All Articles Tagged "retirement"
Retirement? Wow, even as the age approaches more and more each year, I feel way under prepared. As a freelancer I have been lazy about setting up retirement plans. I have tried to set up savings options, but after bills and taxes, I never seem to have the “extra” to set aside. And then, doing the research and organizing all that paperwork, well, it just seems to be too much. If someone else could just do it for me–for free — that’d be greaaaat. But since they can’t, I keep pushing it back in my mind, thinking there is plenty of time or that I just won’t retire. Not a good plan, I know. But I am not alone in that way of thinking, unfortunately.
While nearly a third of Americans over the age of 18 have no retirement savings, 23 percent of people between the ages of 45 and 59 have no savings or pension, according to a 2014 study by the Federal Reserve. And African Americans are in even worse retirement space, found the Urban Institute. “In 2013, the average white family had more than $130,000 in liquid retirement savings, compared to $19,000 for the average African-American family and $12,000 for the average Hispanic family,” reported The New Republic. This is due in part to the racial wealth gap, and also a lack of planning.
I am so not alone in my silent freak out over my impending retirement–no matter how far off it may be. As a new article in Bloomberg pointed out, millennials are worried over retirement but aren’t taking any action–or if they are, it’s minimal.
“Young workers today probably can’t even think about retiring for 40 or 50 years. Longer lives and the prospect of weaker investment returns mean millennials will probably have to save more money, over a longer period of time, than their parents and grandparents,” reported Bloomberg. Still, retirement is square on the mind of millennials who say it is their top priority, even if they can’t make any moves toward it. In fact, a recent Charles Schwab survey found that when asked about financial priorities, millennials put saving for retirement far ahead of student loans, credit card debt, and job security. Still, even though millennials are worried about retirement, they aren’t saving for it. And most are not taking advantage of their employer’s 401(k) program.
According to T. Rowe Price Retirement Plan Services, which runs 401(k)-style plans for nearly 1.9 million people, just 30 percent of young workers sign themselves up for their 401(k) plans. For some, the paperwork is too time-coming so a few companies automatically sign up workers for 401(k)s, and in these cases among 20-something workers, 84 percent go along with being auto-enrolled in a 40(k) plan.
So when millennials have someone else doing the legwork, they are actively participating in retirement plans. But if left on their own to enroll and do the paperwork, many of them, like me, just aren’t doing it. Where do you stand?
In a recent poll created by American Express Travel, surveyors revealed that they would rather focus on creating a “meaningful life” than spend time heavily investing in finances or careers.
Forbes reports that millennials express the same sentiments when they have to choose between traveling and saving for their retirement. And while dropping everything and moving abroad sounds amazing now, Forbes notes that if and when millennials choose to delay saving for retirement, they’ll likely be sacrificing the opportunity to have a comfortable lifestyle when they become senior citizens.
President and CEO of The American College of Financial Services, Robert R. Johnson, told Forbes time is the greatest ally millennials have when saving for a retirement fund, which should last more than 30 years. “Catching up is simply very difficult, as you can’t make up for lost time. If a 25-year-old invests $157 per month for 40 years and earns 10% interest, she will have accumulated $1 million at age 65,” Johnson shared. “If that same person waits until age 35 to begin saving, the monthly investment required to accumulate $1 million by age 65 is $439 per month. If that same person waits to start saving at age 45, she will have to invest $1,306 per month to accumulate that $1 million.”
The longer millennials wait to save their money, the more they compromise their chance to even retire at all. However, Zachary Abrams, an advisor for Capital Advisors, said that if millennials have to choose between traveling or saving for their retirement funds, they should pick the option that they will make them the happiest. “Everything has a cost, and the cost of saving at the expense of travel is the experience you won’t ever have or get back,” Abrams claimed. Although a once-in-a-lifetime trip may not allow a millennial to save more money for her retirement plan, Abrams’ theory resonates with those who have unconventional values.
Although Abrams and Johnson’s have opposing views, Ben Offit, a partner at Clear Path Advisory believes millennials can save for both their #travelgoals and #retirementgoals, simultaneously. In his model, Offit shared that if traveling is a high priority for an individual, they should save 75 percent of their monthly earnings towards it and 25 percent should be deposited into a retirement fund. “Once their traveling ‘itch’ has been scratched, they change the allocation of 75% savings towards retirement and 25% towards short-term and traveling,” Offit explained.
Which concept would you personally choose?
We get it. Talking about finances with your partner can get a little — well — awkward. But trust me, an uncomfortable financial discussion now will save you the whirlwind of money troubles you may plummet into later. You don’t want to be among the 43 percent who inaccurately guessed their significant others’ earnings in Fidelity Investments’ 2015 Couples Retirement Study.
And here’s the kicker: Despite the fact that four in 10 clearly have a hazy idea about their partner’s finances, a whopping 72 percent say they communicate “exceptionally” or “very well” with their significant other. America has a problem — and that’s getting into the nitty gritty of our relationships’ finances.
MadameNoire Business spoke with Kristen Robinson, Fidelity’s SVP of Women and Young Investors, to get some insight on why we shy away from crucial financial talks.
“For many, conversations about money can feel uncomfortable. In some cases we don’t know how to start a discussion, so we put it off, even though we know it’s important,” Robinson said. “Clearly though, avoiding the conversation leads to these disconnects.”
The “disconnects” that Robinson is referring to is the significant share of couples in the study who have a fuzzy idea about their future financial standing — particularly retirement.
“We saw in the survey that one in three couples disagree on the kind of lifestyle they want to live in retirement – how they want to spend their time,” Robinson said. “Those disagreements could likely be avoided by tackling the topic head on.”
On top of this, nearly half of couples had absolutely “no idea” how much money they would need to maintain their current lifestyle when they retire. And 48 percent of couples disagreed on the amount needed to preserve their present way of life.
Robinson says that all this confusion can be avoided with an in-depth financial discussion. There must be a time where couples put away the mushy-gushy talk and get serious about money.
“Sure, you can name their favorite color, but when it comes to building a life together, do you know what your other half brings to the table?” Robinson asked. “Get to know what investments your partner has.”
Robinson also suggests discussing future expenditures — such as having a family, buying a home, and saving for your children’s college education. “These sorts of discussions should not be left to impulse. Planning together and making decisions jointly can make life a lot easier,” she said.
And again — we get it. It’s financial talks are awkward. But Robinson gives us all a tip on how we can break the ice: “Use something timely, like planning a vacation together. This opens the door to talking about how you’ll share the expense of paying for travel costs and activities. Sharing what you’re comfortable spending and what your limits may be can lead to a broader discussion about your own financial situation and goals.”
This is brilliant. While you’re getting the scoop on your partner’s financial position on a short-term plan, you can gauge where he or she stands in the long run.
It can be hard at times to do the right thing — only to question if you’re actually doing the right thing. This is how I feel at times when it comes to investing. I don’t come from a family of wealth or parents who emphasized the importance of building a nest egg. My mom and dad were awesome in many areas, but had their own battles when it came to finance.
This is one of the reasons why I try to focus on filling in the blanks when it comes to being money savvy. One big area of concern for me is my 401(k).
Unlike most, I don’t have a company 401(k). It’s an individual retirement account through my own company that I research and maintain. There’s no corporate matching or management that oversees investment choices. As crazy and complicated as it sounds, I actually enjoy the set up as I can pick and choose from practically any platform I want.
Thus far things have been going well. I always try to invest 15 percent of my income and follow an asset allocation model that’s moderately aggressive. I’m 30 years old, so I have plenty of time to take a few risks and let my money grow. There’s also some conservative options in there like bonds and cash to help keep things anchored.
Call me crazy but I’m constantly flipping though investment-related magazines as if I have Warren Buffet’s money. I might be far from becoming a millionaire anytime soon but that doesn’t mean us “common folks” can’t learn more about the game. After all, who doesn’t want their coins working hard for them? Lord knows we work hard for our money.
When it comes to your financial future, do you ever worry if you’re on the right track? Here are some clues your 401(k) is headed in the right direction.
You have goals. Hopefully you aren’t just picking options for your 401(k) account without understanding them and how they can affect your end game. Everyone should have goals or an investor profile that helps you determine what you want to achieve — outside of making a ton of money.
Don’t put all of your eggs in one basket. It’s really great that you love your company’s stock option. However, that does not mean you invest 75 percent of your 401(k) in it. Sure you’ll realize great gains if it soars but you must also set yourself up for some pretty big hurt if it goes down the toilet. Remember that whole asset allocation thing? This is where it comes in handy. Having one as a model can make your life easier. Speak to HR or the department who handles 401(k) inquiries to see if there are models in place for you to follow. You can always research online for more options.
Invest enough for company matching, but more if able. This one is very important. It doesn’t matter how balanced your portfolio is, if you’re barely putting anything in it, it more than likely will not grow. It’s recommended that people in their 30s invest 10 to 15 percent. If this isn’t possible right now, you should put in the bare minimum to receive company matching.
Allow it to grow. This one might sound like a no-brainer, but you wouldn’t believe the amount of people who dip into their 401(k). Aside from being a bad idea, you also get penalized for early withdrawals. In addition to saving for your retirement, it’s important you also have an emergency fund in the event you need an IOU.
Want to learn more? Here are a few more reads on investing:
Welcome to our Mommy Mogul column where we cover issues of importance for moms who are launching a new business, working a side gig, or managing work life and home life. Is there a topic you’d like us to address? Send your thoughts to tgarcia@ . And, as always, take to the comments with your feedback.
Any “mommypreneur” can tell you that juggling a healthy work/life balance can be difficult at times. You want to dedicate your energy to pursuing your passion but also want to be as present as possible when it comes to your children and family needs.
As a work-from-home mother myself, I truly commend those who set out to pave their own way. It’s not always a glamorous or an easy life as you tend to navigate newfound territory without a map or guide. Sometimes you feel like you carry the weight of your household on your shoulders (technically you do if you’re a single parent) and constantly find yourself asking whether or not you’re making the right decisions.
Unfortunately we don’t always have the answers, but one area where we need to make the right choice is with our finances.
If I asked you what your top five financial needs are, what would be your answer?
Being a mother, it’s a little too easy to put the needs of others in front of our own. In many cases, we have to as we must do everything we can to provide for our family. That however does not mean we neglect our own retirement needs. We’re going to need to save for our financial future and must start right now.
Things weren’t as organized as they are now when I first made the decision to pursue my own ventures. There were times of plenty and times when I had to rely on my savings to help pay the bills. Through hard work and dedication I’ve been able to create a reliable monthly salary to take care of monthly needs and future planning. Even though my husband has a pretty good job and saves like no other, I felt it was important for me to have something of my own.
In fact, it’s important for everyone to have something set aside. The latest numbers show that one in five Americans dies penniless, with one in six people actually dying in debt.
After doing a bit of research in the investing arena, I determined an individual 401k was the best option for me. I filled out the necessary paperwork and within days had my own retirement vessel. Whether you use a personal 401k or an IRA, it’s important to have a good grasp of your investment needs and the proper outlets (e.g. stocks, mutual funds, ETFs) to achieve your goals. It took some time for me to remember I am the person in charge of picking mutual funds and adding money to them.
Over time I have been able to build a steady portfolio and am working with professionals to fulfill estate planning needs as my husband and I own property and have children.
It can be a little overwhelming saving for your retirement as all decisions fall in your lap. Unlike working for someone else, you’ll have to research, buy and sell things on your own. Some business owners hire an outside party like a financial adviser to take care of these tasks, but if you don’t have that in your budget, you’ll be okay. Most retirement platforms are pretty easy to navigate. You just have to have a little patience.
Regardless of how you save for your retirement, make it a habit to pay yourself first. Once you deal with estimated taxes and monthly bills, it’s very easy to overlook your own savings and shortchange yourself. You’ll also need to try and invest as much as possible in order to see it grow in value over the years. I put away 10 percent each month as a minimum and add to it when I can.
How are you saving for your retirement?
To those starting on this journey, here are a few resources that might help steer you on the right track. Those looking for specific help should speak to a financial adviser who can help you tailor a plan to fit your needs. Regardless of your goals, do make sure you have a budget in place so you aren’t overspending in areas where you can save (and invest).
SEP IRA vs Individual 401k – You might be scratching your head at these two terms. Both are retirement outlets to help you save for the future you should consider. Here’s another read that will help break down the two.
Remember when Michael Jordan retired from basketball and then baseball and then basketball again? Sometimes it’s hard to say goodbye to the limelight. And these celebrities who said they’d retire know that better than anyone else.
Michael Jordan earned $100 million in 2014 — more than any other current or retired athlete — making him the richest retired athlete in the world, reports Forbes magazine.
Figures analyzed by Forbes show athletes’ salaries have increased in recent years as media companies have made billions broadcasting sporting events that can’t be DVR’d for later. An example of this is shown in the recent NBA and MLB salaries. NBA athletes earn $5 million whereas their baseball counterparts earn $3.8 million.
Because athletes have shorter professional careers, the financially savvy among them will invest their money or create a brand to ensure an ongoing paycheck. Thanks to Nike, Jordan has banked millions with his iconic and trendy sneakers. Jordan as also invested in various basketball teams and works in the NBA’s administration.
The other retired athletes who were among the richest retired athletes for 2014 were soccer athlete David Beckham earning $75 million, golfer Arnold Palmer raking in $42 million and another golfer Jack Nicklaus who accumulated $28 million.
The average white family in America has $134,200 in wealth whereas their Black family counterparts have an average of $11,000, reports CNN Money. The Urban Institute found in their investigation that whites currently have 12 times the wealth of blacks, a huge leap from 1995 when whites had seven times more wealth than blacks. Signe-Mary McKernan who serves as the co-director of the Opportunity and Ownership Initiative at the Urban Institute says, “The American Dream remains out of reach for many African-American and Hispanic families. Families of color, who will be the future majority population of this country, are not on a firm wealth-building path.”
The wealth gap continues to widen between Blacks and whites because Blacks are less likely to be homeowners or participate in retirement accounts. Also the federal government programs that help Americans to purchase homes and save for retirement often have parameters that exclude lower income Americans. Blacks and Hispanics are more likely to fall in that category.
“The bottom 20% of taxpayers, in terms of income, received less than 1% of federal subsidies for homeownership or retirement,” the article says.
The Urban Institute report found white families have at least $285,000 saved in funds and are able to enjoy a comfortable retirement. Inheritances make it possible for children to accumulate wealth or purchase property.
CNN Money also says Blacks and Hispanics save less for their retirement in 401(k)s and IRAs. These retirement plans have replaced pensions, leaving Blacks with less money to pass toward their children. Forty-seven percent of whites are covered by employer retirement plans whereas 40 percent of Blacks don’t receive the same work benefits.
Besides employment benefits, Blacks build up more student loan debt than whites. Also with low graduation rates, many Blacks face the burden of loans but no college degree thus creating problems as they try to push forward financially.
Young professionals have the power to make great strides when it comes to planning for their financial future. The earlier you start to plan, the more you’ll have in your pot. Yet millennials aren’t saving their money. While things like student debt and bills are very real, we must do what we can to make sure we have what we need down the road. Here are some 401k tips for us folks in our 30’s.
Ladies, the time has come for us to step up our game in the finance department. Even though we’re more likely to enroll in a retirement program, we just aren’t saving up what we should for our days out of the office. Now we can think of tons of reasons why we are lagging behind when it comes to building up a nest egg. Women earn less than men. Most single parents tend to be mothers. The list goes on and on. Rather than go through all the excuses, let’s focus on how we can save more for retirement.