401(k) http://www.wisebread.com/taxonomy/term/3831/all en-US Watch Out for These 5 Sneaky 401K Fees http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/watch-out-for-these-5-sneaky-401k-fees" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_nest_egg_000006292825.jpg" alt="Learning which 401K fees to look out for" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>No matter how diligent you are at socking away money into your 401K, you could still be contributing less than you think, thanks to hidden fees and plan costs. According to a study from AARP, about three in five Americans are unaware of how much they're paying in <a href="http://assets.aarp.org/rgcenter/econ/401k-fees-awareness-11.pdf">401K plan fees</a>.</p> <p>Excessive 401K fees can eat away your returns. Let's assume that a worker invests $5,000 every year over a 35-year period in a 401K plan with an annual return of 4.9%. She would end up with $423,000 at the end of period assuming an annual fee of 0.5% of the total balance, and with $345,000 at the end of the period assuming an annual fee of 1.5% of the total balance.</p> <p>To claim back control of your retirement account, here are five 401K&nbsp;fees to look out for.</p> <h2>1. 12b-1 Fee</h2> <p>Owing its name to the Securities and Exchange Commission (SEC) Rule 12b-1, a 12b-1 fee is a charge from a mutual fund to cover marketing, distribution, and administration expenses.</p> <p>The original intent with this rule was to encourage mutual funds to invest in marketing so that more people would buy into the mutual fund. In theory, the more assets that a mutual fund can buy, the better the economies of scale. Unfortunately, the empirical evidence from the SEC shows that mutual funds with 12b-1 fees have higher expense ratios than those without those fees, and that the services rendered to earn the fees don't enhance the fund's performance.</p> <p>By law, 12b-1 fees can range between 0.25% and 1% of a fund's net assets. Given that these fees have shown no benefit to investors, you should try to choose funds that don't charge 12b-1 fees at all. If all your available investment options charge such a fee, go with the one that charges closest to the minimum 0.25%.</p> <h2>2. Redemption Fee</h2> <p>A front-end load is one of many sneaky <a href="http://www.wisebread.com/4-sneaky-investment-fees-to-watch-for">investment fees to watch out for</a>. Front-end load funds have such a bad rap that many investment firms have started advertising no-load fund options.</p> <p>However, there can be a catch. While no-load funds won't charge you for loading shares, those funds can charge you a fee for unloading your shares too soon. Known also as an exit fee, back-end load, or contingent deferred sales charge, a redemption fee is applied to an investor that exits a fund too soon. How soon is too soon? The minimum holding period ranges from 30 days to one year, so make sure to check your fund's prospectus.</p> <p>Here are two useful rules of thumb when evaluating redemption fees:</p> <ul> <li>The average minimum holding period to avoid a redemption fee is 65 days, so avoid funds that require you to hold onto your fund much longer than that. While your nest egg should be a last resort fund, you shouldn't be penalized for accessing your money when in need.<br /> &nbsp;</li> <li>The SEC limits redemption fees to 2%. However, some funds may charge as low as 0.01%. The lower the redemption fee, the better.</li> </ul> <h2>3. Exchange Fee</h2> <p>Diversification is a useful investment strategy to lower your market risk. For example, it's generally better to split your investment into three significantly different assets than to &quot;put all your eggs in one basket.&quot; If one of your investments tanks, you still have two to fall back on.</p> <p>Before you fire up the online dashboard of your 401K and transfer money from one fund to another, check for applicable exchange fees within your retirement plan. Even worse, some 401K plans may tack on additional load and redemption fees when you exchange between funds.</p> <h2>4. Individual Service Fee</h2> <p>On top of your plan's administrative fee, your 401K may incur individual service fees related to features that you opted into. You may incur individual service fees when:</p> <ul> <li>Taking a loan from your 401K account;<br /> &nbsp;</li> <li>Executing participant investment directions;<br /> &nbsp;</li> <li>Opting for a clause to terminate a contract with your employer before the contract's expiration date; or<br /> &nbsp;</li> <li>Choosing an investment option that includes an insurance component (e.g. annuity).</li> </ul> <p>There are many other types of individual service fees. Keep in mind that some individual service fees that are paid indirectly from the investment options you have chosen may not be listed in your quarterly 401K statement.</p> <h2>5. &quot;Other&quot; Fee</h2> <p>Along with those other fees, 401K plans can have a miscellaneous fee category for listing anything that is neither a sales charge nor an account maintenance charge.</p> <p>Some examples of other fees are:</p> <ul> <li>Custodial expenses;</li> <li>Legal expenses;</li> <li>Recordkeeping expenses;</li> <li>Furnishing statement expenses;</li> <li>Toll-free telephone service fees;</li> <li>Transfer agent expenses; and</li> <li>Other administrative fees.</li> </ul> <p>Depending on the terms of your plan, another fee may be a percentage of your assets invested in the fund or a flat fee.</p> <h2>The Bottom Line</h2> <p>Do your due diligence before choosing funds within <a href="http://www.wisebread.com/7-signs-your-401k-is-underperforming">your 401K plan</a>. To get a full picture of your investment options, you need to go beyond their average returns. The two key documents that you need in order to find out more about applicable fees are the Summary Plan Description and the Annual Report.</p> <h3>Summary Plan Description (SPD)</h3> <p>Upon joining the 401K plan, you receive a copy of your SPD. You will receive an updated copy every five years if there are significant changes or every 10 years if there are no changes.</p> <h3>Annual Report (Form 5500 Series)</h3> <p>Every year you should receive a copy. If not, you can examine a free copy from the <a href="http://www.efast.dol.gov">Department of Labor</a>.</p> <p><em>Do you know what fees your 401K is charging you? Are they fair?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-enjoy-retirement-if-you-havent-saved-enough">How to Enjoy Retirement If You Haven&#039;t Saved Enough</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">12 Things You Didn&#039;t Know About Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don&#039;t Despair Over Small Retirement Savings</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-facts-millennials-should-know-about-retirement-planning">5 Facts Millennials Should Know About Retirement Planning</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) Hidden fees investments returns Mon, 28 Sep 2015 13:00:40 +0000 Damian Davila 1568872 at http://www.wisebread.com 7 Signs Your 401(k) is Underperforming http://www.wisebread.com/7-signs-your-401k-is-underperforming <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-signs-your-401k-is-underperforming" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_reviewing_contract_000015199733.jpg" alt="Woman finding ways to tell if her 401(k) is underperforming" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've been diligently putting money away through your company's retirement plan, and are hopeful that the mutual funds in your 401(k) will accumulate enough cash for you to retire comfortably some day. But how do you know if your account is performing as well as it could?</p> <p>An <a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make">underperforming 401(k)</a> can cost you thousands of dollars in retirement income, so it's important to understand where it may be lacking.</p> <p>Here are seven ways to tell if your 401(k) is not up to snuff.</p> <h2>1. The Underlying Indexes Are Performing Better</h2> <p>You may have your 401(k) invested in funds that are meant to mirror certain indexes, such as the S&amp;P 500 or Russell 3000. In general, your overall investment returns should be in line with these indexes. If they aren't, then you may want to evaluate what you are paying in fees (see below), or consider switching to a fund that is better managed.</p> <h2>2. You've Never Rebalanced</h2> <p>You may think you have the ideal investment mix, but it's important to remember that your original investment choices may have shifted in proportion over time due to your portfolio's growth. For example, let's say you decided to place 60% of your money in domestic stocks, and 40% in international. But if domestic stocks grow more quickly, over time, that may turn into a 70/30 split. Reallocating your existing investments to reflect your investment choices will usually help you achieve greater growth.</p> <h2>3. You Pay a Lot in Fees</h2> <p>Many people don't realize that most 401(k) plans come with fees. There are fees to administer the plan, fees to manage the funds, fees for record keeping, and a variety of other things. Generally speaking, fees should not represent more than $1 for every $100 in your account, or a total of 1%. If you are primarily invested in index funds, anything more than .20% is high. Even the slightest fee can represent thousands of dollars in lost savings over the life of a plan.</p> <h2>4. Your Plan Administrator Uses Only Its Own Funds</h2> <p>If the company administering the 401(k) plan insists on offering only its own funds, that could be a problem. Those funds might be fine, but studies show they are often not the best funds available and administrators are less likely to <a href="http://www.barrons.com/articles/SB50001424052748704836204578354421066445066?autologin=y">dump those funds</a> when they underperform.</p> <h2>5. You Aren't Getting the Maximum Match From Your Employer</h2> <p>If you're not certain what percentage of each paycheck to put into your 401(k), you should at least contribute the minimum required for your maximum company match. This amount varies, but it's often between 3% and 5% of your salary. If you don't take advantage of the company match, you're leaving free money on the table.</p> <h2>6. You're Trying to Time the Market</h2> <p>One of the best things about 401(k) plans is that money is usually deducted straight from your paycheck, so you can contribute a consistent amount into specific funds without much work. But if you decide to adjust your contributions according to market fluctuations, you might be messing with a good thing. Trying to time the market is rarely effective. The average 401(k) investor hangs on to investments for about three years, when they should be staying the course for at least five.</p> <h2>7. You Live in the South</h2> <p>If you live below the Mason-Dixon Line, you might find that your 401(k) is a little sluggish. According to BenefitsPro, six of the top 10 states with the <a href="http://www.benefitspro.com/2015/01/29/top-10-states-with-underperforming-401ks?t=trends&amp;page=2&amp;page_all=1">most underperforming 401(k) plans</a> are located in the south. This includes Alabama, Mississippi, Tennessee, South Carolina, Georgia, and Florida. In many of these states, more than 10% of all plans were considered low performing. Check with your HR department or plan administrator for a better understanding of your investment choices.</p> <p><em>How is your 401(k) doing?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/7-signs-your-401k-is-underperforming">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/intimidated-by-retirement-investing-get-professional-help">Intimidated by Retirement Investing? Get Professional Help!</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">12 Things You Didn&#039;t Know About Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don&#039;t Despair Over Small Retirement Savings</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-facts-millennials-should-know-about-retirement-planning">5 Facts Millennials Should Know About Retirement Planning</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) 403(b) company matches mutual funds underperforming Thu, 03 Sep 2015 15:00:12 +0000 Tim Lemke 1541994 at http://www.wisebread.com 4 Reasons Early Retirement Might Be Financially Risky http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-reasons-early-retirement-might-be-financially-risky" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000017275515.jpg" alt="Learning why early retirement might be a financial risk" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>&quot;The money's no better in retirement &mdash; but the hours are!&quot; So goes a popular saying.</p> <p>Maybe that's why many dream of retiring early. A March 2015 study of Americans with investible assets of $1 million or more found that that most of them planned to <a href="http://money.usnews.com/money/retirement/articles/2015/04/07/tales-of-early-retirement-the-path-3-people-took">retire by age 56</a>, and a whopping 20% of them by age 40.</p> <p>However, early retirement &mdash; even for those with a $1 million nest egg &mdash; might be financially risky. Here are four reasons why.</p> <h2>1. Reduced Social Security Benefits</h2> <p>Nine out of 10 Americans age 65 or older <a href="http://www.ssa.gov/news/press/basicfact.html">receive Social Security benefits</a>. For those that receive Social Security, they count on those payments to cover about 38% of their income during retirement.</p> <p>While you can start receiving your Social Security benefits as early as age 62, you should wait a couple more years. For those born in 1960 or later, you would <a href="http://www.ssa.gov/oact/ProgData/ar_drc.html">receive only 70%</a> of your full retirement benefit by retiring at age 62.</p> <p>To receive your full retirement benefit, you need to retire by your full retirement age (age 67 for those born 1960 or later) as determined by the Social Security Administration. However, by waiting until age 70 to retire, depending on your year of birth, you can receive up to 132.5% of your full retirement benefits. (See also: <a href="http://www.wisebread.com/4-exciting-affordable-american-cities-to-retire-in?ref=seealso">4 Exciting, Affordable American Cities to Retire In</a>)</p> <h2>2. Early 401(k) Withdrawal Penalties</h2> <p>By socking away as much as possible and taking advantage of employer matches, you can build such a strong 401(k) plan, you'll be tempted to retire in your late 50s.</p> <p>Hold that thought.</p> <p>In 2014, 401(k) plans were <a href="https://www.ici.org/policy/retirement/plan/401k/faqs_401k">18% of the $24 trillion</a> in U.S. retirement assets. From 2004 to 2010, penalized 401(k) withdrawals increased from <a href="http://business.time.com/2013/01/23/cash-leaking-out-of-401k-plans-at-alarming-rate/">$36 billion to about $60 billion</a>. If this trend continues, then retirees may not receive the full share of their 401(k) plans.</p> <p>Taking early distributions from your 401(k) before you reach age 59&frac12; is a bad idea for several reasons:</p> <ul> <li>On top of applicable income taxes, you're liable for a 10% additional tax on those early distributions.<br /> &nbsp;</li> <li>To avoid that 10% tax penalty, you would have to take retirement payments under a <a href="http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Substantially-Equal-Periodic-Payments">substantially equal periodic payments</a> program, which are not only very complicated to set up, but can also cause cash crunches.<br /> &nbsp;</li> <li>All of your outstanding loans from your 401(k) plan become taxable income and are also subject to the additional 10% early distribution tax.<br /> &nbsp;</li> <li>Outstanding 401(k) loan balances can't be rolled into any eligible retirement plan.</li> </ul> <p>This is just one of the many <a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make">dumb 401(k) mistakes</a> smart people make.</p> <h2>3. Subpar Nest Egg</h2> <p>By deciding to retire early, you can say goodbye to a bigger nest egg.</p> <p>Assuming you were contributing $400 every month to your 401(k) with a 5% rate of return compounded annually, here are some examples of how much you would forego by retiring early:</p> <ul> <li>One year earlier: $4,929.03</li> <li>Three years earlier: $15,538.77</li> <li>Five years earlier: $27,236.01</li> <li>Seven years earlier: $40,132.21</li> <li>10 years earlier: $61,996.82</li> </ul> <p>The bigger your monthly contribution and the higher your plan's rate of return, the larger your nest egg&hellip; could have been! And let's not forget that these calculations don't include additional contributions:</p> <ul> <li>Employer matches (average American foregoes $1,336 per year or extra 2.4% in retirement savings);<br /> &nbsp;</li> <li>Potential windfalls (e.g. commissions, end-of-year bonuses); and<br /> &nbsp;</li> <li>Catch-up contributions starting age 50 (<a href="http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Catch-Up-Contributions">$6,000 per year</a> in 2015).</li> </ul> <h2>4. Higher Chance of Empty Retirement Fund</h2> <p>There's good news and bad news.</p> <p>First, the good news: Americans are living longer. In 1990, the life expectancy for men and women were age 71.8 and 78.8, respectively. Nowadays, those number are <a href="http://www.ssa.gov/planners/lifeexpectancy.html">age 84.3 and 86.6</a>, respectively. Our life expectancy is so good that about 10% of current 65-year old Americans will live past age 95!</p> <p>Now, the bad news: a longer life expectancy means that your nest egg may run out. For many years, $1 million used to be the goal for most retirement plans. If you make withdrawals from your nest egg using the suggested 4% annual rate, you will <a href="http://www.bankrate.com/finance/retirement/retirement-statistics-1.aspx">run out of retirement funds</a> within 25 years. Under this scenario, by retiring early by age 55, you could run out of retirement monies by age 80!</p> <p>Adapting to a very thrifty lifestyle (&quot;What? No summer cruise to the Bahamas!&quot;) may not be possible for some early retirees. Especially those who worked really hard to build up those $1 million nest eggs.</p> <p>The reality is that early retirement requires careful planning and persistent saving. To prevent such a retirement catastrophe, many registered investment advisors are recommending Millennials set a goal of <a href="http://money.usnews.com/money/retirement/articles/2011/09/15/gen-ys-2-million-retirement-price-tag">at least $2 million</a> for their retirement savings. (See also: <a href="http://www.wisebread.com/5-facts-millennials-should-know-about-retirement-planning?ref=seealso">5 Facts Millennials Should Know About Retirement Planning</a>)</p> <p><em>Do you know any stories about people who successfully retired early? Please share them in the comments below</em><strong><em>.</em></strong></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">12 Things You Didn&#039;t Know About Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-do-i-need-to-retire-how-much-can-i-spend">How much do I need to retire? How much can I spend?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-enjoy-retirement-if-you-havent-saved-enough">How to Enjoy Retirement If You Haven&#039;t Saved Enough</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) early retirement millennials nest egg social security Mon, 24 Aug 2015 13:00:26 +0000 Damian Davila 1531825 at http://www.wisebread.com 10 of the Coolest Sayings About Saving http://www.wisebread.com/10-of-the-coolest-sayings-about-saving <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-of-the-coolest-sayings-about-saving" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/happy_woman_piggy_bank_000067054473.jpg" alt="Woman hearing the coolest sayings about saving" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Don't downplay the importance of frugality: <a href="http://www.wisebread.com/save-100s-next-month-with-these-10-grocery-shopping-tips">Saving money</a> is the single best thing you can do to secure your future.</p> <p>If you're having a tough time tightening the purse strings, taking a look at 10 of the coolest sayings about saving money can put things in perspective.</p> <h2>1. &quot;Money looks better in the bank than on your feet.&quot; &mdash; Sophia Amoruso</h2> <p>Spending your money on clothes, shoes, and accessories might make you the fashion queen or king among your friends, but a fabulous wardrobe isn't going to cover the cost of an unexpected expense. Fashion trends come and go, but financial stability never goes out of style. You can look good without compromising your savings account if you learn how to be a savvy, budget-minded shopper.</p> <h2>2. &quot;Don't tell me what you value, show me your budget, and I'll tell you what you value.&quot; &mdash; Joe Biden</h2> <p>Joe Biden isn't one to bite his tongue &mdash; and with regards to why some people can't get ahead, this quote hits the nail on the head. You might say saving for the future and building an emergency fund are important, but if your budget shows you're spending more on entertainment than growing your 401(k) or savings account, you need to adjust your priorities.</p> <h2>3. &quot;A bargain ain't a bargain unless it's something you need.&quot; &mdash; Anonymous</h2> <p>We've all been guilty of buying something we didn't need just because it was on sale. It's easy to justify this bad habit. But in actuality, we're wasting money that could otherwise be put toward a financial goal like growing our savings or paying off debt. Before every impulse buy, ask yourself: <em>Do I need this item?</em> If not, leave it in the store and deposit the money you would have spent into your savings account.</p> <h2>4. &quot;Saving requires us to not get things now so that we can get bigger ones later.&quot; &mdash; Jean Chatzky</h2> <p>The need for instant gratification is real and it gets a lot of people in hot water. People with spending problems unknowingly rob themselves of the opportunity to acquire better things in the future. Think about it. You can't buy a home without a down payment, and you can't save a down payment unless you're willing to curb your spending and make sacrifices. So whenever you feel the urge to spend, think about your future plans and decide whether the purchase is worth delaying your goal.</p> <h2>5. &quot;Beware of little expenses; a small leak will sink a great ship.&quot; &mdash; Benjamin Franklin</h2> <p>This saying perfectly explains the effect seemingly little expenses can have on our personal finances. Tracking your spending might reveal you're wasting money every week on things you don't really need. Spending $2 a day for coffee and $3 for lunch adds up quickly. That's $100 a month or $1,200 a year that could go toward growing your savings.</p> <h2>6. &quot;Stop buying things you don't need, to impress people you don't even like.&quot; &mdash; Suze Orman</h2> <p>I absolutely love this quote. Many people won't admit to this behavior, but given how some people go into debt and sacrifice their savings accounts in order to impress others with their bigger homes, nicer cars, and the latest fashions, it's a quote everyone needs to hear. If you feel you have to maintain an elaborate lifestyle to impress a specific group of people, you need new friends. So what if you don't own the best of everything. Learn how to live on less and you'll acquire something a lot of people don't have &mdash; a bigger bank account.</p> <h2>7. &quot;You can be young without money, but you can't be old without it.&quot; &mdash; Tennessee Williams</h2> <p>This quote reminds us that the time to plan for retirement is when we're young and have energy to work. Saving when we're younger might mean fewer vacations, cheaper housing, and discount shopping. But it also ensures enough income to live comfortably in our later years when we can't work as much. If you haven't already, explore retirement options. Enroll in your employer's 401(k) plan or open an individual retirement account.</p> <h2>8. &quot;Save one-third, live on one-third, and give away one-third.&quot; &mdash; Angelina Jolie</h2> <p>I think it's cool when rich people give savings advice &mdash; and it's even cooler when they follow their own advice. Some people don't grasp the benefit of living beneath their means. But if you're able to live on just a fraction of what you earn, you'll have an opportunity to save a greater percentage every month, plus have money available to give back to your community or donate to your favorite charity. Of course, it's easier for rich people to live off a third of their income, but even if you have to adjust the percentage to fit your unique circumstances, this quote is a simple reminder to spend less than you earn.</p> <h2>9. &quot;Get rich slow, or get poor fast.&quot; &mdash; Anonymous</h2> <p>I once heard someone say, &quot;I'm always going to be broke, so what's the point in trying to save.&quot; Coincidentally, this person is also the first to buy the newest electronic gadgets no matter the cost, and his wardrobe takes up three closets. Just from my observation, if he would put as much energy into saving as he does shopping, he wouldn't be broke. Similarly, you have a choice. You can either commit to saving and allow your money to grow slowly over time, or you can spend everything you earn and have nothing meaningful to show for it.</p> <h2>10. &quot;If saving money is wrong, I don't want to be right.&quot; &mdash; William Shatner</h2> <p>Saving money is cool, and don't let anyone tell you differently. Some people might try and derail your savings plan by tempting you to spend outside your budget, or they might snicker because you never shop without a coupon or discount code. This money saying is one of the best because no matter how much we earn, we should never stop looking for bargains.</p> <p><em>Have you heard any cool savings sayings? What money-savvy words do you live by? Let me know in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/10-of-the-coolest-sayings-about-saving">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-everyday-money-tasks-youve-been-doing-wrong">12 Everyday Money Tasks You&#039;ve Been Doing Wrong</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-money-secrets-of-the-amish">9 Money Secrets of the Amish</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-personal-finance-skills-everyone-should-master">12 Personal Finance Skills Everyone Should Master</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/insights-from-the-worlds-9-most-frugal-cultures">Insights From the World&#039;s 9 Most Frugal Cultures</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-improve-your-finances-using-social-media">How to Improve Your Finances Using Social Media</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Budgeting 401(k) advice famous inspirational quotes saving money Mon, 13 Jul 2015 17:00:11 +0000 Mikey Rox 1484702 at http://www.wisebread.com 7 States With the Lowest Taxes for Retirees http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-states-with-the-lowest-taxes-for-retirees" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/island_beach_000022850516.jpg" alt="States with lowest taxes for retirees" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>For retirees living on fixed incomes, taxes can be burdensome and impact quality of life during retirement. Many <a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">financially savvy retirees</a> move to states like Florida, not just for the sunshine, but to reap the economic benefits of low taxation. Florida is one of seven no-income tax states and makes the list of states with a marginal federal and state tax rate of under 25%.</p> <p>Consider these seven states with the lowest retirement tax burden.</p> <h2>1. Alaska</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/bear_alaska_000034056692.jpg" width="605" height="340" alt="" /></p> <p>Sure, Alaska is a little lacking in the sun and warm weather many retirees seem to favor, but the state's lenient tax policies might make you want to pick up and move there, anyhow. State residents are exempt from retirement income tax, and only 24 of its 164 municipalities levy a property tax. And it gets better: Those 65 years and older residing within one of these 24 communities are exempt from property taxes on the first $150,000 of their home's assessed value. To top it all off, there is either no or low sales tax. Of the 107 municipalities reporting sales tax, the rate ranges from a low 1%&ndash;7% (typically 2%&ndash;5%).</p> <h2>2. Florida</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/miami_beach_florida_000037761516.jpg" width="605" height="340" alt="" /></p> <p>While Florida residents enjoy no tax on retirement income, they can't escape the burden of property taxes. Florida ranks 23 out of 50 of states with the highest property tax rates. Miami Dade County, with it's sprawling luxury oceanfront condos that attract wealthy foreign investors, ranks highest with an average 1.02% of median home value, while property taxes in densely populated Dixie County (population: 16,422) are the lowest at .51% of median home value. Residents 65 years and older qualify for a $50,000 property tax exemption on their properties. Sales taxes in Florida aren't astronomical &mdash; at 6% since 1988, but they can swing as high as 7.5%.</p> <h2>3. Nevada</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/nevada_000025827739.jpg" width="605" height="340" alt="" /></p> <p>Far removed in spirit from the glitz and glamor of the Las Vegas Strip, many retirees set their sights on the city's quieter suburbs. The state's tax burden ranks second-lowest in the nation. Nevada has no income or inheritance tax and the cost of living is relatively low compared to neighboring states. Plus, the Nevada housing market has not fully rebounded from the 2008 crisis, which means home buyers can still get a good deals.</p> <h2>4. South Dakota</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/south_dakota_000012547520.jpg" width="605" height="340" alt="" /></p> <p>The tax structure in the Midwestern state of South Dakota is one of the most favorable in the country. South Dakota does not levy a tax on retirement income, inheritances, and estates. Sales taxes are relatively low compared to other areas in the region at 4%, but it can swing as high as 6% in some municipalities. The median home price is roughly $126,000. The only downside to retiring in South Dakota is it's inclement winter weather, but it's great in the summer, especially if you love the outdoors.</p> <h2>5. Texas</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/texas_scenery_000038884690.jpg" width="605" height="340" alt="" /></p> <p>Good ole' Texas, the Lone Star State &mdash; and my hometown state. Texas is a great place to live for a number of reasons. But the number one is that there's no tax on personal income. The sales and use tax is a bit on the high-end at roughly 8.25%. Property taxes vary by county and range from $0.24 to $0.50 per $100 valuation with median home prices at $160,000 in Dallas and $158,000 in Houston. Persons 65 and older qualify for a $10,000 homestead exemption for school taxes, in addition to a $15,000 exemption for all homeowners.</p> <h2>6. Washington</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u11/washington_000006960866.jpg" width="605" height="341" alt="" /></p> <p>Washington, with its vast terrain and beautiful landscapes, has no income tax. The sales tax rate is 6.5% &mdash; as high as 9.5% in some areas. Property taxes vary by county with King County residents paying the most &mdash; around $4,507 per year and Lewis County residents paying the least &mdash;around $474 per year. The median home value is $270,400. If you decide to make Washington your primary residence, as a person 65 and up, you could qualify for <a href="http://www.dor.wa.gov/Content/FindTaxesAndRates/PropertyTax/IncentivePrograms.aspx">additional property tax exemptions</a>.&nbsp;</p> <h2>7. Wyoming</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u11/wyoming_000026149821.jpg" width="605" height="340" alt="" /></p> <p>Wyoming ranks first on the Tax Foundation's 2015 Business Tax Climate Index because of no tax on personal or corporate income, low sales tax of 4%, and low property tax. Median home prices are $103,000. And though the cost of living is already low, the state of Wyoming has no excise tax, which means you won't pay an additional levy on items like food and gasoline.</p> <p>Two other states worth considering are New Hampshire and Tennessee. The state of New Hampshire has no income tax and 0% sales tax, but there's a 5% tax on dividend and interest income and property taxes are the third highest in the nation. Tennessee does not impose income tax but has what's called a &quot;hall tax&quot; of 6% on dividend and interest income. And its sales tax of 7%, as high as 9.75% in some municipalities, ranks highest in the nation due to the complexity of local and special purpose taxes that are levied in addition to the sales and use tax.</p> <p><em>What low-tax retirement destinations are you considering?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-worst-states-for-retirees">The 10 Worst States for Retirees</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-financial-moves-you-should-make-five-years-before-retirement">5 Financial Moves You Should Make Five Years Before Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">12 Things You Didn&#039;t Know About Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-can-you-afford-to-spend-in-retirement">How Much Can You Afford to Spend in Retirement?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) cost of living fixed incomes moving social security taxes Tue, 23 Jun 2015 13:00:18 +0000 Qiana Chavaia 1460740 at http://www.wisebread.com 6 Retirement Rules You Should Be Breaking http://www.wisebread.com/6-retirement-rules-you-should-be-breaking <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-retirement-rules-you-should-be-breaking" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_gardening_000022104123.jpg" alt="Woman breaking common retirement rules" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are there right and wrong ways to retire? While that's a relative question, there are retirement rules that are in your best interest to follow &mdash; and those you might want to break. Consider these six <a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">retirement rules</a> you might be better off ignoring.</p> <h2>1. Depending on a Pension or Social Security</h2> <p>Counting on a pension or Social Security to help you ride out your retirement years? That's probably not the best strategy to have, considering that very few companies still offer pensions (though you'd know if yours does) and Social Security is still in crisis (so much so that it might be bankrupt and not even exist by the time you retire). That's not to mention that inflation is likely to outpace your per-month payouts in the off chance that you do receive these income sources.</p> <p>You may need to think of other ways to fund your retirement &mdash; and it's in your best interest to start planning for it now (or better yet, <em>yesterday</em>).</p> <p>Brent Cumberford, founder of the personal-finance blog&nbsp;<a href="http://www.vosa.com">VOSA</a>, offers a few suggestions.</p> <p>&quot;Start your own retirement accounts; invest in business to generate a second &mdash; and third and fourth &mdash; stream of income; and hustle to make some extra money on the side to kick start your retirement savings,&quot; he says.</p> <p>Putting in the extra time and effort early on to pad your retirement account for later means you might actually be able to enjoy those golden years.</p> <h2>2. Withdrawing From Your Retirement Fund or Social Security Right Away</h2> <p>Even if you have plenty of money in your retirement fund (or think you do, as is the likelier scenario), that doesn't mean you should start withdrawing from it the day after your retirement party. Proceed with caution in this case and remember that you still have a long life ahead of you.</p> <p>&quot;One retirement rule that no longer makes sense is the one that suggests a 4% annual withdrawal rate on your retirement portfolio,&quot; observes personal finance expert David Bakke of MoneyCrashers. &quot;Americans are living longer these days, and if you go by that rule you might outlive your money. Your best bet is to withdraw as little as possible in the beginning and adjust your strategy as you see how things are progressing as you get acclimated to living off of your retirement money.&quot;</p> <p>Bakke says that waiting to withdrawal money from Social Security has its benefits too, as you may receive a larger annual Social Security benefit when you wait.</p> <h2>3. Going Full Retirement Because You Think You Have To</h2> <p>Just because the government says you can retire at age 65 doesn't mean that you have to resign the rest of your life to whiling away the hours. Instead &mdash; if you're still willing and able &mdash; consider semi-retirement. It's the best of both worlds really: You can still contribute to society as a part-time member of the workforce, and you can enjoy more leisure time as a result of your shorter work schedule.</p> <p>More and more older Americans are opting for semi-retirement, in fact. Some are even opting for a new career path altogether. Continuing to work at least part-time past retirement age will not only help you feel like you still have something to offer the world, but it also helps you to continue to actively build your retirement fund &mdash; or at least maintain it at its current level.</p> <p>Elle Kaplan, CEO and founder of an asset management firm, touches a bit more on the financial benefits of semi-retirement.</p> <p>&quot;How would a semi-retirement change your financial reality?&quot; she asks. &quot;Take two months and track the money coming in and going out. Keep track of what you spend and all your bills. This will give you a clear sense of where you stand. Next, figure out what your Social Security payment is going to be each month in retirement. The Social Security Administration will provide this information and tell you how much you'll get based on what age you retire. Working even a few more years can have a huge impact.&quot;</p> <h2>4. Waiting Until You're 65 to Retire</h2> <p>Retirement age is typically specified at 65 years old in the United States. But to heck with that! Wouldn't you like to retire earlier?</p> <p>Of course, you'll probably need to strike it rich &mdash; or live <em>very</em> meagerly &mdash; in order to hang up your work boots in advance of the government-issued go-ahead. But maybe not. Have you ever thought about short-term mini-retirements? Ever even heard of the concept?</p> <p>&quot;Obviously it would be awesome if everyone could earn a fortune, retire young, and travel the world, but it's not going to happen for everyone,&quot; Cumberford says. &quot;What can happen for almost everyone is short-term mini-retirements, a concept spoken about in greater detail by Tim Ferriss in&nbsp;<a href="http://www.amazon.com/gp/product/0307465357/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=390957&amp;creativeASIN=0307465357&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=YIR4QCCLJFO4ATW3">The 4-Hour Workweek</a>. Saving money specifically for a short sabbatical, or even just an extended vacation while keeping your current employment can typically be negotiated. Think five weeks in Southeast Asia, or a summer backpacking across Europe. With the virtually endless amount of airline and hotel points that can be earned through travel hacking, even far away places can be very affordable.&quot;</p> <p>As someone who has hosted lots of Australian guests who are allotted at least six weeks vacation every year, I'm not only envious, but also in favor of the idea of short-term mini-retirements. While they're working to live, we Americans are living to work (well into our golden years), and that's an outlook that could use some rethinking. Shouldn't we enjoy a high-quality lifestyle throughout our lifetime instead of when we're darn near dead?</p> <h2>5. Clinging to the Family Home</h2> <p>For many of us, our homes hold a lot of memories that make it hard to part with the house &mdash; even after the kids are grown and gone. But as you enter retirement, it's not a great idea to hang on to a large space with high utilities or even a mortgage that will become more and more difficult to manage as you age. The alternative is to downsize, of course, such as a smaller house or apartment, or even alternative-living situations that may suit you even more &mdash; like an RV, for instance.</p> <p>Janet Groene, author of&nbsp;<a href="http://www.amazon.com/gp/product/007178473X/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=390957&amp;creativeASIN=007178473X&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=P2WLK6WDV5V7MKUB">Living Aboard Your RV, 4th Edition</a>, lived in an RV for 10 years before settling in Florida, and she's a staunch advocate for the nomad lifestyle.</p> <p>&quot;By selling out and moving into an RV, retirees fulfill their dreams of travel and at the same time live comfortably in a fully equipped home on wheels while scouting for the right place to settle down in retirement,&quot; she encourages.</p> <h2>6. Heading South for the Winter</h2> <p>Snowbirding &mdash; the practice of northerners spending the winter in warmer climates and summers at home &mdash; is common among retirees. But isn't that just a little too passé for today's generation of leisure seekers? Mark Koep, founder of CampgroundViews.com, thinks so. Like Groene, he wants retirees to think about their living options and arrangements more in depth so they don't automatically relegate themselves to a lifestyle that isn't necessarily fulfilling.</p> <p>&quot;The old idea of snowbirding ignores the freedom and adventure that modern retirees seek,&quot; he says. &quot;Instead retirees should consider boondocking &mdash; camping in Bureau of Land Management and Forest Service lands for free &mdash; and discount membership clubs to travel and explore more destinations.&quot;</p> <p><em>Do you have other retirement rules we should be breaking? Let us know in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early">5 Ways to Boost Your Odds of Retiring Early</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-making-these-10-bogus-retirement-savings-excuses">Stop Making These 10 Bogus Retirement Savings Excuses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-plan-for-retirement-when-you-re-ready-to-retire">How to Plan for Retirement When You’re Ready to Retire</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) pensions rules savings social security Wed, 17 Jun 2015 11:00:11 +0000 Mikey Rox 1454606 at http://www.wisebread.com 8 Reasons Why Your Retirement Cost Calculations May Be Wrong http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-reasons-why-your-retirement-cost-calculations-may-be-wrong" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement_piggy_bank_000018686866.jpg" alt="retirement cost calculations that might be wrong" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Saving for retirement is tricky, in part because you don't really have a clear idea of how much money you'll need when you stop working. There are many variables to consider, and a lot of our assumptions about the <a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">cost of retired life</a> may also be incorrect.</p> <p>The best way to deal with this uncertainty is to simply save and invest as early and as much as you can. But in the meantime, be aware of these reasons why your retirement cost calculations may be off.</p> <h2>1. Your Overall Expenses May Be Less Than You Think</h2> <p>There's a common assumption that people should save enough to &quot;maintain their current lifestyle.&quot; But the reality is that most people start to spend less as they get older. The Bureau of Labor Statistics reports that a <a href="http://www.bls.gov/cex/22014/midyear/age.pdf">person's expenses</a> peak between ages 45 and 54 at about $62,000 annually. Then, expenses start to decline. Those older than 65 spend about $42,000 a year, on average. And those older than 75 spend just $35,000 annually.</p> <h2>2. Your Might Pay Off Your Mortgage</h2> <p>When calculating your future living expenses, are you assuming that you'll eventually own your home free and clear? BLS statistics show that while only 19% of homeowners between ages 45 and 54 live mortgage-free, that figure jumps to 35% among people aged 55 to 64. Meanwhile, two-thirds of all homeowners over 75 are living free of house debt.</p> <h2>3. You Eat Less as You Age</h2> <p>While it's nice to assume that you'll be dining on lobster tail and caviar in retirement, the truth is that older Americans decrease their food expenditure as they age. A typical person at age 50 spends roughly $8,000 annually on food, according to BLS, dropping to $5,400 by age 65. Older people also dine out less. An average 50-year old will spend $3,279 on food away from home. That will drop to just over $1,300 by age 75.</p> <h2>4. You'll Drive Less</h2> <p>Think you'll be going on a plethora of road trips in retirement? Statistics show that older people actually drive less over time and spend far less on car purchases and automotive maintenance. An American's average expenditure on transportation peaks between ages 35&ndash;44 at just under $11,000 annually. That drops to $6,700 by age 65 and $4,800 by age 75.</p> <h2>5. You're Calculating Your Social Security Payments Incorrectly</h2> <p>When you use the Social Security calculator provided by the Social Security Administration's website, you will usually receive three numbers. The first is based on age 62, or early retirement. Another is based on age 66 (full retirement), and a third number is based on age 70 (maximum benefit.) To calculate your payments correctly, you must be honest about when you think you'll need to begin collecting. It's also worth noting that some observers don't even <a href="http://www.forbes.com/sites/johnwasik/2014/06/11/why-you-shouldnt-trust-social-securitys-lowball-estimate/">trust the government's calculations</a> in the first place.</p> <h2>6. Social Security Payments May Be Adjusted in the Future</h2> <p>Younger Americans may be faced with the reality that Social Security benefits may change by the time they reach retirement age. The government openly states that by 2033, payroll taxes will only cover 77 cents for every dollar of scheduled benefits. Rest assured that whatever we <em>think</em> we'll be getting in benefits by the time we retire, the reality will change between now and then.</p> <h2>7. Your Investment Returns Won't Be as High as You Assume</h2> <p>Younger investors tend to assume that the stock market will grow at an average of about 9% per year, but may forget that investment returns could be less in later years as they move to more conservative investments. As you approach retirement age, it makes sense to put more of your money in bonds, cash, and other stable vehicles. But it's important to remember that this may impact the total amount you save.</p> <h2>8. You Are Not Calculating the Correct Length of Retirement</h2> <p>There's a rule of thumb that assumes each person should plan for a 30-year retirement. But this number is based on an average, not each individual. If you have many family members that lived into their late 90s, you may need to save more to make your money last. It's also important to extend the length of your retirement if you retire at a relatively young age. Someone who retires at age 50, for instance, could see a retirement of 40 years or more.</p> <p><em>How are you calculating your retirement needs?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">6 Retirement Rules You Should Be Breaking</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don&#039;t Despair Over Small Retirement Savings</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-plan-for-retirement-when-you-re-ready-to-retire">How to Plan for Retirement When You’re Ready to Retire</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">12 Things You Didn&#039;t Know About Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) expenses savings social security Mon, 08 Jun 2015 11:00:12 +0000 Tim Lemke 1444656 at http://www.wisebread.com 5 Facts Millennials Should Know About Retirement Planning http://www.wisebread.com/5-facts-millennials-should-know-about-retirement-planning <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-facts-millennials-should-know-about-retirement-planning" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/young_group_employees_000064329039.jpg" alt="Millennials that should know facts about retirement planning" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Millennials never seem to get a break.</p> <ul> <li>14% of 25 to 34-year-olds are still living at home with their parents.<br /> &nbsp;</li> <li>In 2013, the median annual income was $30,000 and $35,000 for full-time Millennial women and Millennial men, respectively.<br /> &nbsp;</li> <li>Just 36% of Americans under the age of 35 own a home, according to the Census Bureau.</li> </ul> <p>Don't kill the messenger, but the retirement outlook for Millennials is looking a bit tougher than earlier generations'. There are clear signs that what our retirement looks like and how we save for it is much different from our grandparents' (or even parents') experience. Here are five warning signs that Millennials need to take note of.</p> <h2>1. High Student Loan Debt</h2> <p>Back in 2012, college seniors graduated with an average debt of <a href="http://ticas.org/content/pub/student-debt-and-class-2012">$29,400 per borrower</a>. That number is almost $4,000 higher for the Class of 2014. In 2014, a college graduate owes an average of <a href="http://blogs.wsj.com/numbers/congatulations-to-class-of-2014-the-most-indebted-ever-1368/">$33,000 in student loans</a>.</p> <p>To put those statistics in perspective: Only 45% of Class of 1993 graduates had debt, and their average debt was $15,000 in inflation-adjusted dollars.</p> <p>More and more Millennials are borrowing to pay for college. In 2000, 60% of graduating students had schools loans. Last year, that percentage grew to over 70%. The problem with high student loan balances is that they effectively diminish your potential to save for retirement.</p> <p>Let's assume that you graduate with a standard 10-year loan and pay $2,400 for each of those 10 years. If you were to have invested those dollars in an index fund with a 5% return compounded annually, you would have ended with $30,998.14 available in your nest egg at the end of 10 years.</p> <p>Remember that your twenties and thirties are your most important years for retirement saving because those years offer the longest timeframe to earn compounded returns. Keep those student loan balances in check.</p> <h2>2. Low Financial Literacy</h2> <p>Only 24% of Millennials are able to answer correctly four or five questions on a five-question <a href="https://www.finra.org/sites/default/files/14_0100%201_IEF_Research%20Report_CEA_3%206%2014%20%28FINAL%29_0_0.pdf">financial literacy</a> quiz. On the other hand, 48% of Baby Boomers and 55% of members of the Silent Generation are able to do that.</p> <p>While more Millennials are attending college, they are less financially literate than older generations. This low level of financial literacy makes Millennials ill-prepared to make critical financial decisions:</p> <ul> <li>Only 7% of employers offer traditional pensions plans. Forced to rely more on 401(k) plans to save for retirement, Millennials need to make many decisions, such as what funds to invest in and how much to contribute.<br /> &nbsp;</li> <li>43% of Millennials use expensive forms of borrowing, such as pawnshops and payday lenders. Only 21% of Boomers and 8% of the Silent Generation use those lending options.<br /> &nbsp;</li> <li>According to a 2012 National Financial Capability Study, 34% of Millennials engage in three or more costly credit card behaviors over a 12-month period. In contrast, only 24% of Boomers and 13% of the Silent Generation engage in such behaviors.</li> </ul> <p>Grandpa is taking you to (finance) school. Take action: Set up a meeting with a certified financial planner to develop a retirement plan, and talk with your employer about your company's retirement accounts.</p> <h2>3. Low Savings Level</h2> <p>Only 61% of Millennials label themselves &quot;savers,&quot; according to a 2013 Wells Fargo survey.</p> <p>When you're not saving for retirement, you're getting further and further away from your nest egg's goal. A common rule of thumb from financial advisors is that you should have a $1 million target for retirement.</p> <p>Consider these two scenarios:</p> <ul> <li>If you were to start putting away $361 every month at age 20 in an index fund with a 6% return, you would be about $100 short of $1 million by retirement age 65.<br /> &nbsp;</li> <li>If you were to start 20 years later at age 40 and still would like to retire by age 65 with a $1 million nest egg, you would need to put away $1,430 per month on that same retirement account.</li> </ul> <p>However, grandpa's rule of thumb of $1 million may no longer be enough. More and more registered investment advisors recommend Millennials to set a <a href="http://money.usnews.com/money/retirement/articles/2011/09/15/gen-ys-2-million-retirement-price-tag"><em>$2 million retirement goal</em></a>. The main reason is that Americans are living longer.</p> <p>The Social Security Administration projects that about 10% of 65-year-olds will even <a href="http://www.ssa.gov/planners/lifeexpectancy.html">live beyond 95</a>. Life expectancy is likely to be even higher for Millennials once they reach age 65. Assuming a 4% annual withdrawal rate, a $1 million nest egg would run out in 25 years.</p> <p>So, start maximizing your contributions to your 401(k) and take advantage of your employer's matching program, if available. In 2015, the IRS allows you to put away up to $18,000 for retirement. Once you turn age 50, you can start making catch-up contributions to get closer to your retirement goal.</p> <h2>4. Lower Starting Salary</h2> <p>More than 60% of Millennials <a href="http://time.com/?post_type=money_article&amp;p=3855869?xid=tcoshare">don't negotiate salary</a> when receiving their first job offers.</p> <p>Every single generation has heard that &quot;this is the worst possible year to graduate.&quot; At least I did when I got my Bachelor of Commerce back in 2002, then again when I received my Masters in Educational Technology in 2007, and yet again when I completed my MBA in 2009. (Disclaimer: I graduated debt free all three times!)</p> <p>Don't think that negotiating your first salary puts you at a disadvantage with other applicants:</p> <ul> <li>80% of students and grads who <a href="http://www.nerdwallet.com/blog/recent-grad/negotiating-salary-study/">negotiate a higher salary</a> are at least partially successful.<br /> &nbsp;</li> <li>90% of employers have never retracted an offer because entry-level applicant tried to negotiate salary.<br /> &nbsp;</li> <li>Only 34% of female grads negotiate salaries, while 44% of male ones do. However, both genders have the same 80% rate of success.<br /> &nbsp;</li> <li>75% of employers could raise a starting salary by 5% to 10%.</li> </ul> <p>Don't leave money on the table when negotiating salary for your first job. You'll regret it just a few years later and again during retirement.</p> <h2>5. Missing Out on Company Matches</h2> <p>Millennials are getting hit with a double whammy.</p> <ul> <li>42% of workers earning less than $40,000 per year don't take full advantage of their employer match.<br /> &nbsp;</li> <li>35% of workers age 25 and 30% of workers age 30 don't maximize their employer match.</li> </ul> <p>The average U.S. worker foregoes $1,336 per year or an extra 2.4% in retirement savings. This means, that about $24 billion in matching contributions are left on the table every year. The combination of lower income level and younger age makes Millennials more prone to miss out on contributions to their retirement accounts.</p> <p>No matter your employer's match level, it's free retirement money. If you find it difficult to meet the <a href="http://time.com/money/2791164/how-much-income-to-save-for-retirement/">10%&ndash;15% suggested contribution</a> to your retirement account, then contribute enough so that your employer match fills the gap.</p> <h2>The Bottom Line</h2> <p>Meeting your retirement goal may feel overwhelming at times. These statistics should be a well-needed wake up call to realize that saving for retirement is not like it used to be. They're just a diagnostic &mdash; not a prognostic.</p> <p>Still, Millennials should be happy that we have more time to save for retirement than older generations. Let's take advantage of this edge and take corrective steps now.</p> <p><em>Millennials, what are you doing to save for retirement?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/5-facts-millennials-should-know-about-retirement-planning">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">12 Surprising Things Women Should Know About Retirement Planning</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">5 Ways to Strengthen Your Finances Before Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-is-why-you-cant-postpone-planning-for-your-retirement-and-how-to-start">This Is Why You Can&#039;t Postpone Planning for Your Retirement (And How to Start)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-start-saving-for-retirement-at-40">How to Start Saving for Retirement at 40+</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) debt financial literacy millennials savings Thu, 28 May 2015 21:00:08 +0000 Damian Davila 1438459 at http://www.wisebread.com Follow These 5 Steps to Full Health Care Coverage in Retirement http://www.wisebread.com/follow-these-5-steps-to-full-health-care-coverage-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/follow-these-5-steps-to-full-health-care-coverage-in-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_medicine_000044118320.jpg" alt="How to avoid healthcare shortage in retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are you sure you'll be able to afford healthcare in retirement? Positive?</p> <p>Consider this: A recent report analyzing the rising <a href="http://www.hvsfinancial.com/PublicFiles/Data_Release.pdf">out-of-pocket Medicare costs</a> estimated that people retiring 10 years from now will spend $9 of every $10 they receive from Social Security on health care, in the form of copays, supplemental insurance premiums, prescription drugs, and things not covered by Medicare such as visits to the dentist.</p> <p>This means that the cost of medical care is something everyone should factor into their <a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">retirement saving plan</a>. But this is no ordinary expense &mdash; there are specific strategies for saving for health care that can put you in a much better position in your golden years.</p> <h2>1. Maximize Your Social Security Benefits</h2> <p>&quot;The number one thing people should do &mdash; most people aren't aware of this &mdash; is optimize Social Security,&quot; says Ron Mastrogiovanni, founder of HealthView Services, which issued the alarming report.</p> <p>The main way to maximize benefits is to wait as long as possible to start receiving Social Security. A couple retiring 10 years from now at age 65 will receive $142,000 less in lifetime benefits than they would if they worked until age 67, he said.</p> <p>&quot;If you're capable of working, why would you throw away $142,000?&quot; Mastrogiovanni says.</p> <h2>2. Start a Roth IRA</h2> <p>&quot;Under Medicare, they have something called means testing; the more you earn, the more you pay,&quot; Mastrogiovanni says. &quot;Here's the kicker: Those income brackets are not indexed to inflation.&quot; That means that if the government doesn't adjust the income at which retirees are considered affluent, many middle earners of today will end up paying more once they retire.</p> <p>But not all retirement income is counted in this calculation. Money drawn from a traditional 401(k) counts, but money drawn from a Roth IRA or a Roth 401(k) doesn't. So if your regular 401(k) is building up towards a high income in retirement, you might want to divert some of your contributions to a Roth, or convert the account to a Roth, to keep your income below the level where you'll be considered an affluent retiree.</p> <h2>3. Consider a Health Savings Account</h2> <p>Health savings accounts are not generally considered a retirement savings vehicle &mdash; they are meant to help people pay high medical care deductibles with certain insurance plans. But Medicare expert Katy Votava advocates saving excess contributions to HSAs for retirement health care needs.</p> <p>&quot;You can put in significant money and it grows tax free. Most people don't need to spend their full health savings account every year to meet their full health insurance needs,&quot; Votava says.</p> <h2>4. Consider Long-Term Care Insurance</h2> <p>The high out-of-pocket costs outlined in the HealthView report do not include the cost of nursing homes or other long-term care, but those are obviously a major concern when looking at lifetime health care costs. Some advisors recommend purchasing insurance that would protect your savings if you go to a nursing home, while others warn against it. This Wall Street Journal report explores both sides of the <a href="http://www.wsj.com/articles/SB10001424052702303425504577352031401783756">long-term care insurance issue</a>.</p> <h2>5. Purchase the Right Supplemental Plan</h2> <p>Your parents or grandparents may not have had to pay anything out of pocket once they qualified for Medicare, but people retiring now and in the future need <a href="http://www.medicare.gov/supplement-other-insurance/medigap/whats-medigap.html">supplemental insurance</a> to cover the copayments, coinsurance, and deductibles that Medicare doesn't cover. You'll also have to pay for a <a href="http://www.medicare.gov/supplement-other-insurance/medigap/medigap-and-part-d/medigap-plans-and-part-d.html">prescription drug plan</a>. Choosing the right plan can be so complicated that many people turn to consultants like Votava to help them figure out which to pick. Before signing up for a plan, make sure it covers your doctors and your medications, because not all plans cover everything, Votava warns.</p> <p><em>What are you doing to ensure sufficient health care coverage in retirement?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/follow-these-5-steps-to-full-health-care-coverage-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">12 Things You Didn&#039;t Know About Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-about-a-price-list-at-the-hospital-or-doctor-s-office">How About a Price List at the Hospital or Doctor’s Office?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-enjoy-retirement-if-you-havent-saved-enough">How to Enjoy Retirement If You Haven&#039;t Saved Enough</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Insurance Retirement 401(k) healthcare HSA medical social security Thu, 14 May 2015 15:00:09 +0000 Carrie Kirby 1416618 at http://www.wisebread.com How to Enjoy Retirement If You Haven't Saved Enough http://www.wisebread.com/how-to-enjoy-retirement-if-you-havent-saved-enough <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-enjoy-retirement-if-you-havent-saved-enough" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retired_couple_vacation_000038250840.jpg" alt="Retired couple taking cheap vacation" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are you ready to retire, but haven't managed to save enough yet?</p> <p>In fact, the U.S. Census Bureau of Labor Statistics says that although the average retirement age is 62, many seniors are retiring at age 65 or older, and a large percentage &mdash; roughly 80% &mdash; still will not have saved enough by then. Of them, about a third will depend entirely on Social Security benefits. If you're within five years of calling it quits but haven't saved enough to retire, here are a few steps that may bring retirement closer within reach.</p> <h2>1. Wait Until You're 65</h2> <p>Wait until you're age 65 or older before you start collecting Social Security benefits, as the longer you wait, the larger your benefit. Use Bankrate's Social Security <a href="http://www.bankrate.com/calculators/retirement/social-security-benefits-calculator.aspx">benefit calculator</a> to estimate your future payments.</p> <h2>2. Don't Wait to Downsize</h2> <p>Consider selling your home and investing the profits. Downsize to a lower-cost senior living community or condominium in an area where your property taxes will be affordable. You can also inquire about school parcel tax exemptions that allow seniors to apply for tax exemption from taxes imposed by local school districts.</p> <h2>3. Move to a No Tax State</h2> <p>Move to a state with no income tax on pension, Social Security, or dividend income. Florida, Nevada, New Hampshire, Pennsylvania, Washington, and Wyoming are among the states that do not tax that income.</p> <h2>4. Accept Government-Sponsored Medical Insurance</h2> <p>Medicare provides adequate health insurance coverage for doctor's visits, emergency care, assisted living, etc., but does not cover prescription drugs, dental, or vision care. For this, you will need add-on coverage like those offered by Medicare Advantage and Supplemental Insurance (Medigap). Consult with your insurance provider prior to retirement to ensure you can afford proper health insurance coverage. If you can't, inquire about government subsidies or senior plans offered by the likes of <a href="http://www.aarp.org/">AARP</a>.</p> <h2>5. Max-Out Retirement Accounts</h2> <p>By now you should be fully funding all of your retirement accounts and making any catch-up contributions. The 2015 catch-up contributions for IRAs total an additional $1,000 ($6,500) and $6,000 ($24,000) for your 401(k). As they are the most tax advantageous, make sure you are fully funding these accounts over the next few years preceding your retirement.</p> <h2>6. Diversify Using Bonds and ETFs</h2> <p>As you are nearing retirement age, you will want to gradually rebalance your portfolio so that it has less of volatile investments like stocks, and more of safer investments such as bonds and exchange-traded funds, or ETFs.</p> <h2>7. Join AARP</h2> <p>The benefits of joining AARP are endless. For those unfamiliar, AARP is the popular senior citizens advocacy group. The annual membership fee is only $16 and is discounted even further when years are bought in bulk. Members receive invaluable discounts on dining, travel, roadside assistance, auto insurance, health benefits, and more. This is a program that's definitely well worth signing up for.</p> <p><em>Are you prepared for retirement? What are you doing to get ready?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/how-to-enjoy-retirement-if-you-havent-saved-enough">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">12 Things You Didn&#039;t Know About Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees">Watch Out for These 5 Sneaky 401K Fees</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/choosing-a-retirement-account-whats-available-and-what-s-best-for-you">Choosing a Retirement Account: What&#039;s Available, and What’s Best for You?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/follow-these-5-steps-to-full-health-care-coverage-in-retirement">Follow These 5 Steps to Full Health Care Coverage in Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) aarp investments IRAs saving money social security Fri, 01 May 2015 15:00:25 +0000 Qiana Chavaia 1400950 at http://www.wisebread.com How to Start Saving for Retirement at 40+ http://www.wisebread.com/how-to-start-saving-for-retirement-at-40 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-start-saving-for-retirement-at-40" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement_fund_jar_000020745280.jpg" alt="Retirement fund you should start adding to over 40" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Perhaps you missed the memo urging you to start saving for retirement in your 20s or 30s. Or, if your situation is anything like mine, you started a family early or didn't find your passion in life until you were in your 30s.</p> <p>Fortunately, it's not too late to start saving for retirement, because you're likely earning more today than you did a decade ago. You should be able to start saving now and still retire with a hefty nest egg. But first, you must take some essential steps.</p> <h2>1. Evaluate Your Savings Potential</h2> <p>Be realistic. Sure, we all wish we could save $5,000 per month, but can you <em>actually </em>achieve this based on your earnings and expenses? Remember, no savings amount is so small that it won't positively impact your goals. Save what you can, even if it's only a few hundred dollars per month. There are always ways to push your savings goals further by <a href="http://www.wisebread.com/the-first-step-to-budgeting">establishing a budget</a>, <a href="http://www.wisebread.com/10-great-home-based-side-business-ideas">creating a side business</a>, <a href="http://www.wisebread.com/this-is-how-you-downsize-your-home-and-start-living-a-better-life">downsizing your life</a>, or all of the above.</p> <h2>2. Set a Financial Goal</h2> <p>How much do you need to retire? Start by taking an assessment of where you are financially and where you need to be. How much money do you need to live comfortably in retirement? Do you anticipate a need for $25,000, $50,000 per year, or maybe more? It may be that you have to postpone your retirement by a few years while you make a few adjustments and implement a quick-fix plan to catch up with your goals.</p> <h2>3. Create a Plan</h2> <p>Any good financial plan should begin with an honest assessment of your goals and the steps you'll take to get there. Try using a <a href="http://www.aarp.org/work/retirement-planning/retirement_calculator.html">retirement calculator</a> to determine how much you'll need to save each month in order to retire by your desired date.</p> <p>You may be surprised by how much money you'll need to save, but don't fear the challenge. Consider working longer, finding a second income, or downsizing your lifestyle to enable progress toward your savings goals.</p> <h2>4. Bias Your Portfolio Towards Stocks</h2> <p>Because stocks offer higher returns than other, less aggressive investments, and you're playing a bit of catch-up, you will want to take on more risk by favoring these over bonds or other more conservative investments. As you grow nearer to retirement, you can take a more conservative investment approach.</p> <h2>5. Max-Out Retirement Accounts and Catch-Up Contributions</h2> <p>Max out your retirement accounts. Take full advantage of employer-sponsored accounts whether your employer offers match contributions, or not. If you don't already have one, open an Individual Retirement Account (IRA) and make the maximum contribution of $5,500. At retirement, given your account has been open at least five years, you can make withdrawals absolutely tax-free.</p> <p>If you're over the age of 50, the government allows you to make <a href="http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Catch-Up-Contributions">catch-up contributions</a> to your 401(k) or IRA plans, thus enabling you to save even more tax-deferred money for retirement.</p> <h2>6. Take Your Retirement Savings to New Heights</h2> <p>If you need to boost your savings in order to meet your goals, consider falling back on your business consulting skills, or any other skill you've developed throughout your career, and using it to create a second income. Freelancers, independent contractors, and small business owners can deduct many of their expenses.</p> <p>There's also a retirement savings incentive for being self-employed. The self-employed can set-up retirement accounts that allow both employer and employee contributions. For 2015, annual plan contributions for a SEP-IRA is up to $52,000, SIMPLE IRA is up to $12,500 plus an employer contribution of 3% of income, and the Solo 401(k) is up to $53,000.</p> <p>The IRS allows the self-employed to make contributions to both an IRA and 401(k). That's a lot of savings towards retirement.</p> <p><em>What steps are you taking toward retirement savings after age 40?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/how-to-start-saving-for-retirement-at-40">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-accounts-and-money-to-spend">Retirement accounts and money to spend</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/choosing-a-retirement-account-whats-available-and-what-s-best-for-you">Choosing a Retirement Account: What&#039;s Available, and What’s Best for You?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-401-k-is-not-an-investment">Your 401(k) is not an investment</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-planning-if-you-re-under-30">Retirement Planning If You’re Under 30</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">12 Surprising Things Women Should Know About Retirement Planning</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) budgeting downsizing financial planning IRAs savings stocks Tue, 28 Apr 2015 11:00:29 +0000 Qiana Chavaia 1397574 at http://www.wisebread.com 5 Ways to Boost Your Odds of Retiring Early http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-to-boost-your-odds-of-retiring-early" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/guy_computer_000025658945.jpg" alt="Man trying to boost his odds of retiring early" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The <a href="http://crr.bc.edu/briefs/the-average-retirement-age-an-update/">average age of retirement</a> stands today at 62 for women and 64 for men. But if you're like many Americans, you'd probably much prefer to have your feet in the sand and a piña colada in hand well before you reach your 60s. No matter your age, it'll be pretty hard to pay for that oceanfront real estate and tiki bar tab if you haven't set aside enough savings.</p> <p>Fortunately, your dreams of a comfortable, early retirement can still come true &mdash; so long as you're willing to do some heavy duty planning, smart saving, and savvy investing. Read on for our roundup of the best tips and tricks for retiring early &mdash; without winning the lottery.</p> <h2>1. Set a Savings Goal</h2> <p>First thing's first: You need to calculate how much money you'll need to stockpile before you can quit your day job. Be forewarned &mdash; it'll likely be a number that will make your jaw drop. But even if it seems totally unattainable, rest assured that it's not. Let's say you'd like to retire at 48 &mdash; a plum 15 years earlier than the average American. Take your pre-retirement income and multiply it by the number of expected years of life you'll have in retirement; in this case, we'll say it's 48 x 31 (this assumes you're going to live to be 79, the average life expectancy for an American).</p> <p>For example, if you're living off a $70,000 salary now, you'll need to save $2.2 million before you can ditch your nine-to-five. On average, retirees spend between 65% and 95% of their<a href="http://www.forbes.com/sites/fidelity/2015/03/23/are-you-on-track-for-the-retirement-you-want-infographic/?sr_source=lift_polar"> pre-retirement income</a>, so this calculation shoots a little high. But since you very well may live a decade or two longer than the average Joe, it's better to have a bigger cushion than no cushion at all.</p> <h2>2. Live Frugally</h2> <p>If you want to achieve a comfortable, early retirement, one way of getting there is by living frugally. That means forgoing name brand clothing, coupon-less meals at restaurants, salon visits, and airplane travel. Buying used cars only &mdash; or giving up cars, altogether and instead riding a bike or public transit. (See also: <a href="http://www.wisebread.com/the-two-biggest-mistakes-people-make-when-starting-to-live-frugally?ref=seealso">The Two Biggest Mistakes People Make When Starting to Live Frugally</a>).</p> <p>If this sort of lifestyle sounds foreign to you, you may want to begin by crafting a carefully detailed budget that will set you up to achieve your long-term retirement savings goal. If all of this sounds exactly like the way you don't want to live out your younger years, frugal living as a road to early retirement quite simply may not be for you.</p> <h2>3. Start a Business &mdash; Then Let Someone Else Run It for You</h2> <p>If you've got an entrepreneurial bone in your body, you might want to explore launching your own business as a means of achieving early retirement. Whether it's a food truck or a marketing and consulting firm, the idea is to launch the business and work it until it's profitable enough that you can hire someone else to run the day-to-day operations while you kick back in that beach chair and watch the money pour in. Alternatively, the sale of your business could fund your retirement. Nearly 40% of small business owners say they are <a href="http://www.guardianlife.com/glife11pp/groups/camp_internet/@stellent_camp_websites/documents/document/sbo-retirement-readiness.pdf">poised to retire earlier</a> than they had anticipated. (See also: <a href="http://www.wisebread.com/starting-your-dream-business-is-easier-than-you-think-heres-how?ref=seealso">Starting Your Dream Business Is Easier Than You Think &mdash; Here's How</a>)</p> <h2>4. Get Yourself a Pension</h2> <p>The beauty of the pension plan: It's sort of like earning a salary, only without having to put in the work. And although many industries are phasing out these plans, about one in four large employers still offer some sort of <a href="http://www.towerswatson.com/en/Insights/Newsletters/Americas/Insider/2014/retirement-in-transition-for-the-fortune-500-1998-to-2013">pension to new hires</a>, according to a recent study. At the top of the list are companies in the insurance, utilities, energy, transportation, and food and beverage industries. Government is another sector where pensions are alive and well. Many municipalities still offer firefighters, police officers, and public works employees pensions that include overtime and saved vacation in the final calculation. The result is that some workers can retire with a pension that's <a href="http://www.ctpost.com/local/article/Crushed-by-town-pensions-1413396.php">higher than their former salary</a>. Imagine that.</p> <p>Alternatively, Apple, Google, Microsoft, and other big-name employers in the <a href="http://money.usnews.com/money/retirement/slideshows/10-industries-with-the-best-retirement-benefits/10">information industry</a> offer workers an average retirement benefit contribution of $2.76 per hour worked. That's huge. Also, these tend to be pretty high-paying jobs, which means employees have more flexibility to make larger contributions to their own retirement savings, in addition to what the company chips in.</p> <h2>5. Make Smart Investments</h2> <p>The best time to start investing is now. Case in point: If you start maxing out your IRA contributions at age 25, you will have saved $1.6 million by the time you're 70. But if you were to start at 35, you'd save about half that sum. Clearly, a few years can make a huge difference. Now, if you're not investment savvy, there are tons of tools available to help you figure out where to put your money.</p> <p>One of the best and easiest is an automated investment advisor, such as FutureAdvisor, that specializes in retirement planning. With <a href="http://track.flexlinks.com/a.ashx?foid=1029882.978749&amp;fot=9999&amp;foc=1&amp;foc2=941565">FutureAdvisor</a>, you can get your 401(k), IRA, and other accounts analyzed, plus receive recommendations on how to improve your existing investments &mdash; absolutely free of charge. Then, if you're impressed with the results and want to hire FutureAdvisor as your investment manager, there's a monthly fee of either $9 or $19, depending on the value of your assets. Rest assured, all of FutureAdvisor's investment recommendations are made with the goal of setting you up for the most comfortable retirement years possible.</p> <p><em>What other steps are you taking to ensure an early retirement?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/brittany-lyte">Brittany Lyte</a> of <a href="http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">6 Retirement Rules You Should Be Breaking</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-sep-ira-is-how-the-self-employed-do-retirement-like-a-boss">The SEP-IRA Is How the Self-Employed Do Retirement Like a BOSS</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-tell-if-youre-on-track-for-retirement">How to Tell if You&#039;re on Track for Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don&#039;t Despair Over Small Retirement Savings</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-facts-millennials-should-know-about-retirement-planning">5 Facts Millennials Should Know About Retirement Planning</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Investment Retirement 401(k) pensions savings Tue, 14 Apr 2015 09:00:42 +0000 Brittany Lyte 1379696 at http://www.wisebread.com 12 Surprising Things Women Should Know About Retirement Planning http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/12-surprising-things-women-should-know-about-retirement-planning" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement_000014649650.jpg" alt="Woman considering her retirement as homeless person" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>One of my longstanding fears is that my retirement will see me living on the street, homeless and destitute. As it turns out, my fear is far from unique. In fact, it even has a name: Bag Lady Syndrome. According to a poll by Allianz Life Insurance, 49% of American women fear <a href="https://www.allianzlife.com/retirement-and-planning-tools/women-money-and-power/bag-lady">ending up a bag lady</a>, even those who make six figure salaries. In fact, according to a recent survey of workers by the Transamerica Center for Retirement Studies, only 14% of women are very confident in their ability to retire comfortably.</p> <p>Yes. I have heard the news: Women continue to make huge strides in school and in the workplace. But I also know the reality. Women are at a much greater risk of financial insecurity in later life than men for a number of reasons.</p> <h2>1. Longevity Does Not Work in Women's Favor</h2> <p>The women in my family generally live to be close to 100. While most people are impressed by my genetics, I find longevity to be an expensive double-edged sword. How am I going to pay for a 30-year retirement? The average American woman lives six years longer than the average man, which is why 70% of Social Security beneficiaries over age 85 are women. There are <a href="https://www.americanprogress.org/issues/women/report/2008/10/08/5103/the-straight-facts-on-women-in-poverty/">50% more elderly women</a> living in poverty than men.</p> <h2>2. 54% of Women Don't Plan to Retire, Ever</h2> <p>Like Mrs. Hughes on Downton Abbey, over half of all American women plan on working until they drop dead.</p> <h2>3. Almost Half of All Women Plan to Work Through Retirement</h2> <p>Shuffleboard and sensible shoes are not everyone's dream retirement. Roughly 49% of women plan on continuing to work during retirement. While work is pleasurable for many women, and delaying retirement is a great way to shore up savings, the job market for 70- year-olds isn't great. Planning to simply not retire is not a viable retirement strategy.</p> <h2>4. Baby Boomers Are Still Living the Dream</h2> <p>Like every other gen X-er on the planet, I figured out in college that I would spend my life paying for someone else's social security, since it's a benefit that I doubt I will ever enjoy. However, this bitter worldview is generational. To wit: 26% of baby boomers (born 1946-1964) don't have a backup plan if they are <a href="http://money.usnews.com/money/personal-finance/mutual-funds/articles/2013/10/08/boomers-forced-to-retire-face-unexpected-challenges">forced into retirement</a> sooner than expected due to health problems or job loss.</p> <h2>5. Time Off for Caregiving Negatively Impacts Retirement</h2> <p>Millennials, get ready to be poor when you are old. Even if your baby boomer parents put away enough money for retirement, you might still have to supplement their care. A recently published study by the Employment Benefit Research Institute calculates that female baby boomers on the verge of retirement have a <a href="http://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&amp;content_id=5487">savings shortfall</a> of nearly $63,000, while male boomers have a deficit of $34,000.</p> <p>What's worse, 58% of women don't plan to take time out of the workforce to act as a caregiver for a child or an aging parent, which is odd considering that 80% of American women give birth at some point during their child bearing years. In fact, the average woman spends <a href="http://boston.cbslocal.com/2014/09/29/bag-lady-syndrome/">17 years raising children</a> and 18 years caring for aging relatives (including her spouse).</p> <p>Of the 22% of the female population who <em>aren't </em>living in denial of the time suck that is parenting or childcare, 67% believe that taking time off work to care for children or aging parents will hurt their ability to save for retirement. (See also: <a href="http://www.wisebread.com/the-9-people-in-your-life-who-are-keeping-you-poor?ref=seealso">9 People in Your Life Who Are Keeping You Poor</a>)</p> <p>While women who take off time to be caregivers lose out on matching funds and cannot contribute to a 401(k), a survey by the asset management firm BlackRock shows that women can <a href="http://www.cnbc.com/id/102473846#.">close the savings gap</a> when they return to the workforce. However, they miss out on the magic that is compound interest during years spent being caretakers.</p> <h2>6. The Majority of Women Expect to Self-Fund Retirement</h2> <p>Only 5% of women expect a company-funded pension to be the primary source of retirement, because less than a third of women will receive any kind of pension at all. Roughly 27% expect to rely on social security, while 59% of women expect to self-fund their retirement through a 401(k) or other savings and investments.</p> <h2>7. Part-Time Work Is Women's Work</h2> <p>Due to childcare responsibilities, women are much more likely than men to <a href="http://www.nytimes.com/2014/08/21/upshot/how-a-part-time-pay-penalty-hits-working-mothers.html?abt=0002&amp;abg=0">work part-time</a>. Not only does this translate into a much smaller paycheck, most part-time jobs do not include benefits such as health care.</p> <h2>8. Women Are Less Likely to Be Offered a Retirement Plan</h2> <p>Also, because part-time workers of either gender are less likely to be included in 401(k)-style retirement plans through work, fewer women are offered retirement benefits.</p> <p>This is compounded by the fact that women who take time out from their careers to raise children or care for aging relatives are not eligible for retirement plans and miss out on matching contributions.</p> <h2>9. Women's Annual Contributions to 401(k)-Style Plans Lag Behind Men</h2> <p>This falls into the &quot;No Duh&quot; category of financial factoids. Women's annual contributions to retirement plans lag behind men's because women make less money on average, and have to take off more time for childcare.</p> <h2>10. Fewer Women Take Advantage of Retirement Plans Than Men</h2> <p>What is preposterous, however, is that even when women are <a href="https://www.transamericacenter.org/docs/default-source/resources/women-and-retirement/tcrs2015_sr_womens_retirement_outlook.pdf">offered retirement plans</a>, only 77% participate, compared to 82% of men!</p> <h2>11. Women Think They Will Only Need $800,000 to Retire Comfortably</h2> <p>Statistically, women live longer than men, and therefore have a longer retirement. This should correspond with higher estimates for retirement savings needs. However, it does not. The median estimated retirement savings need for women is $800,000, compared to the $1,000,000 median men need to feel financially secure in retirement. Why is there this discrepancy?</p> <h2>12. Women Are Guessing Their Retirement Savings Needs</h2> <p>Alas, the main reason that women are low-balling their savings is because 57% are just <a href="http://womenmoneyandsuccessmag.com/resources/statistics">guessing their retirement needs</a>. Only 8% of women in the Transamerica Study used a calculator to run numbers.</p> <p>While this is depressing news, women of every age can take steps to improve their retirement readiness.</p> <h3>Develop a Retirement Strategy and Put It on Paper</h3> <p>Use a retirement calculator to figure out how much you will need to save each year &mdash; including both employer-sponsored plans and outside savings.</p> <h3>Plan Your Parenthood</h3> <p>Can you actually afford to have children? If you already have children, carefully consider any and all options to help mitigate the impact on your long-term financial security. Can you move in with family to help save on childcare costs?</p> <h3>Seek Retirement Benefits</h3> <p>If you employer doesn't offer you a retirement plan, it doesn't hurt to ask for one or seek out an employer who does.</p> <h3>Participate in Company Plans</h3> <p>Regardless of how little money is left over from each paycheck, workers with 401(k) plans should try to maximize the amount of money they put away, especially if the employer matches funds. Women (and men) who don't participate in matching 401(k) plans are literally refusing free money.</p> <h3>Educate Yourself About Retirement Investing</h3> <p>If you can, seek professional guidance. Learn about ways to stretch savings, including when to withdraw money from retirement accounts with minimal penalties.</p> <h3>Have a Backup Plan</h3> <p>Do you have disability insurance or life insurance? Identify possible cost-cutting or money-making lifestyle changes such as moving into a smaller home or living with roommates.</p> <h3>Actually Do the Math</h3> <p>Use a retirement calculator to estimate your retirement savings needs and do everything in your power to achieve that goal.</p> <h3>Share Your Knowledge and Plans</h3> <p>Talk to your family and close friends about your retirement plans. Managing financial and time expectations should be part of everyone's retirement strategy.</p> <p><em>Are you afraid of becoming a bag lady? What is your strategy to keep this paranoid fantasy from becoming a reality? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/max-wong">Max Wong</a> of <a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early">5 Ways to Boost Your Odds of Retiring Early</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-start-saving-for-retirement-at-40">How to Start Saving for Retirement at 40+</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don&#039;t Despair Over Small Retirement Savings</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-every-woman-can-take-control-of-her-finances">How Every Woman Can Take Control of Her Finances</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) bag lady syndrome poverty savings women Mon, 30 Mar 2015 11:00:08 +0000 Max Wong 1359519 at http://www.wisebread.com The Step-by-Step Guide to Rolling Over Your 401(k) http://www.wisebread.com/the-step-by-step-guide-to-rolling-over-your-401k <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-step-by-step-guide-to-rolling-over-your-401k" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_401k_000020117190.jpg" alt="Woman discussing rolling over her 401(k) with her employer" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you've recently switched jobs, you may be wondering what to do with your retirement accounts. First, congratulations on thinking ahead and planning for your future. Rolling over accounts is an important step toward continuing to build your financial future, and we've created this step-by-step plan to help you navigate the process.</p> <p>That said, before you figure out how to rollover your 401(k), it's first important to know what not to do.</p> <h2>Don't Take a Distribution</h2> <p>It's tempting to let your former employer send you a check to cash out your account, but, unless you're over age 59&frac12;, this can be a huge mistake. Your former employer is required to withhold 20% of the distribution. On top of that, the IRS will charge you an additional 10% penalty if you're younger than 59&frac12;.</p> <p>To break it down in dollars and cents, let's assume there's a $10,000 balance in your 401(k) and you're in a 25% tax bracket.</p> <p>$10,0000 &ndash; $2,000 (20% Withholding) &ndash; $1,000 (10% Tax Penalty) = $7,000</p> <p>You've just taken a $3,000 hit on your portfolio. That's a heavy hit to take. Plus, you'll no longer have that money working in the market for you, which means you're more likely to end up like the majority of Americans who fear their retirement funds are lacking.</p> <p>Some people take distributions because they're not sure how to make ends meet between jobs (a valid fear). But taking a 401(k) distribution is one of the most expensive ways to bridge the gap when you're between jobs.</p> <p>But some distributions happen by accident. If you don't know how to conduct a 401(k) rollover, the paperwork can be confusing and it's easy to check the wrong box or make an inaccurate assumption.</p> <p>If your former company has already sent a check directly to you, there is a remedy, if you act fast. You'll have 60 days to get the funds deposited into an IRA. There is a bit of a hitch, though. You'll be directly responsible for making up the 20% that was withheld by your former employer.</p> <h2>So, What Should You Do?</h2> <p>If you're just starting the 401(k) rollover process, you'll have a few options.</p> <h3>Keep Your Funds In the Current 401(k)</h3> <p>If your 401(k) balance is greater than $5,000, you'll have the option to keep the money right where it is. The upside? No paperwork. The downside? Well, there are a few.</p> <ul> <li>It's easy to lose track of your accounts. The average person holds 11 jobs by age 46. That can add up to a lot of retirement accounts, if they're not being rolled over or combined.<br /> &nbsp;</li> <li>Retirement plan quality varies greatly. Not all 401(k)s are created equal. There are drastically different fee structures and varying levels of investment options. Most separated employees would be better off moving their money into an account with a low-fee provider like Vanguard or Fidelity, each of which offers vast investment options for your IRA.</li> </ul> <p>Some employers automatically distribute 401(k) funds for separated employees if the balance is below the $5,000 mark. If this is you, you'll want to get your rollover going immediately.</p> <h3>Roll Your Funds Into Your New Employer's Retirement Plan</h3> <p>It's not a bad idea to keep your retirement funds in the same place, so that you don't lose track of previous accounts. Not all 401(k) plans accept rollovers, so if you want to go this route, check with your new employer first.</p> <p>If rollovers are accepted, ask your new employer for instructions on where your former employer should send your existing 401(k) funds. Once you have these rollover instructions, call your former employer and ask for the forms you'll need to fill out.</p> <p>Once the paperwork is complete, your former employer should send your account balance directly to your new employer's plan. There shouldn't be any taxes withheld or penalties assessed for a direct rollover. (See also: <a href="http://www.wisebread.com/10-easy-ways-to-supercharge-your-retirement?ref=seealso">10 Easy Ways to Supercharge Your Retirement</a>)</p> <h3>Roll Your Funds Into an IRA</h3> <p>This is my favorite option, because low cost mutual fund giants like Vanguard or Fidelity generally offer more investment options than most employer 401(k) plans, and they're usually cheaper, too.</p> <p>The first step is to open a new IRA account with a high-quality, low-fee investment provider (like <a href="https://personal.vanguard.com/us/openaccount?CompLocation=GlobalHeader&amp;Component=OpenAccount">Vanguard</a> or <a href="https://rewards.fidelity.com/offers/iramatch?imm_pid=1&amp;immid=00994&amp;imm_eid=e41730670&amp;buf=999999&amp;gclid=CjwKEAjwoZ-oBRCAjZqs96qCmzgSJADnWCv8IN3h4jALOK1EtX2J45rce9bLEBvEsPyTK_PJF86VXxoCDLLw_wcB">Fidelity</a>). You can open an account online with most investment providers by simply going to their website, selecting the Open An Account option, and looking for an account option for rolling over employer-sponsored retirement plan account. To open the new account, you'll need the following:</p> <ul> <li>Your personal information, like social security number, birth date, email address, and street address;</li> <li>The current balance in the 401(k) account that you're rolling over;</li> <li>Your former employer's name;</li> <li>The name of the investment (usually a mutual fund of exchange traded fund) in which you plan to invest your funds. If you don't know what to choose, a popular option is a target retirement fund, which automatically rebalances your account as you age and get closer to retirement.</li> </ul> <p>Once the rollover account is open, the next step is to call your former employer and ask for their rollover instructions. They will likely have a form that needs to be completed and will likely ask for the name and address of the investment house where the funds are to be sent. They'll also need your new rollover IRA account number.</p> <p>Make sure the check they send goes directly to the investment house where you've opened the new account. The check should be made out to the new investment house, with your name and new account number notated on the check. Do not have the check sent directly to you.</p> <p>To complete the transaction, some employers will require a letter of acceptance. If yours is one that does, you'll need to go back to the investment house where you opened the IRA and make the request. Not all employers require this, but it's not uncommon, either, meaning getting the form together shouldn't be a big deal for your new account holder.</p> <p>Once all the forms are signed and completed, it usually takes about three weeks for a rollover to be complete. The funds should be sent directly from your old employer to your new account holder and you should receive a confirmation either in the mail or email. Again, there shouldn't be any taxes withheld or penalties assessed for a direct rollover. (See also: <a href="http://www.wisebread.com/how-to-set-up-an-ira-to-build-wealth?ref=seealso">How to Set Up An IRA to Build Wealth</a>)</p> <p>The whole thing should take about 10 minutes in paperwork and three weeks in wait time (while your old employer sends the funds to your new account holder). It's a small price to pay for building a secure retirement.</p> <p><em>Have you rolled over your 401(k) recently? Did you hit any snags or was it smooth sailing? Tell us about it in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/alaina-tweddale">Alaina Tweddale</a> of <a href="http://www.wisebread.com/the-step-by-step-guide-to-rolling-over-your-401k">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/if-you-want-your-401k-to-grow-stop-doing-these-6-things">If You Want Your 401K to Grow, Stop Doing These 6 Things</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/left-a-job-do-a-rollover">Left a job? Do a rollover.</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-is-why-you-cant-postpone-planning-for-your-retirement-and-how-to-start">This Is Why You Can&#039;t Postpone Planning for Your Retirement (And How to Start)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/intimidated-by-retirement-investing-get-professional-help">Intimidated by Retirement Investing? Get Professional Help!</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">12 Things You Didn&#039;t Know About Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) IRA life hacks personal finance retirement rollover Wed, 25 Mar 2015 13:00:10 +0000 Alaina Tweddale 1356036 at http://www.wisebread.com 5 Simple Ways to Boost an Underperforming 401(k) http://www.wisebread.com/5-simple-ways-to-boost-an-underperforming-401k <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-simple-ways-to-boost-an-underperforming-401k" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/piggy-bank-chalkboard-retirement-savings-growth-Dollarphotoclub_77966716.jpg" alt="piggy bank retirement savings" title="piggy bank retirement savings" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There are about 52 million Americans saving up for retirement using a 401(k). While this is an impressive number, it doesn't tell the full picture of the state of U.S. retirement planning. (See also: <a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement?ref=seealso">12 Things You Didn't Know About Retirement</a>)</p> <p>In 2014, the average U.S. worker had only accumulated in their 401(k) enough for $4,000 annual retirement income, or about $333 monthly. That's an alarmingly low figure.</p> <p>Here are five simple ways to boost those underperforming 401(k) plans.</p> <h2>1. Switch Actively Managed Funds to Index Funds</h2> <p>When allocating the funds in their 401(k), folks often choose accounts that promise high returns. In other words, they look to beat the market.</p> <p>Stop it.</p> <p>Chasing those high returns is eating away your 401(k) contributions. Funds that try to outperform the market, also known as actively managed funds, generally have higher fees than those that seek to simply track market performance, known as index funds.</p> <p>While investing in index funds may sound like a boring investment strategy, consider these three facts:</p> <ul> <li>While the average expense ratio for actively managed U.S. mutual funds is 1.32%, the Vanguard Total Stock Market Index (VTSMX), the largest index mutual fund, charges just 0.17% per year.<br /> &nbsp;</li> <li>Warren Buffett's will stipulates that 90% of his assets be invested in a very low-cost <a href="http://www.berkshirehathaway.com/2013ar/2013ar.pdf">S&amp;P 500 index fund</a>.<br /> &nbsp;</li> <li>Mad Money's Jim Cramer has gone on the record about the benefits of index investing: &quot;After a lifetime of picking stocks, I have to admit that Bogle's arguments in favor of the index fund have me thinking of joining him rather than trying to beat him.&quot; John &quot;Jack&quot; Bogle, the founder of Vanguard, has championed low-cost index investing since the 1970s.</li> </ul> <h2>2. Stop Playing Stock Trader</h2> <p>Would you hire a plumber to fix your car?</p> <p>Definitely not!</p> <p>So, why are you insisting on trading the stocks and accounts in your 401(k)?</p> <p>A nationwide <a href="http://pressroom.aboutschwab.com/press-release/schwab-corporate-retirement-services-news/workers-bank-401k-retirement-need-help-makin">survey of 401(k) participants</a> found that:</p> <ul> <li>52% of American workers find explanations of their 401(k) investments more confusing than explanations of their health care benefits;<br /> &nbsp;</li> <li>46% don't know what their best investment options are; and<br /> &nbsp;</li> <li>34% feel a lot of stress over allocating their 401(k) monies.</li> </ul> <p>If you're still unconvinced about the negatives of actively trading your account, remember that the average actively managed mutual fund has an average <a href="http://www.fool.com/School/MutualFunds/Performance/Record.htm">annual return of 2% less</a> than that of the stock market. A sample of <a href="http://money.usnews.com/money/personal-finance/mutual-funds/articles/2012/06/18/some-401k-plans-let-you-take-the-wheelif-you-dare">self-directed account holders</a> showed that 76% of their account returns underperformed the S&amp;P, and 72% underperformed the core model of their plans.</p> <p>On top of that, some 401(k) plans may charge you additional fees for self-directed brokerage options. Now that's a double whammy for playing stock trader. Instead, request a one-on-one appointment with your plan's administrator (over half of retirement plans offer individual investment advice) to go over your retirement saving strategy, and stick to it. (See also: <a href="http://www.wisebread.com/this-is-the-basic-intro-to-having-a-retirement-fund-that-everyone-needs-to-read?ref=seealso">This Is the Basic Intro to Having a Retirement Fund That Everyone Needs to Read</a>)</p> <h2>3. Consolidate 401(k) Balances</h2> <p>The term &quot;four-year career&quot; has gone from oxymoron to a reality for younger generations. According to data from the Bureau of Labor Statistics, today's average worker <a href="http://www.forbes.com/sites/jeannemeister/2012/08/14/job-hopping-is-the-new-normal-for-millennials-three-ways-to-prevent-a-human-resource-nightmare/">stays on the job</a> for 4.4 years. And for younger workers, that time period is cut in half.</p> <p>This means that there are many workers who have several 401(k) plans laying around. Since not all 401(k)s are alike, it's a good idea to consolidate all those balances into a single account. It will simplify your life and make it easier to keep track of your nest egg's performance.</p> <p>While there are several criteria to evaluate plans, there are two that lead the pack:</p> <ul> <li>Choose the plan with the lowest expense ratio. A good rule of thumb is that your total expense ratio should be no more than 1%.<br /> &nbsp;</li> <li>Evaluate the additional perks that may become available for maintaining a larger balance at a single institution.</li> </ul> <h2>4. Maximize Employer Contributions to Your 401(k)</h2> <p>Vanguard reports that the <a href="https://pressroom.vanguard.com/content/nonindexed/How_America_Saves_2014.pdf">most common matching formula</a> for employers is $0.50 on the dollar on the first 6% of pay. This means that an employee with a $50,000 annual salary would receive a $1,500 boost to her 401(k), if she were to maximize her contributions.</p> <p>It's in your best interest to bump up your savings to the full 6% (or the applicable maximum of your plan) of your pay. If you don't use it, you are missing out on <em>free </em>retirement cash.</p> <p>Additionally, ask your plan sponsor about a couple of key plan details: true-up and vesting schedule.</p> <h3>True-Up Feature</h3> <p>Some companies have complicated contribution matching formulas, so a true-up feature helps you maximize the amount of possible matching funds under your 401(k)'s guidelines. This feature is particularly useful for those employees that wait for big bonuses to make a contribution to their retirement accounts.</p> <h3>Vesting Schedule for Employer Contributions</h3> <p>Employer contributions to your 401(k) plan may be subject to a vesting period. If you change jobs before the vesting period, you lose your employer's contributions to your retirement plan.</p> <h2>5. Ask Your Plan Administrator for Lower Fees</h2> <p>If you're using an employer-sponsored 401(k), then ask your plan's sponsor to renegotiate operating expenses. During the 2013-2014 period, more than 75% of employers attempted to <a href="http://www.kiplinger.com/article/investing/T001-C000-S002-employers-trim-401k-fees.html#buTvG5muw7udQ0Hw.99">cut 401(k) expenses</a>, so your request is nothing out of the ordinary.</p> <p>Find out why your plan administrator is choosing the funds that the're choosing. If there is no record of legitimate reasons, then you have ammunition to demand a re-evaluation of current fees and class shares. The lower your plan's fees, the better your returns.</p> <p><em>What have you done to boost an underperforming 401(k)?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/5-simple-ways-to-boost-an-underperforming-401k">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. 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