return on a college education, but virtually all of the additional benefits may still apply.
Before you exit the bank, to get a college education, consider a few things. Some colleges and universities are extremely expensive. Some are exceptionally modest and will not change your income potential. Most Americans, however, have access to relatively affordable college tuition at state schools. Community colleges are often downright cheap, offer quality education that prepares students well to finish a four-year degree at a university.
Subscribe to:
Posts (Atom)