retirement

Americans Not Doing a Good Job of Saving for Retirement

Written by adminJuly 3, 2019

We all have the hope and desire of one day retiring during our golden years and sitting by the beach. We’ve worked really hard to get to enjoy this time, but sadly, Americans aren’t able to save enough money. They make decent estimations, according to Catherine Golladay. She’s the COO of Schwab Retirement Plan Services.

They did a survey of 1,000 people of working aged adults. They guessed close to the right amount they’ll need to retire on. That number is around $1.7 million. The rest of the survey also found that Americans are vastly under prepared. 51% of those surveyed are contributing less than 10% of their salary, adding about $8,800 per year to their 401(k).

-55% said they just found a number they were good with.

-36% said they were matching their employer’s contributions.

-8% go with the default amount that was set when they enrolled.

While a lot of Americans are at least trying to save, they find a lot of obstacles are getting in their way. Debt is a large part of why they’re not able to save. Whether it’s spending the next decade paying off student loan debt or other monthly bills and credit cards. It can be difficult to balance debt, saving, and monthly payments, especially when the economy is turbulent.

Many Problems With this Thinking

After looking at the survey results, it’s easy to spot two different misconceptions Americans have about retirement. The first is that they see themselves as savers, when in reality, they’re investors. You’re investing into your 401(k) to get the most of out of it. Just ‘saving money’ won’t get you to your retirement goals.

The second thing Americans seem to push off is getting the advice they need to ensure they have enough to retire on. They’re just making guesses and going with the flow. They have no idea, in general, if they’re on track to reach their goals. And in a lot of cases, they aren’t making it. Considering we’re living longer, that plays a part as well.

Nearly every person involved in the survey said they would feel much more confident is they had the advice of a financial planner, but about half said they don’t feel their financial situation is bad enough where they should spend the money to get advice. It will end up costing them in the end of they don’t know where they’re headed financially.

“They may think their situation is simple, but your wealth is your wealth,” Golladay said. “Put yourself in the best possible position and take advantage of the help out there. It could help Americans to think of themselves as investors, not just savers,” she said. The problem is, investing is an art and it can be intimidating.

“But people — especially younger ones — tend to find the act of investing intimidating, and don’t consider themselves investors even when they have an employer-sponsored retirement account. Shifting the mind-set from saving to investing can help make a person feel more in control,” said Erin Lowry, author of “Broke Millennial Takes on Investing.”

Written by adminMay 17, 2019

Saving

We all have a goal of reaching our golden years with enough money in the bank to make it through. The problem is, we don’t know how much money we’ll need. Life is unpredictable. We could live another 40 years after retirement as modern and future medicine works to extend our life expectancy.

The best plan is to have at least a million dollars saved up by the time you’re ready to retire. A person can make it quite a while on that chunk of change. Not to mention the interest that will grow as you get older over the time that you’re saving up. Here are seven rules that will help you save $1 million by the time you retire.

Rule #1: You Must Make Saving a Priority

If you truly want to save $1 million, you can’t be a spender. This is the number one rule for a reason. You need to develop the mindset of saving as much money as possible. You can start saving at 23 and it will take you saving $400 per month, every month, to accomplish this goal. That takes having a lot of discipline!

Rule #2: Start as Early as You Can

The earlier you start your saving process, the much better the odds you’ll make it. The later you start, the more you’ll have to save each month to get there. Or you’d have to do some type of Wall Street investing into the right stocks. Still, the clearest and safest picture is investing early, especially so you can take advantage of compound interest on your savings.

Rule #3: Look at the Different Retirement Plans

Your employer might have a retirement plan they’re willing to help invest in. For example, 401(k) plans are to help you reach your retirement goals. Many employers match your own investment. By taking full advantage, you should consider putting in as much as your employer will allow you. Every dollar you invest is literally free money when they contribute the same.

If your employer doesn’t do a 401(k), then look IRAs. There are a lot of ways to help grow your retirement funds. Look at all of your options. Maybe choose a company that offers the right incentives so you’re in a much better place when it’s time to retire.

Rule #4: Keep Your Hands Off Your Retirement Funds

Something a lot of people try to do is borrow or cash out some of their retirement money. They might be going through a hardship or just need some quick cash. The thing is, it’s a bad idea to take from your retirement. Not only will taxes and fees be added into the equation, you will lose the added benefits you receive with compound interest.

Rule #5: Keep the Amount of Your Debt Low

Listen, if you have a lot of debt, it’s going to be extremely hard to save for your retirement. You most certainly won’t reach your $1 million retirement goal. If you have a lot of debt, you will have to pay interest on that debt and it’s going to sap your monthly salary. Those extra thousands of dollars on interest payments could be going into your retirement fund, but are instead wasted on debt.

The ultimate goal for living a life with financial freedom is to be able to save. You need both a rainy-day fund and a retirement account. That’s the best way to protect yourself and your family against bad times, a changing economy, and any accident that might happen. Be a saver rather than a spending and you’ll do fine.

Written by adminMay 15, 2019

Life Style

As Americans, we try to do our best to prepare for all outcomes. Retirement is one of those issues where we seem to be having a difficult time planning for. Many millennials and even older generations have been unable to save for retirement. They’re dealing with low wages and tons of student loan debt.

Even if you’re 100% organized and ready for retirement, what happens if you’re forced to do it earlier than planned? This is one trap even the highly organized person can fall into. Life can throw us a curveball we’re not prepared for. So, let’s prepare for it! It’s really the only way to pull off your retirement the right way without being left in the dust.

“Best way to be prepared is to have a plan. It’s why I encourage people to have a 3-6 month emergency fund that they just set aside and you can just keep that liquid in a money market account and it’s available if life were to happen,” said Chris Hogan, financial expert and author of the book “Everyday Millionaires”.

“There are all kinds of plans and options out there. Don’t sit back and not be informed. Engage with an insurance professional so you can understand what’s out there. Or what are some gaps in your coverage that you may need to purchase an additional policy to be able to protect yourself and your family.”

Are Americans Fully Prepared for Retirement?

According to new research from the Center for Retirement Research, a large percentage of us are not ready for that curveball. It’s almost as if we don’t expect anything to happen that will curtail our plans. That’s how most people plan their life. They aren’t prepared for the ‘anything can happen’ rule.

As a result, nearly 37% of older Americans are forced to retire earlier than planned. This is due to a health scare, accident, or the loss of a job. We don’t know when the economy might tank or we’ll be forced out to make room for younger, faster employees. As things change, businesses are become more high-tech and demanding different types of talent to thrive.

The key to being fully prepared for retirement is getting out of debt as fast as you can. Downsize your life if you have to. Start saving money. If you don’t have a rainy-day fund right now, that can hurt you no matter the age. Most Americans don’t even have $400 in their accounts if they needed it for an emergency. That’s an alarmingly small amount of money.

“First thing I tell people is to get serious about getting out of debt. When you get out of debt, you actually free up your money. You give yourself a raise, and it’s really important for student debt not to just hang out like it’s a relative, but you actually treat it like an enemy,” he said. “You get very, very serious. You downgrade lifestyle. You take on extra income. You do whatever is necessary to attack that debt.”

Written by adminJuly 30, 2018

Life Style

When you grow up during a time of turmoil, it can distort your thinking to the point of learning not to trust a certain institution…or you might get bit!

Can we really blame millennials for not trusting the stock market after the big collapse? During the past decade, millennials either struggled through it themselves or watched their parents fight to keep their homes and jobs during the worse economic disaster since the Great Depression.

The thing is, millennials say they’re confident in investing in the various vehicles, like stocks and bonds. 66% of them say they know what to do, but they seem keener on stuffing that money in a jar in the backyard rather than investing it. In fact, 2/3rds of young adults have decided it’s best to keep their money out of the market and in their own hands.

According to Ryan Bailey, the head of Bank of the West, they’re putting their money at risk by doing this.

“Millennials have been stuffing their savings under the mattress instead of putting their income to work through strategic investments. While this may seem safe, they are putting their goals at risk by keeping cash on hand. While they are young, millennials have time on their side and could be missing an opportunity to grow their savings over a lifetime.”

That might be exactly the thing on their minds. They’re still young and have plenty of time to plan for retirement. We’ve written previously about millennials not so focused on retirement just yet. They’re more invested on digging out of extreme student debt or saving to buy a house.

According to a survey, 65% of millennials say the Great Recession has given them pause to invest in the stock market. This is despite an extremely bullish few years that saw stocks rise to their highest levels in its history. It seemed as if a new record was set every other day, making those who dared to invest quite wealthy.

Still, millennials aren’t too concerned with their future. And it’s just not their age group. 21% of all Americans have no retirement plan or savings at all. Either they can’t afford to save or they aren’t too concerned. That seems to be a major habit of a lot of Americans as the economy gets better…live for today and they’ll worry about tomorrow when it comes.

Due to this fear, the Trump administration wants to make it easier for all Americans to prepare for retirement, either by saving or helping to incentivize employers to provide plans to their employees, with the second round of tax cuts.

Written by adminJuly 20, 2018

Saving

It’s a wonderful thing that people are living longer these days thanks to modern medicine. More people are living past their 80s than ever before. While physical health is improving, it’s taking a toll on our financial well-being.

Fewer companies are helping their workers save for retirement, and because we’re living longer than expected, it’s leaving us to wonder how we will be able to fund the entirety of our retirement.

In a lot of cases, we won’t be able to. It’s as simple as that. And it’s devastating to those who are ready to enter that golden age of their lives, but have to keep working because they simply can’t afford to retire.

It’s not just having the money, either. The typical American workforce is changing, thanks to economic disasters that have pulled people out of the factories and on the computer.

Right now, 33% of our workers are freelancers, a number that is growing significantly with each passing year. 16% of these freelancers plan to keep working past retirement age because they simply won’t be able to afford life otherwise.

80% say debt is the number one reason why they’re not saving.

John Stein, CEO of Betterment, believes Americans need to find a new retirement strategy.
“The emergence of the gig economy has changed the American workforce. And the way we save for retirement needs to change with it,” he said.

Of course, this isn’t just for U.S. freelancers, but for workers around the world. Nearly half of all workers and retirees alike believe that the next generation of workers will have it much worse than they do.

Work-sponsored benefits are disappearing. Social Security is dwindling. And extreme levels of the debt, the highest we’ve ever seen, make it impossible for workers to afford their own retirement. It’s a perfect storm of frustration and fear for future workers who don’t want to work until they die.

Catherine Collinson, the CEO at Transamerica, is watching all of this unfold. She says:

“People are living longer than any time in history and birthrates are declining. Employers have been replacing traditional defined benefit pension plans with employee-funded defined contribution retirement plans. Today, individuals are expected to take on increasing risk and responsibility in self-funding a greater portion of their retirement income.”

35% of Americans are considering investing in the stock market, but nearly half worry about an incoming recession and market volatility. Really, all options are seemingly falling apart.

The average amount needed to safely retire on is between $1 million and $1.5 million, which is usually earned over the lifetime of a career. But now, there are plenty of 30 and 40-year-olds who haven’t even been able to save a penny and are racked with so much debt it’s hard to breathe.

In fact, 1-in-3 of U.S. citizens have nothing saved. According to a CNN survey, 56% of us have less than $10,000 saved. Only 13% have more than $300,000. This is showing a huge discrepancy between need and ability to save. It’s particularly difficult for women, as they are less prepared than men and live longer on average.

The best way to conquer this is to save money as if you’re retiring tomorrow. Because of the debt situation, retirement isn’t as much of a priority to Americans and it shouldn’t be that way, especially as you get older. Do whatever you have to do, even if that means you put in extra hours doing freelance to get there.

Written by adminMay 25, 2018

Saving

The secret to saving money is knowing how to spend it wisely. If you want to have a few extra bucks saved in your account for rainy days, for that family vacation you deserve, or for anything else you might need, then you have to be practical about how you spend.

Here are 5 easy ways to save money throughout the year.

1) Pay your bills early and on time.

I get it. You hate to pay bills. It’s a part of being an adult we all loathe. But, if we want things, then we need to pay for them. If you want cable and high-speed internet, it’s going to cost you a good chunk of change. The phone bill for you and the family will require a blood sacrifice and your first born.

We’re not saying you should get rid of that stuff, but if you’re going to have it, then make sure the bill is paid on time every month. Most of these accounts require commitments and if you miss a payment, you’ll be racked with late charges, penalties, and your credit score can take a hit. The last thing you need to do is shell out even more money for services.

2) Have an emergency fund.

You might think this is a waste of time and money. A lot of people don’t bother to save, either because they don’t think they can afford it, or they don’t anticipate something happening. In realty, that’s not a smart choice to make. Things WILL go wrong at some point in your life.

A recent survey said that a majority of Americans don’t even have access to $400 if something were to happen. If you got into an accident tomorrow, and you couldn’t work for a while, how tough of a situation would you be? If you’re living paycheck-to-paycheck and have nothing saved in the bank, you’d really be hurting.

The best advice is to have about 6-9 months saved up in the bank, which is the average time it takes to find a new job or get back on your feet after an accident.

3) Learn how to say no to impulse desires.

One of the biggest financial blunders Americans make is taking on more debt when they can’t even afford the debt they have. They see something they want, really can’t afford it, but mindlessly swipe the credit card and magically believe it will take care of itself later.

Monthly payments will eventually catch up to you, you’ll get late, have fees and penalties added on, it will wreck your credit score, and before you know it, you’re drowning. It happens to millions of Americans every year.

As I stated in the previous point, things happen all the time. It’s better to not have that shiny new toy and put the money in the bank for a rainy day, then to barely eek out every month. Do yourself a favor and just say no.

4) Refinance your student loans and get help paying them off.

We’ve covered this topic a lot on this blog. Student loans are a burden on so many people. They are preventing former students from getting a house and even from being able to work their dream job…the whole reason why they went to college in the first place. A lot of states will revoke your license to work if you have unpaid student loans.

If this is you, there is help out there! Government programs, refinancing loans into one payment so you’re working with a smaller interest rate, and so much more is available to you. To learn more, feel free to give us a call!

5) Don’t borrow from your retirement.

One misstep plenty of people take is borrowing from their retirement whenever they need a few bucks, but that approach is like robbing your future self of the retirement you deserve. Not only is it a risky move, you can be charged extra for pulling money out early. The big question remains: what will you do in retirement if you can’t replenish the fund?

Getting involved in this vicious cycle of poor money habits won’t offer you an ounce of financial freedom. It might make you feel good for a few days being able to buy what you want, but after some time, that joy becomes stale as you (and millions of others) regret the decision. Be smart, learn to say no, and save as much as you can. You’ll be happier for it.

Written by adminMay 23, 2018

Saving

Money can be a touchy subject with millennials. This is the generation that is getting hit the hardest with disabling student debt, low wages, and the recession, which hit right as they were graduating college.

It wasn’t an uncommon sight to see someone in the mid-20s and lower-30s, with a college degree, living at home with their parents. Those who are making it, are barely doing so. High rent prices and the cost of living constantly outpacing their ability to get raises has made life difficult for most of our younger generations.

When the website MarketWatch wrote a piece about how much money 35-year-olds should have saved up (about twice their salary to be safe), the fury was intense. There were many responses of varying degrees, from righteous indignation to jokes to cut the tension.

The message was clear. Millennials SHOULD be saving their money, but they simply can’t afford to. We recently wrote an article talking about how Americans still can’t afford their basic needs. This is a growing problem as debt keeps piling on and wages remain stagnant. Many families still have to make tough decisions and what they can afford and what has to wait.

If you can barely afford to feed yourself, you’re not going to have enough to save, especially if you’re paying insane interest rates on loans just to keep your head above water.

The sad reality is, we can’t talk about retirement enough. This is a subject no one should pass up just because it’s a difficult conversation. No matter what we’re dealing with right now, we need to keep it a part of our thinking and budget planning. In fact, it should be a priority.

There’s no one-size-fits all approach to saving for retirement. What you’re going to need and when you’re going to need it will vary per person, but if you haven’t even begun to address the issue in your 30s, you’re in danger to fall well short by retirement age.

Social Security is dwindling and no one knows how much longer it will last. Many experts aren’t even sure what the future of the program will look in the next 30 years. It’s not a program today’s millennials can take for granted or expect to still exist. They will have no choice but to invest their own dollars into their retirement plan.

That starts now.

There are two things people can do to ensure they’re in a good spot.

The first is to save as much as you can. Ideally, you should be putting away 15% of your monthly salary. If that’s impossible, trying to cut back as much as you can. Even 5% saved is better than nothing. As the economy improves and your situation is better under control, you can up the amount you save.

The second way to better prepare yourself for retirement is to take care of your debt. Don’t keep adding more to it just because you want that shiny new car. If you know things are tough and you can barely afford to save, paying a large debt that’s mostly interest isn’t a good idea.

As of this writing, the government has put in place several programs designed to help people pay back their student loans. Most people who qualify for these programs can have what they owe significantly reduced, as well as the time it takes to pay back these loans.

The sooner you pay down your loans, the more money you’re able to save. Nothing is more important than your future and the future of your family. Paying off debts and having extra money to put away is only the first step into gaining financial freedom.

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