Take these financial lessons to heart. You have a chance to manage your money better than previous generations have. Some crucial financial steps may help you do just that. Live below your means and refrain from living on margin. How much do you save per month? Generations ago, Americans routinely saved 10% or more of what they made, either depositing those savings or investing them. This kind of thriftiness is still found elsewhere in the world. Today, the average euro area household saves more than 12% of its earnings, and the current personal savings rate in Mexico is 20.6%.1
Resist the temptation. Your future self will thank you. Retirement accounts are not bank accounts. Nor should they be treated as such. When retirement funds are drawn down, they impede the progress of retirement planning, even if the money is later restored. In a financial crush, a retirement account may seem like a great source of funds. It is often much larger than a savings account; it is technically not a liquid asset, but it can easily be mistaken for one. The central problem is this: when you take a loan or an early distribution from an IRA or a
What pre-retirees owe could compromise their future quality of life. The key points of retirement planning are easily stated. Start saving and investing early in life. Save and invest consistently. Avoid drawing down your savings along the way. Another possible point for that list: pay off as much debt as you can before your “second act” begins. Some baby boomers risk paying themselves last. Thanks to lingering mortgage, credit card, and student loan debt, they are challenged to make financial progress in the years before and after retiring. More than 40% of households headed by people 65-74 shoulder home loan
If that is your dream, explore whether these steps could be useful to take. How could you retire in your fifties by choice? You will need abundant retirement savings and ways to access your retirement assets that lessen or avoid early withdrawal penalties. You may also need to have other, sometimes overlooked, components of retirement planning in place. There are ways to tap retirement savings accounts before 60. True, the I.R.S. discourages this with 10% penalties on traditional IRA withdrawals prior to age 59½ and withdrawals from many employee retirement plans before age 55½ – but those penalties may
Here is a way for a solopreneur to save much more for retirement. Self-employed? Seeking to ramp up your retirement savings? You should look at the potential of the Roth Solo 401(k). If you are a high-earning solopreneur, this savings vehicle may be a great choice because it allows you to make both employee and employer contributions to a 401(k) plan in the same year, with the potential for tax-free income in the future.1 How does a Roth Solo 401(k) work? Think of it as a standard Solo 401(k) with an added Roth account. The magic word is Roth.
Does your spouse contribute to a 401(k)? You are probably eligible for a retirement plan that can help you save and invest for retirement in the same way – a 403(b).
First offered in the late 1950s, 403(b) plans actually predate 401(k)s. School districts and non-profit organizations commonly offer these retirement savings vehicles to their employees.1
Will you have enough money to make ends meet? You may have heard that people spend less once they are retired. Statistically, that is true. The question is whether a retiree has enough income to meet his or her expenses. Ideally, retirees should be able to live comfortably on 70-85% of their end salaries and draw their retirement fund down no more than 4-5% per year during a 30-year retirement. Are these two objectives realistic for the average retiree household?1,2 According to the most recently published Bureau of Labor Statistics data, a household maintained by someone 65 or older had
If you live to 100, can you avoid outliving your money? Will you live to 100? Your odds of becoming a centenarian may be improving. Earlier this year, the Centers for Disease Control reported that the population of Americans aged 100 or older rose 44% between 2000-2014. The Pew Research Center says that the world had more than four times as many centenarians in 2015 as it did in 1990.1,2 If you do live to 100, will your money last as long as you do? What financial steps may help you maintain your retirement savings and income? Consider these ideas.