How to Plan for Retirement When You are In Your 30s

January 13, 2021 by Russell Henderson Posted in Mortgage Tips Tagged All, Budget, car, Children, college, Credit, credit report, credit score, Emergency Fund, Estate Planning, Family, Financial Advisor, Financial Goals, Financial Wize, FinancialWize, Grow, home, How To, income, Invest, Investing, investment, kids, Life, loan, Main, Make, Marriage, money, More, Move, Planning, recession, Relationships, Retirement, Retirement/Investing, Saving, Saving for Retirement, savings, Savings Accounts, School, second, selling

The post How to Plan for Retirement When You are In Your 30s appeared first on Penny Pinchin' Mom.

For many of us, our 30s are a dynamic time in life. During these busy years, jobs turn into careers and relationships are solidified by marriage or transformed by children.Â Most people are also in their mid-30s when they purchase their first home.Â While these are all expensive items, one thing you should not overlook is saving for retirement.

financial moves in your 30s

Retirement seems a long way off when you are 30, but is much closer when you turn 39.Â The sooner you start saving and investing for your golden years, the more money you will have when the time comes. And, if you work it right, you may even be able to start your retirement earlier than expected.

Thirty-three percent of people ages 30 to 49 years old donât have a retirement account. YIKES!! If youâre within this one-third of people, and in your 30s, you need to make retirement savings a priority.

If you aren’t in your 30s, these articles can help with retirement planning:

Retirement In Your 20s: What To Do NOW To Get On the Right Savings Path
Saving for Retirement in Your 40s
In Your 50s? There is Still Time to Save for Retirement
Why It’s Not Too Late to Save for Retirement in Your 60s

STRATEGIES TO SAVE FOR RETIREMENT IN YOUR 30s

Invest in your 401(k)

If your company offers retirement savings through a 401(k), start by discussing your options with someone in human resources. They can get you set up with a plan that works well with your income and goals.

If you currently contribute to your company’s plan, make sure you are making the maximum contribution that they may match.Â For example, if they match 25% of what you contribute, up to 4% of your contributions, that is FREE MONEY!Â Make sure your contribution is 4% as they will give you 1% for free – for a total 5% contribution.

As you get a raise, continue to increase your contribution by 1% annually.Â You will not miss the money and will be on target for achieving your savings goals.

Open an IRA

Another retirement vehicle to consider is an IRA.Â An Individual Retirement Account (IRA) is an easy way to add more money to your retirement savings.Â You can contribute up to $5,500 (subject to age and income limitations) and the contributions may be tax deductible (see your CPA).

Visit with a Financial Planner

Financial Planners are a must when you have investments and are saving for retirement.Â They analyze and help ensure you are on the right path to achieving your financial goals.Â They don’t usually charge for their services (if you invest with them) and can tailor a plan just for you.

Don’t change jobs

Sometimes it is tempting to change jobs because it looks better.Â But, keep in mind that you will need to start over with service requirements and contributions to a retirement plan.Â The company may also have a plan that is not nearly as robust as the one through your current employer, making you miss out on additional savings.

Diversify your investments

As you get older, the level of risk you can, or are willing to take, changes.Â You can be much more aggressive in your 20s and early 30s, but as you approach your 40s, you may want to make adjustments.Â Ask your investment or financial advisor about changes you should make each year.

FINANCIAL GOALS IN YOUR 30s

In addition to saving for retirement, there are goals you may want to achieve and financial rules you should follow once you hit your 30s.

Budget

Make sure you have a written budget you follow every month.Â You should account for every penny you make — in essence giving every penny a job.Â Don’t forget to include items such as additional retirement and emergency fund savings accounts.

Watch your Credit Report and Score

Each year, check your credit report for free at AnnualCreditReport (this is the free site mandated by the government and the only one you should use).Â Check for errors such as items that should have been discharged, accounts you did not open and other issues so you can submit them for correction.

You should also know your credit score.Â You can use a free site such as Credit Sesame to check your credit score, but keep in mind it is your vantage score (so not your true score – but it is pretty accurate). If you want to know your actual credit score, MyFico.com offers this and access to your credit reports from all agencies for a reasonable fee.

Save at least six months of income

Experts have always said you should save three months of your income in case of an emergency.Â However, if we learned anything during the last recession, that isn’t quite enough. If you are single, work on saving at least six months of income and if you have a family, aim for nine.Â Â You can increase your savings in many ways, such as eating out less, selling items and even getting a second job.

Have a will and health care directives

It is something none of us wants to think about, but it is important to not only have a will, but also health care directives as well.Â For around $70 – $90 you can create one at LegalZoom. However, if your situatio is more complex, or you are not comfortable creating one yourself, it is important to reach out to an attorney who specializes in estate planning.

Check your life insurance

If you have kids, you need life insurance.Â And, it is also wise to purchase policies on them as well.Â If something happens to any of you, funeral expenses alone can be a financial burden.Â Then, if there are medical expenses you need to pay for on top of burial costs, it can cause a lot of financial strain for your loved ones.

Invest Time, Too

A 2014 survey conducted by Charles Schwab, found that only 11 percent of workers spent five hours or more assessing their 401(k) investment options. This is far less time than how long many of us spend researching a new car or a vacation! If the idea of investments and the terminology attached overwhelms, you might consider taking a course. Â It might be good to think about hiring someone to help.

A trained professional can ensure you are meeting your retirement goals. When you work with a financial planner, he or she will help you establish an account and assist with diversification â an important element to successful investment. A good financial planner can be invaluable when your accounts, and family, grow.

Steady As You Grow

Once children enter the picture, so do a host of excuses about why retirement saving is impossible. While itâs important to provide every avenue of support for your little ones, you must do so responsibly. For instance, starting a state-sponsored 529-college plan for your children is a great way to save for college expenses but itâs important to remember that they can always get a loan for school â you canât for retirement.

What is your key takeaway for saving if you are in your 30s? Start putting more money away for retirement. While saving 10-15 percent of your income for retirement might be difficult, it will feel so good when you are comfortably retiring in your 60s.

saving for retirement in your 30s

The post How to Plan for Retirement When You are In Your 30s appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com

The Reality of Retirement Planning | Discover

January 13, 2021 by Russell Henderson Posted in Mortgage Tips Tagged Financial Goals, Financial Wize, FinancialWize, Planning, Retirement, Saving, Saving for Retirement

Start saving for retirement early so you are better prepared to reach your financial goals when retirement finally arrives.

Source: discover.com

Why Investing for Retirement is So Important for Women (and How To Do It)Â

January 13, 2021 by Russell Henderson Posted in Mortgage Tips, Retirement Tagged All, big, Blog, Budget, Business, Checking Account, college, color, down payment, Financial Goals, Financial Plan, Financial Wize, FinancialWize, guest post, home, How To, Invest, Investing, investment, Learn, Life, Luxury, Make, Make Money, money, More, mutual funds, Retirement, Salary, Saving, Saving for Retirement, Saving Money, Spending, spouse, Stocks, virtual

Hey everyone! Michelle speaking for a moment. Today, I’d like to introduce you to my friend Amanda Holden. She runs one of my favorite financial blogs – Dumpster Dog. Below is a guest post from her on why investing for retirement is important for women – and how you can start. Enjoy!

Play along with me for a moment: Imagine a deliciously styled woman in her 70s.

She is having a sip of her morning espresso at a sidewalk café in Paris. She’s perusing a big, beautiful novel alongside her (much younger) Parisian lover, who is bringing her a third croissant for before 10 am (because why not).

This woman is you.

Or at least, this woman could be you.

Whether or not your retirement dream includes croissants and a Parisian lover, you’re going to need to save and invest to make it happen.

We’re so accustomed to thinking about retirement in terms of an age—age 65—when in reality, retirement is an amount of money saved.

Because young people will not have access to the pension plans of our parents and grandparents, retirement is entirely our responsibility.

After spending six years workin’ in a fancy investment management job, I quit.

Helping the rich get richer just wasn’t going to be “it” for me. So, I created my own business, called Invested Development (Invested Development is great for beginners and for those looking to step up their investing game. My favorite part of this work is that “ah-hah moment” when students realize that investing is absolutely within their capacity.

Part of this work is addressing the specific hurdles that women face and finding solutions to those problems so that my students can live out their Golden Years in style.

Here are four reasons women need to save and invest for retirement—and how to do it.

1. Retirement is the single biggest lifetime expense for everyone, not just women.

Can we real-talk for a hot minute? It’s hard as hell to get motivated to save for retirement. Retirement is so frickin’ far away and you’ve likely got more immediate financial goals you’d like to achieve, like a down payment for a home or building a luxury palace for your collection of rescued street cats.

But, here’s the rub: Retirement will likely be the single-biggest expense in your lifetime. That’s right: Bigger than a house (at least, for most of us), and bigger than kid’s college. Take a step back, and simply think about what retirement is: You’re living for 20 or 30 years with no working salary.

Ask yourself: How much money do you need to spend in one, single year? How about for twenty or thirty years?

Without getting too caught up in the numbers, you get the idea: That’s a heckuva lot of money to save. Saving money is going to be the foundation to achieving retirement—but investing is the secret sauce.

2. Women live longer than men.

The job of saving and investing for retirement is already big. And for women, it will be even bigger.

In 2019, women have a life expectancy of 81.6, while the average for men is 76.9. That’s nearly five more years to account for. And the tough truth is—these years aren’t usually cheap or easy or healthy.

This means that women need to plan to be alive for longer than men, which means they need more money for retirement. And really, we should all plan to live to be at least 90 or even 100.

The worst thing you can do is make a plan that assumes you’ll live to be 81.6, and then live to be 100 with nothing in the bank. (This is especially important as life expectancies are expected to rise over the next several decades.)

3. Women need their own money.

Hey! Would you like to feel very angry right now? Well then allow me to introduce you to: The National Institute on Retirement Security!

Their data shows us year after year that women are significantly more likely to live in poverty than men in retirement, and it’s worse for women of color and single women. Any of us could be single, divorced, or widowed. I’m still single IF YOU CAN BELIEVE IT!

It’s rare that life ends up the way that we expect it to.

Planning for a scenario where no one gets sick and no one gets divorced is more than just dumb, it’s dangerous—especially for those of us living in countries with waning social safety nets.

We all know, in theory, that a partner is not financial plan; the hard part is making a plan into reality and doing the work now, and not waiting until disaster or heartbreak strikes.

(Because really, I can think of no worse time to learn about Modern Portfolio Theory, expense ratios, AND THE DAMN BANK PASSWORD than after a messy divorce or the unexpected death of a spouse.)

4. Women Earn Less Than Men

Think of what investing is: Investing is using your money to make even more money.

That’s right, ladies: Let’s make money do some of the heavy lifting around here! Putting our money to work is especially important for women, who are likely to earn less than men over the course of a lifetime. Women will have less money to work with, making it critical that we make the most of the money we do have.

I do not think this is fair.

My absolute first choice would be to close this wage and opportunity gaps and for moms to have support at work. While we are working towards the cultural shift and legislative changes necessary to leveling the playing field for women, women must work within the system we’ve got.

And that means learning about investing and prioritizing her future self, even when it’s so hard.

How to Invest for Retirement

Your first step is to understand your options for retirement accounts. Where should your investments go?

Are you already covered by workplace retirement account, like a 401(k) or 403(b)? Or are you self-employed?

If so, that you’ll need to open your own at a brokerage bank of your choosing—think Fidelity or Charles Schwab. Depending on your needs, you could open a Roth IRA, SEP IRA, and/or Solo 401(k).

Next, you’ll have to decide how to invest within your retirement account.

A 401(k) is not an investment—a 401(k) holds investments. Just like your checking account holds cash, but a 401(k) holds cash, stocks, mutual funds, and so on. You can think of your 401(k) or Roth IRA as a glorified adult Caboodles (with special tax treatment)—it just holds your investments.

The treasures held inside are the investments.

Many people will opt for a mix of stocks and bonds appropriate to their goals and risk tolerance. You may find it easiest to invest in stocks and bonds using mutual funds. A mutual fund bundles together some other investment type—you can think of them as big ol’ suitcases. And just like a suitcase, what is packed inside is the most important part, and will say a lot about the type of trip you’re about to take.

Many money experts prefer index mutual funds or index ETFs which are funds that aim to return the average of whatever market they “mimic,” with very low fees. Basically, you’re just along for the ride.

No matter which strategy you choose, you’ll need to minimize what you pay in fees. Any fees you pay to an advisor, plan administrator, or broker, are fees that will come directly from your potential investment returns—so you’d better be damn certain of the value you get out of that service. Remember, the goal here is to make you rich, not to fund some overpaid mutual fund manager’s Viagra-blue sportscar.

Finally, Become Confident in Your Saving and Investing Plan

Are you ready to learn how to invest, make the most of your money, and make your badass granny dreams a reality?

Take Invested Development, which is a live, virtual, four-part Investing 101 course taught by me. (That’s right, you can take the class from the comfort of your home—popcorn, sweatpants, greasy topknot and all!) I’m committed to helping my students learn by making them laugh and providing a judgment-free place to ask questions. You will walk away with a plan of action you’re confident in.

Feeling in charge of your money and investments: It’s a powerful place for a woman to be.

And often, learning requires the right teacher: I’m a writer and educator specializing in teaching women how to invest. Through my business, Invested Development, I’ve taught thousands of women to invest, revolutionizing what they think is possible for themselves and their financial futures. I take women who are unsure of their knowledge and turn them into confident, wealth-building badasses.

I also write a blog called The Dumpster Dog Blog, which has been nominated for Money Blog of the Year and Women’s Money Blog of the Year for two years running.

Invested Development has upcoming classes in January and February. Because it is live, virtual, and classroom style, spaces in the class are limited. Invested Development will show you that investing is something that is absolutely within your capacity: don’t put it off for one day longer. Your future granny depends on it.

Are you saving for retirement? Why or why not?

The post Why Investing for Retirement is So Important for Women (and How To Do It)Â appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com

You CAN Reach Retirement! Avoid These Top 5 Retirement Mistakes

January 13, 2021 by Russell Henderson Posted in Debt, Mortgage Tips, Retirement Tagged All, Bank Accounts, Budget, Business, college, Credit, credit card, Debt, Education, Emergency Fund, Financial Wize, FinancialWize, frugal, home, Investing, investment, Learn, Life, Lifestyle, Loans, Make, minimalist, Minimalist Lifestyle, money, More, Mortgage, Planning, property, Rates, Retirement, Retirement mistakes, Save Money, Saving, Saving for Retirement, savings, School, social security, Spending, Student Loans, Taxes, Travel

Wondering what retirement mistakes will ruin your retirement? Here are the biggest retirement mistakes we all make.

Have you ever checked in to see if you are on track for retirement? I know this can feel like a daunting task, but preparing yourself for retirement can help you save more and avoid common retirement mistakes.

For some, retirement means quitting their job after 40+ years, but it can also mean working towards early retirement, in your 20’s, 30’s, 40’s, and so on.

I know that’s not for the “average” American, but by avoiding some of the retirement mistakes I will talk about today, you can start preparing for retirement at any age.

Related: How To Save For Retirement

The thing about retirement is that sadly many out there are not saving enough money. In fact, according to Zacks Investment Research, 72% do not save enough for retirement each month.

Also, according to surveys done by Bankrate, 20% of people aren’t saving any money, and 61% of Americans have no idea what they will need to save for retirement.

These numbers are very alarming.

Saving money in general is an important thing to do, but if you don’t want to work for the rest of your life, saving for retirement should be something that you are thinking about. And, I believe that saving for retirement is possible if you start working towards it and avoid retirement mistakes when it comes to planning and saving.

While many believe the economy ruins their chances for retirement, in reality most retirement mistakes come from specific beliefs people have about retirement. Some of these beliefs come from expectations of what their budget will be during retirement, that they can rely on their pension or social security, and more.

There are many reasons for why a person might not be saving for retirement, and by looking at the various retirement mistakes you might be making, I feel that more people can be aware of and overcome their retirement preparation problems.

Here are five retirement mistakes and how they might be hurting your chances for retirement:

1. You ignore saving for retirement altogether.

Many people skip out on saving for retirement for several reasons, including:

Believing you don’t have enough money to save for retirement.
Thinking that you’re too young to care about retirement or that it’s too late to start.
Relying too much on pensions and social security.

No matter how young or how old you are, you should be saving and preparing for retirement. You never know when you will need it, and I am all for a person being in charge of their own retirement plan instead of relying too much on other sources of retirement (such as relying on social security 100%).

Millennials are especially at risk and according to an article by Business Insider, a shocking 40% of millennials have nothing saved for retirement. This is a scary number because these people will all have to retire one day and I’m not sure what they will do when the time comes.

But, it isn’t just young people who aren’t saving for retirement. Bankrate found that only 60% of people aged 45-54 have some type of retirement savings. You can read more crazy retirement statistics here.

It is important to realize that part of the reason for these low savings rates is that many are currently living paycheck to paycheck, which makes it hard to even approach saving for retirement. Fortunately, you can start investing with very little money, and you can learn how to start investing for beginners if you are wanting to start planning for retirement.

There is never a bad time to start saving for retirement, and you can correct this retirement mistake by starting today.

Side note: I highly recommend that you check out Personal Capital if you are interested in gaining control of your financial situation. Personal Capital allows you to aggregate your financial accounts so that you can easily see your financial situation. You can connect your mortgage, bank accounts, credit card accounts, investment accounts, retirement accounts, and more. And, it’s FREE!

2. You take on debt for others and don’t think about your future.

I talked about this topic in the post Should I Ruin My Retirement By Helping My Child Through College? This is a hard thing for a lot of parents especially as student loans are out of control, and I am hearing from parents nearly every week saying that they cannot afford to retire because they are paying for their child to go to college.

If this is your situation, I want you to STOP making this one of your retirement mistakes. Unless you are on track for retirement, I honestly think you need to seriously start prioritizing your future. Your child will be fine without your monetary support.

There are lots of ways to support your child through school that don’t involve leveraging your future for their education. You can help them find a job, find scholarships, be an emotional support, and more.

You can take out loans for college, but you cannot take out loans for retirement.

3. You think you’ll never have to retire.

Recently, I read an article about someone who made hundreds of thousands of dollars a year, had a monthly budget of around $30,000 (yes, MONTHLY!), and yet hardly saved anything. This person said they didn’t really feel the need to save for retirement because they enjoyed their job so much. That’s just crazy!

See, even wealthy people make retirement mistakes.

Assuming you will love your job forever can be a huge mistake. While it’s great that you love your job now, it’s hard to judge what you will love decades down the line.

Also, you never know if something will come up in the future that will completely prevent you from working, such as a medical issue or some sort of major life change. Beyond realizing that you will need to prepare for retirement, an emergency fund should be something you already have or are working on – emergency funds are there to protect you from the what-ifs.

Related articles:

Everything You Need To Know About Emergency Funds
Is A Credit Card Emergency Fund A Smart Idea?

4. You miscalculate how much money you’ll spend in retirement.

For some reason, many people just assume they will spend less money in retirement, but that is not always the case.

While you might find some ways to save money on things like commuting expenses, work clothes, lunch if you weren’t bringing it, you will probably experience a very similar budget to the one you had while working.

You are still going to spend money on housing (even if you pay off your home completely, you will still need to pay property taxes, utility bills, etc.), food, clothing, entertainment, and so on.

Many retirees also take up new hobbies or activities. And, some retirees just have more time to pursue things they’ve already been doing, which can add up to a lot of extra expenses.

Plus, medical expenses may come up, you might decide to travel more, and like I said, the truth is that retirement spending is not usually much different than what you are currently spending.

Some make plans to become super frugal after they enter retirement, but life doesn’t always work out so perfectly. To make sure this isn’t one of the retirement mistakes you are making, I recommend starting to cut down your budget now.

By living frugally before you retire, you will be able to save more, will have less expenses going into retirement (the less money you spend, the less you need in the future), and you might even reach retirement sooner. Really, if you cut your spending now and become more frugal, you will be used to living with less. I’ve been living a more frugal and minimalist lifestyle since we moved onto our boat, and it can be a life changing thing.

5. You use your retirement funds for expenses other than retirement.

This is one of the worst money mistakes out there, and unfortunately many young people are making it. I’ve actually heard far too many stories about people taking money out of their retirement funds in order to pay for a vacation, a timeshare, pay off low interest debt, and more.

When preparing for retirement, this is a HUGE mistake.

While I don’t know everything about taking money out of retirement funds, I do know that this can usually hurt you more in the long run. Taking funds out of a retirement account can lead to large penalties and paying extra towards taxes.

The other thing about saving for retirement is that the longer you have funds invested, the more you will have for retirement. Compound interest is a powerful thing, and if you are taking money out of your retirement account it means that you don’t get the full benefit of it.

You should always just use your retirement funds purely for retirement. If you are struggling with debt or need help differentiating between wants and needs, it’s time to make a change. Don’t wreck your future by making this huge retirement mistake.

What retirement mistakes have you seen? Do you think you will have enough money to retire and how are you preparing for retirement? What age do you expect to retire?

The post You CAN Reach Retirement! Avoid These Top 5 Retirement Mistakes appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com

Am I On Track to Retire?

January 13, 2021 by Russell Henderson Posted in Mortgage Tips, Retirement Tagged All, Business, Financial Wize, FinancialWize, Grow, How To, income, Invest, Investing, investment, Life, Lifestyle, Main, Make, money, More, Planning, project, Retirement, Salary, Saving, Saving for Retirement, savings, social security, spouse, Stocks, Taxes

The only way to retire with financial security is by saving for retirement ASAP. Although setting aside retirement savings is a solid start in the right direction, making sure youâre saving enough toward your retirement goal is just as important.

Once youâve decided how much you’ll contribute to your retirement fund, youâll be closer to knowing if your savings are on track. Hereâs how to get started.

The main takeaway is that you can get on track to retire at just about any age. But you have to be willing to commit to saving as much as you can and on a completely consistent basis.

Compound Earnings Catapults Your Retirement Fund

Building your retirement savings isnât something you can do on a whim, work on for a few years, and then abandon. You need to set up a plan â and the earlier in life, the better â then commit to it for decades.

Why? Because compound earnings over time is what gets you to your retirement goal faster.

When you invest into your retirement, your funds earn interest. That interest is reinvested to earn more interest. This is the concept behind âcompound interestâ. To successfully plan for retirement, putting your contributions on auto-pilot is essential to maximize your compounded earnings.

This starts with opening the right to retirement plan, or even a combination of plans. From there, you can set up payroll deductions or automatic transfers from your bank account to fund whatever retirement plan youâve chosen.

Choosing the Right Retirement Plan

You can start saving for retirement by participating in a workplace retirement plan, if your employer offers one. This will typically be a 401(k), 403(b), 457 or Thrift Savings Plan (TSP).

Under current tax contribution laws, you can contribute up to $19,500 per year to any of those plans, or $26,000 if youâre 50 or older. Some employers also offer a matching contribution that grows your savings fund more quickly.

A limitation of an employer-sponsored plan is that youâre often on your own to manage it. There might also be limited investment options, including some that have high investment fees. A good workaround for this problem is to sign up with a 401(k)-specific robo-advisor, like Blooom.

Itâs a service that creates and manages a portfolio within your employer-sponsored plan, including replacing high-fee funds with those that charge lower fees. And it provides this service for a low, flat monthly fee. Your employer doesnât need to be involved in the process â just add Blooom to your existing plan.

If You Donât Have an Employer-Sponsored Retirement Plan

If you donât have access to an employer-sponsored plan, you have a few options depending on your situation. Here are other types of retirement plans to consider:

Traditional IRA or Roth IRA. It can either include brokerage firms if you prefer self-directed investing, or robo-advisors if youâd rather have your investments managed for you. IRA contribution limits for either type of retirement plan let you contribute up to $6,000 per year, or $7,000 if youâre 50 or older. Here are a few places to open an IRA account.
SEP-IRA. If youâre self-employed and a high-income earner, a SEP-IRA is the best way to build up a large retirement portfolio in less time. Rather than an annual contribution limit of $6,000 for traditional and Roth IRAs, the limit for a SEP-IRA is a whopping $57,000.
Solo 401(k). A Solo 401(k) is also designed for self-employed workers (though it can also include a spouse who participates in the business). It has the same employee contribution limit as a standard 401(k) at $19,500 per year, or $26,000 if you are 50 or older. But a solo 401(k) lets you make an additional employer contribution to the plan up to $57,000 (or $63,500 if you are 59 or older). Employer contributions are also capped no more than 25% of your total compensation from your business.

General Retirement Find Milestone Guidelines

The number of variables involved in retirement makes it impossible to come up with a specific savings goal to aim for in your situation. But like any plan, youâll need to have milestones to let you know if youâre on track to retire or not.

Although there are different methods of calculating retirement milestones, the Fidelity Retirement Widget offers the best ballpark figure. The widget is incredibly user-friendly, produces easy to understand results, and is absolutely free to use.

It determines how much money you should have at each age, based on your answers to three questions:

What is your current age?
What age do you expect to retire?
What do you think your lifestyle will be in retirement? (You can choose below average, average, and above average.)

The last question about your lifestyle in retirement is admittedly vague, but an educated guess is enough.

Plugging in a starting age of 25, with an expected age of retirement of 67, and an average lifestyle in retirement, Fidelity provided the following retirement milestones in five-year increments:

Each bar represents a multiple of your current annual income at a specific age. For example, at age 30, your total retirement savings should roughly equal your annual income. At 35, you shouldâve saved double your income, and so on until age 67 when you retire.

At that point your retirement savings should be 10 times the amount of your annual income just before retiring. (It will be 12X your income at 67 if you expect an above average lifestyle, but just 8X if you expect to live a below-average lifestyle.)

How Accurate Are These Retirement Savings Milestones?

Thereâs no guaranteed method to project your exact future earnings or how much your retirement fund will compound over time. The best we can do is a ballpark estimate, especially if youâre only in your 20s or 30s.

But letâs work a loose example to demonstrate the validity of the Fidelity estimate.

Letâs say you reach 67, your final salary is $100,000, and youâve accumulated 10 times that income in your combined retirement savings (i.e. $1 million).

Itâs not reasonable to assume a $1 million portfolio will consistently generate 10% annual returns, fully replacing your $100,000 pre-retirement income.

General Rule of Thumb for Retirement Savings

Generally, you can plan on replacing 80% of your pre-retirement income. That means $80,000 per year of income in retirement. The reduction assumes you wonât have work-related expenses, like commuting, or making additional retirement contributions. It also assumes a lower annual tax bite. After all, once you retire, youâll no longer be paying FICA taxes.

If you have a $1 million retirement portfolio, you can withdraw 4% per year without draining your portfolio to zero. This is whatâs frequently referred to as the safe withdrawal rate.

Withdrawals of 4% will come to $40,000 on a $1 million portfolio. That will represent 50% of the $80,000 in needed retirement income.

Presumably, the rest will come from a combination of Social Security and any available pension income. You can use the Social Security Quick Calculator to determine what your benefits will be at retirement.

Using a Retirement Calculator to Track Your Goals

With your estimated Social Security benefits in mind, a retirement calculator can help you understand the remaining gap between your savings and how much you need for retirement.

For example, letâs say youâre 25-years-old, earning $50,000 annually, and your employer offers a 401(k) plan. For each of the remaining examples, weâll assume your employer doesnât match contributions, and assume a 7% annual rate of return on investments reflecting a mix of stocks and bonds in your plan.

If you want your 401(k) plan balance to match your salary by age 30, youâll need to contribute

17% of your income â or about $8,500 per year â to your plan. With a 7% annual rate of return, thatâll give you a balance of $50,717.

If you expect to be earning $75,000 per year by the time youâre 35, youâll need to have $150,000 in your plan by the time you reach that age.

Assuming your income averages $62,500 per year between the ages of 30 and 35, youâll need to contribute 21% of your income, or $13,125 per year, to reach the $150,000 threshold in your plan.

The Magic of Saving for Retirement Early

Looking long-term, at retirement at age 67, letâs assume your income will grow to $100,000 between age 35 and 67. In this scenario, your average annual income is $87,500. Since you expect to earn $100,000 just before retiring, you should have $1 million sitting in your 401(k) plan.

What will it take to reach that goal?

Absolutely nothing!

One of the biggest and best secrets of retirement planning is the earlier in life you begin saving, the less youâll need to save later on in life. And sometimes thatâs nothing.

In this case, since you already have $150,000 in your plan at age 35, simply by investing the money at an average annual return of 7% for 32 years your plan will grow to $1.3 million. Thatâs without making even a single dollar of additional contribution.

And for what itâs worth, if you simply made the maximum 401(k) contribution of $19,500 each year between 35 and 67, your plan would have more than $3.4 million by the time you reach retirement.

The most fundamental rule of retirement savings planning is: save early and often!

Planning for Early Retirement

If youâre 25 years old and you want to retire at 50, decide how much income youâll need to live on by the time you reach 50. Since you wonât have the benefit of Social Security or a pension, youâll rely entirely on your retirement savings.

Letâs say youâll need $40,000 per year to live in retirement. In this case, youâll need to have $1 million in your retirement portfolio based on the 4% safe withdrawal rate.

How Much to Save for an Early Retirement

To get from $0 to $1 million in your retirement plan between 25 and 50, youâll need to make the maximum 401(k) contribution allowed at $19,500 each year for 25 years. Assuming your investment produces a 7% return, youâll have $1,181,209 by the time you reach 50. Thatâll be a little bit higher than your $1 million retirement goal.

Itâll be difficult to carve out the full $19,500 on a $50,000 income youâre earning at age 25, but it gets easier as the years pass and your income increases. You might even decide to lower your contributions in your 20s, and work up to the maximum by the time youâre 30.

Just be aware that the foundational strategy of reaching early retirement is based on saving a seemingly ridiculous percentage of your income. Although others are saving 10% or maybe 15% of their income each year, youâll need to think more in terms of 30%, 40%, or 50% savings. It all depends on how early you want to retire.

What to Do if Youâre Not on Track to Retire

Unfortunately, this describes the majority of Americans. But it doesnât need to be you, even if youâre not currently on track to retire.

Letâs say youâre 45 years old and earning $100,000, and you currently have $100,000 in total retirement savings. That means that at age 45 your retirement fund is where Fidelity recommends it shouldâve been at age 30.

Donât give up hope.

If you make the maximum contribution of $19,500 per year between ages 45 and 50, then increase it to the maximum of $26,000 per year from ages 50 to 65, youâll have just over $1.3 million in your plan by the time you reach 65.

You wonât benefit from compound earnings that you wouldâve seen had you started saving aggressively in your 20s, but your situation is far from hopeless.

The main takeaway is that you can get on track to retire at just about any age. But you have to be willing to commit to saving as much as you can and on a completely consistent basis.

The post Am I On Track to Retire? appeared first on Good Financial CentsÂ®.

Source: goodfinancialcents.com

5 Best Short Term Investments to Grow Your Money

January 13, 2021 by Russell Henderson Posted in Home Design, Investing, Personal Finance Tagged $1000, All, big, Buy, Buying, Buying a house, CD, Checking Account, color, Debt, down payment, FDIC, Financial Advisor, Financial Goals, Financial Wize, FinancialWize, Grow, home, Invest, Investing, investment, money, Money Market, mutual funds, Personal Finance, Planning, Popular, principal, Retirement, Saving, Saving for Retirement, savings, short term investing, short-term investment, Stocks, Uncategorized

Short term investments are those investments that can yield their returns within a short period of time — usually within 1 to 3 years. (contrary to a long term investment such as saving for retirement).

In other words, short term investing are typically used to meet short-term financial goals (such as buying a house or go on a vacation).

A bank checking account is one of the best known and popular ways to save for such a goal.

But your traditional checking account only pays a meager return, if at all.

If you can’t find an alternative to a checking account, no need to fret.

There are plenty of short term investments that will help keep your money safe and earn a good return at the same time.

Below, we’ve curated the best short term investments to help reach your investment goals.

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Things to consider:

First thing first, before you make any short term investments, you should know about the risk, return and investing time frame of short term investments.

Average return to expect: 1 to 4% per year;
Risk: very low to low risk of losing money;
Time frame: 0 to 3 years

Best short term investments:

If you’re saving and investing money for the short term, i.e., to use it as a down payment on a house, you will not invest that money in stocks or mutual funds, right?

That’s because, stocks are high risk investments. And if you need the money for a certain time, it might not be available due stock market volatility.

Instead, a smart choice is to save that money in a low-risk investment where you can protect the capital invested and earn interest/income at the same time.

If you have a different investing goal, such as saving for retirement, it’s best to look at stocks or mutual funds. Investing in stocks or mutual funds is considered a long term investment as opposed to short term investing.

If you’re interested in investing for the long term, here’s how the stock market works.

So, what are your options? Here are some of the best short term investments to consider to earn some interest on your money.

1. Savings account.

A savings account at a bank is an excellent choice. And they usually pay more interest than a regular checking.

They are quite safe. Savings account are insured by the FDIC, but only for up to $250,000.

That means if a bank goes bankrupt, the government will step up and give you your money back.

In addition, they are very liquid. You have access to your money fairly easy.

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2. Certificate of deposit (CDs).

If you want a good rate of return on money that you don’t plan on using within the next couple of years, CDs is a safe place to do invest it.

Banks sell certificate of deposit for a specific dollar amount and length of time. As an investor, you agree to leave a certain amount of money with the bank for a specific time.

When the time is up, the CD matures. Then, you get your money back, plus interest.

CDs are also FDIC insured for up to $250,000. They provide a safe and competitive yield. That makes them some of the best short term investments to consider.

The minimum deposit requires to open a CD depends on the bank. But it usually ranges from a few hundred dollars to thousands.

The CIT Bank is paying 1.30% for an 11-month CD. There is an opening minimum of $1,000. With most CDs, if you tap into your money before maturation, you will get hit with an early withdrawal penalty.

However, with this CIT Bank CD, there is no penalty if you withdraw early.

CIT Bank has various types of CDs. If you prefer longer terms CDs, check them out now at the CIT Bank website.

3. Money market fund

While you can keep your cash at a bank in a savings account because they’re safe there, you don’t have to.

You can try a money market fund. They are safe as well.

A money market fund is a type of mutual fund (but thy don’t focus on stocks or bonds).

Mutual funds companies such as Vanguard offer money market funds.

Money market fund is not insured by the government, so there is a possibility you can lose money. However, they are quite safe.

They’re safe, because they have a dollar invested in securities for every dollar you deposit in your fund.

The principal money you invested does not change in value. When you invest in a money market fund, you earn dividends. That’s a good advantage.

Another advantage of a money market fund as a short term investment is that it provides higher yield than bank savings account.

It also allows you to write checks without incurring any charges.

So, if you’re saving money for a home that you’re going to buy soon, a money market fund is a safe place to grow your money.

4. Short-term corporate bond funds.

Bonds, in general, are similar to CDs. An exception is that they, just as stocks, are securities that trade in the market.

So, they may fluctuate in value, but not as much as stocks.

Bond funds are a collection of bonds from companies (large, medium, or small) from different industries. Hence, the name “corporate bond funds.”

Investing in bond funds can be used as a short-term investment. Sometimes, investors consider corporate bond funds to diversify their investment portfolio.

Just like a money market fund, corporate bond funds are not FDIC insured. But they are just as safe as a money market fund.

Plus, you don’t just invest in one bond or two bonds. If one bond in your investment fund takes a hit, it only affects a small amount of your money.

So while they are riskier than money market funds saving accounts, CDs, short term corporate bonds pay you more. That makes them one of the best short-term investments out there.

5. Treasury bonds.

One of the best ways to invest money in the short term is to buy treasury bonds. Treasury bonds are issued by the U.S. government.

There are three types: treasury bills, treasury notes, and treasury bonds. They are like CDs. Once the bond matures, you get the full money invested, plus interest.

Treasury bonds may provide the same or a better interest rate than CDs. But a big advantage is that, while they’re not FDIC insured, they are backed by the U.S. government.

In other words, the government promises to repay your money, which is considered to be very safe.

So if you have more than $250,000, you should consider a treasury bond.

Another advantage is that while interest on a CD is fully taxable, Treasury’s interest is state-tax-free.

In conclusion, short term investments are those in which you make for a certain and short period of time for a specific goal.

Short term investments aren’t the best if you’re seeking high returns.

But if you’re a beginner investor you should consider placing some of your money into these best short term investments.

Remember: don’t invest your money in stocks when you plan to use it within the next five years, because a stock market drop can dry out your investment portfolio.

The Best Ways to Invest $1000 For Good Return
How to Invest With Little Money (Even With $5)
How to Invest 100k to Build Real Wealth

Speak with the Right Financial Advisor

If you have questions beyond short-term investments, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

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The post 5 Best Short Term Investments to Grow Your Money appeared first on GrowthRapidly.

Source: growthrapidly.com

6 Competing Retirement Investing Goals and How to Balance Them

January 13, 2021 by Russell Henderson Posted in Identity Theft Tagged Financial Wize, FinancialWize, Grow, How To, Investing, investment, money, Retirement, Saving, Saving for Retirement

This story originally appeared on NewRetirement. Saving for retirement is hard. When you are still working, creating a retirement investment plan can seem relatively straightforward. The goal is to simply grow the money. But as you approach retirement and start looking into the details, your investment goals become more layered, and possibly downright complicated. You still want your money to grow…

Source: moneytalksnews.com

4 Smart Things to Do When You Get an Inheritance

January 13, 2021 by Russell Henderson Posted in Budgeting, Family Finance, Financial Freedom Tagged All, Banking, big, Budgeting, car, CD, Debt, Debt Repayment, Emergency Fund, Family, Family Finance, Financial Goals, Financial Plan, Financial Wize, FinancialWize, home, How To, Insurance, Investing, investment, Life, Managing Your Money, money, Online Savings Account, Paying Down Debt, property, Quick Tips, Real Estate, Retirement, Saving, Saving for Retirement, savings, Spending, Tax Advantages, trust

You just learned of the passing of a loved one. During this stressful and emotionally taxing time, you also find out that you’re receiving an inheritance. While you’re grateful for the unexpected windfall, knowing what to do with an inheritance can bring its own share of stress.

While the amounts vary greatly, the Federal Reserve Board’s Survey of Consumer Finances reports that an average of roughly 1.7 million households receive an inheritance each year. First words of wisdomâresist the urge to spend it all at once. According to a study funded by the Bureau of Labor Statistics, one-third of people who receive an inheritance spend all of itâand even dip into other savingsâin the first two years.

Not me, you say? Still, you might be asking, “What should I do with my inheritance money?” Follow these four steps to help you make smart decisions with your newfound wealth:

Take time to grieve and process your emotions before diving into the things to do when you get an inheritance.

1. Take time to grieve your loss

Deciding what to do with an inheritance can bring with it mixed emotions: a sense of reprieve for this unexpected financial gain and sadness for the loss of a loved one, says Robert Pagliarini, certified financial planner and president of Pacifica Wealth Advisors.

During this time, you might feel confused, upset and overwhelmed. âA large inheritance that pushes you out of your financial comfort zone can create anxiety about how to best manage the money,” Pagliarini says. As an inheritor, Pagliarini adds that you may feel the need to be extra careful with the funds; even though you know it is your money, it could feel borrowed.

The last thing you want to do when deciding what to do with an inheritance is make financial decisions under an emotional haze. Avoid making any drastic moves right away, such as quitting your job or selling your home. Some experts suggest giving yourself a six-month buffer before using any of your inheritance, using the time instead to develop a financial plan. While you are thinking about things to do with an inheritance, you can park any funds in a high-yield savings account or certificate of deposit.

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âA large inheritance that pushes you out of your financial comfort zone can create anxiety about how to best manage the money.â

– Robert Pagliarini, president of Pacifica Wealth Advisors

2. Know what you’re inheriting

Before you determine the things to do with an inheritance, you need to know what you’re getting. Certified financial planner and wealth manager Alex Caswell says how you use your inheritance will largely depend on its source. Typically, Caswell says an inheritance will come in the form of assets from one of three places:

Real estate, such as a house or property. As Caswell explains, if you receive assets from real estate, you will transfer them into your name. As the inheritor, you can choose what to do with the assetsâtypically sell, rent or live in them.
A trust account, a legal arrangement through which funds are held by a third party (the trustee) for the benefit of another party (the beneficiary), which may be an individual or a group. The creator of the trust is known as a grantor. âIf someone inherits assets through a trust, the trust documents will stipulate how these assets will be distributed and who ultimately decides how they are to be invested,” Caswell says. In some cases, the assets get distributed outright to you; in other instances, the trust stays intact and you get paid in installments.
A retirement account, such as an IRA, Roth IRA or 401(k). These accounts can be distributed in one lump sum, however, there may be requirements related to the amount of a distribution and the cadence of distributions.

One of the first things to do with an inheritance is be sure you understand what you've inherited.

When considering things to do with an inheritance, know that inherited assets can be designated as Transfer on Death (TOD) or beneficiary deeds (in the case of real estate), which means the assets can be transferred to beneficiaries without the often lengthy probate process. An individual may also bequeath cash or valuables, like jewelry or family heirlooms, as well as life insurance or stock certificates.

Caswell says if your inheritance comes in the form of investment assets, such as stocks or mutual funds, you’ll want to think of them as part of your own financial picture. âAll too often, we see individuals end up treating inherited assets as a living extension of their passed relative,” Caswell says. Consider how the investments can be used to support your financial goals when thinking about things to do when you get an inheritance.

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An average of roughly 1.7 million households receive an inheritance each year.

– Federal Reserve Board’s Survey of Consumer Finances

3. Plan what to do with your financial gain

Just like doing your household budgeting, it’s important to “assign” your inheritance to specific purposes or goals, says Pacifica Wealth Advisors’ Pagliarini. Depending on your financial situation, the simple concepts of save, spend and give may be a good place to start when deciding on things to do when you get an inheritance:

SAVE:

Bolster your emergency fund: You should have at least three to six months of living expenses saved up to avoid unexpected financial shocks, such as job loss, car repairs or medical expenses. If you don’t and you’re deciding what things to do with an inheritance, consider parking some cash in this bucket.
Save for big goals: Now could be a good time to boost your long-term savings goals and pay it forward. Things to do when you get an inheritance could include putting money toward a child’s college fund or getting your retirement savings on track.

SPEND:

Tackle debt: If you’re evaluating what to do with an inheritance, high-interest debt is something you could consider paying off. Spending on debt repayment can help you save on hefty interest charges.
Reduce or pay off your mortgage: Getting closer to paying off your homeâor paying it off entirelyâcan also save you in interest and significantly lower your monthly expenses. Allocating cash here is a win-win.
Enjoy a little bit of it: It’s okay to use a portion of your inheritance on something you enjoy or find rewarding. Planning a vacation, investing in more education or paying for a big purchase could be good moves.

GIVE:

Donate funds to charity: Thinking about your loved one’s causes or your own can continue legacy goals and provide tax benefits.

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4. Don’t get tripped up on taxes

When deciding what to do with an inheritance, taxes will need to be considered. “It is extremely important to be aware of all tax ramifications of any decision around inherited assets,” Caswell says. You could be required to pay a capital gains tax if you sell the gift (like property) that was passed down to you, for example. Also, depending on where you live, your inherited money could be taxed. In addition to federal estate taxes, several U.S. states impose an inheritance tax and/or an estate tax.

Since every situation is unique and tax laws can change, when considering things to do with an inheritance, consult a financial advisor or tax professional for guidance.

Make your windfall count

Receiving an inheritance has the potential to change your financial picture for good. When thinking about the things to do when you get an inheritance, be sure to give yourself ample time to grieve and to understand all of your options. Don’t be afraid to lean on the experts to get up to speed on any tax and legal implications you need to consider.

Planning can go a long way toward making the right decisions concerning your newfound wealth. Being responsible with your inheritance not only helps ensure your financial future, but will also honor your loved one’s legacy.

The post 4 Smart Things to Do When You Get an Inheritance appeared first on Discover Bank – Banking Topics Blog.