— YOUR Retirement

SUZE ORMAN’S 2009 ACTION PLAN

Posted on March 8, 2009. Filed under: -- Book Summaries, -- Building Wealth, -- Money Help (in simple terms), -- Suze Orman, -- YOUR Retirement | Tags: , , , |


By Molly Greavessuze_orman_2009_action_plan1

New York Times best-selling author and one of our nation’s go-to experts and on financial matters, Suze Orman believes that 2009 is a critical year for your money. And I completely agree with her, which is why this weekend I sat down and read her book, 2009 Action Plan: Keeping Your Money Safe & Sound.

 

I know Suze Orman is a trusted household name and I wanted to be sure to recap her message for you in case you don’t have time to read her book.  Below I have outlined with bullets the main ideas from each of her 10 chapters.

 

Don’t forget that the whole goal for you making the rights moves in 2009 is to alleviate the stress, fear and anger you’re feeling and replace it with the secure sense that you have done what it takes to protect yourself, the money you’ve worked for, and the one’s you love. Good for you for taking the first step and reading the action plan. Best of luck to you with your goals as well =)

 

Here is SUZE’S 2009 ACTION PLAN and WHAT YOU MUST DO:

 

  • Make it a priority to pay off your credit card balances.

 

  • Read every single statement and all correspondence from your credit card company to make sure you are aware of any changes to your account, such as skyrocketing rates.

 

  • Work to get your FICO credit score above 720.

 

  • Be very careful where you turn to help with credit card debt. Debt consolidators are often a very bad deal. The National Foundation of Credit Counseling is a smarter choice.

 

  • Resist the temptation to use retirement savings or a home equity line of credit to pay off credit card debt.

 

  • Pay the minimum amount due each month on every card. That’s your only shot at keeping your FICO score from falling further. It will also lower the odds that your credit card company will close your account.

 

  • Line up your cards that charge the highest interest rate at the top of the pile. That’s the card you focus on paying off first. Send in as much money as you can each month to get that balance down to zero.

 

  • Once the first card is paid off, focus on the second card in your pile: the card with the next-highest interest rate.

 

  • Keep up with this system until you have all of the cards paid off.

 

  • The biggest risk to your retirement security is giving in to your emotions. You may make decisions that “feel right” for 2009, but that doesn’t mean they are the right long-term solution for you.

 

  • Make sure you have the right mix of stocks and bonds in your retirement account for your age.

 

  • Do not make early withdrawals or take loans from retirement accounts to pay for non-retirement expenses.

 

  • Convert an old 401(k) to a rollover IRA so you can invest in the best low-cost funds, ETFs, and bonds.

 

  • If eligible in 2009, consider moving at least a portion of a 401(k) rollover to a Roth IRA. Or wait until 2010 and convert it to a Roth then. In 2010, everyone regardless of income will be able to contribute to a Roth. Just don’t forget about the tax due at conversion.

 

  • Make sure your bank or credit union is covered by the federal deposit insurance (this is the FDIC for banks and the NCUA for credit unions ).
    20080226_fdic_logo_181
    ncua_logo-1208135202_std

 

  • Check that what you have on deposit is eligible for full insurance coverage in the unlikely event that your bank or credit union fails. Through December 31, 2009, the general limit has been raised to $250,000 from its previous $100,000, but you still need to educate yourself about the ins and outs.

 

  • If your savings is in a money market mutual fund sold through a brokerage or mutual fund firm, consider moving it to the Treasury money market fund at that company.

 

  • Build up your savings to cover eight months of living expenses.

 

  • Move all money you need within the next 5-10 years into savings. Money you need soon does not belong in the stock market (make sure you choose a high-interest yield savings account).

 

  • Separate your wants from your needs.

 

  • Get over the guilt that you aren’t “providing” for your kids.

 

  • Strike the word “deserve” from the conversation. What you deserve is irrelevant; what you can truly afford is all that counts.

 

  • Try to negotiate better terms on a car loan you can’t keep up with.

 

  • Be very careful when asked to co-sign anything, no matter how much you love the person asking you for your help.

 

  • Pledge these three things:

 

1.     Do not spend money for one day

2.     Do not use your credit card for one week

3.     Do not eat out at a restaurant for one month

 

  • Push for a mortgage “modification” if your current loan is too expensive.

 

  • Do not use credit cards or retirement funds to pay for a too-expensive home.

 

  • Stay informed about new programs, from lenders and the government, in the months ahead that aim to keep more homeowners out of foreclosure (try calling 888-995-HOPE or go to hopenow.com)
  • Build a real savings fund a HELOC should not be used as a safety net in 2009.

 

  • Focus on your home’s long-term value, not it’s price change from month to month.

 

  • If your child is headed to college within four years and your collge savings are in the stock market, you should begin to phase out of the market, so that you have 100% out by the time your child is 17.

 

  • If you have a child who will enter college in 2009-2010, look into getting a Stafford loan.

 

  • If Stafford loans are not enough, parents consider a PLUS loan. Significant changes to this program last year make this a viable option for many more families.

 

  • Stay away from private student loans at all costs.

 

  • If you are graduating college in 2009 with student loan debt, know your repayment options.

 

  • Build a substantial savings account today so you will be okay if you are laid off.

 

  • Do not go without health insurance (try ehealthinsurance.com for the largest online resource for health insurance or nahu.org if you like to work with an agent).

 

  • Shop for private health insurance if you are laid off; it is often less expensive than COBRA.

 

  • Purchase an affordable term life insurance policy if anyone is dependent on your income.

 

  • Make sure you have all of your estate-planning documents in order.

 

  • Focus on the road ahead!

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When YOUR neighbors buys a Jaguar…

Posted on July 15, 2008. Filed under: -- Building Wealth, -- For The Investor In YOU, -- Money Help (in simple terms), -- Saving Money And YOU, -- YOUR Retirement | Tags: , , |


By Molly Greaves

If one of your neighbors buys a Jaguar, it looms larger in your mind that the mini-van that your friends and other neighbors drive.

I know this sounds crazy, but I offer you some unconvential advice: if your high spending pals are a problem, find some new ones. That doesn’t mean cut them off, just maybe add some new one’s to your circle that enjoy “free” things like volunteering, going to the park, exercising, meditating, etc. Anything that doesn’t require consumption!   You could even join an investing club!!

It’s no secret that our spending habits are driven in part by the crowd we’re in. But there’s more going on here than envy and status seeking. Most of us don’t like keeping budgets or doing the math. When deciding whether a a big expense is reasonable or not, people often take mental shortcuts when trying to figure things out.   

PS-Until you have an emergency fund built up, don’t even think of eating out! 

PSS-If you cant afford to quit your job for 30 years, than how do you plan to pay for retirement?

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It’s because it’s not what you make, it’s what you keep.

Posted on July 15, 2008. Filed under: -- Building Wealth, -- For The Investor In YOU, -- Money Help (in simple terms), -- Uncategorized, -- YOUR Retirement | Tags: , , , , |


by Molly Greaves

I could walk into Neiman’s and buy pretty much anything I wanted. But I would NEVER do that.  Since I wasn’t born rich, I advocate moderation and discipline as a way to build wealth. It’s because it’s not what you make, it’s what you keep.

I’m talking about cutting back on little extravagences that could have a huge impact later. Take your tall, skinny latte to start as an example. Cutting coffee wont get everyone where they need to be as far as savings and retirement are concerned, but if you’re young, and time is on your side, you’d be amazed at the power of 5 bucks. Little things start adding up to big things! Heck, you’d be even more surprised at what $10 or even $20 can do!  Start paying yourself first and see what you have the power to create!

Worried about investing in the stock market? Well, I hate to tell ya that this is the time now to get in! The longer you wait, the riskier your portfolio will likely have to be in order to reach your target retirement amount.

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Study: Most middle-class retirees WILL OUTLIVE savings

Posted on July 14, 2008. Filed under: -- Building Wealth, -- For The Investor In YOU, -- Money Help (in simple terms), -- Saving Money And YOU, -- YOUR Retirement | Tags: , |


By Molly Greaves

I am a proud subscriber of the Austin Business Journal, and wanted to pass along this posting today that I found…

Monday, July 14, 2008 – 12:38 PM CDT

Study: Most middle-class retirees will outlive savings

Austin Business Journal

Almost three out of five new middle-class retirees will outlive their financial assets if they keep up their pre-retirement ways of living, according to an Ernst & Young LLP study on behalf of Americans for Secure Retirement.

The study found that Washington, D.C. residents, along with those from Rhode Island, Utah and New York, are the least likely to outlive retirement savings.

But on average, middle-income Americans entering retirement now will have to reduce their standard of living by an average of 24 percent to ensure they don’t outlive their financial assets.

“Many Americans envision a retirement where their lifestyle continues much as before,” says Tom Neubig of Ernst & Young. “Our work shows that this is not a realistic expectation and that, with the current state of savings and potentially very long life expectancies, many retirees will have to cut back far more on expenditures than they had ever expected.”

People seven years out from retirement will have to reduce their standard of living an average of 37 percent, the study says.

Retirees with a guaranteed source of retirement income beyond Social Security are more likely to salvage their assets.

“As a guaranteed source of retirement income, life annuities relieve the risks and burdens of managing a nest egg and can maximize savings’ value over the course of an individual’s retirement years,” says Joe Reali, chairman of the D.C.-based Americans for Secure Retirement coalition.

The study found that Montana, Wyoming and South Dakota citizens have the highest likelihood of outliving retirement savings.

Under legislation before Congress, The Retirement Security for Life Act would create federal tax incentives that encourage Americans to invest retirement assets in an individual life annuity.

Americans for Secure Retirement bills itself as a coalition of more than 50 organizations representing women’s, small business, agriculture, Hispanic, and African-American groups, as well as the life insurance industry.

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Why a Pre-Mixed Portfolio/Target Date Portfolio?

Posted on July 10, 2008. Filed under: -- Building Wealth, -- Money Help (in simple terms), -- YOUR Retirement | Tags: , , , , |


By Molly Greaves

These portfolios are becoming more and more popular. The wonderful thing about them, is that you only have to decide on ONE thing: When are you going to retire? They’re especially great for people that dont understand how to choose their own funds, but understand the importance of investing and still want to be able to participate.

They’re designed to help you achieve the right mix of investments for your 410(k) (for example) based on when you want to retire.   They grow more conservative as your retirement date nears. So, as the years go on, these people called fund managers, will adjust your allocation (your mixture of stocks, bonds, and cash reserves) as you get closer to your retirement date, so you have less risk.

Which Fund is right for YOU?!

Find your current age using the chart below (that I got from Vanguard’s website). You’ll be able to then see the approximate amount of years until you retire (of course this varies with each person, but this is following standard US typical guidelines) and also the recommended fund for YOU based on the age you’ve selected. 

Fund Name Your Current Age Years to Retirement
Vanguard® Target Retirement 2050 Fund 18–25 About 44
Vanguard® Target Retirement 2045 Fund 26–30 About 37
Vanguard® Target Retirement 2040 Fund 31–35 About 32
Vanguard® Target Retirement 2035 Fund 36–40 About 27
Vanguard® Target Retirement 2030 Fund 41–45 About 22
Vanguard® Target Retirement 2025 Fund 46–50 About 17
Vanguard® Target Retirement 2020 Fund 51–55 About 12
Vanguard® Target Retirement 2015 Fund 56–60 About 7
Vanguard® Target Retirement 2010 Fund 61–65 About 2
Vanguard® Target Retirement 2005 Fund 66–71 In retirement
Vanguard® Target Retirement Income Fund 72+ In retirement

Although the above suggests the Target Fund 2045 for me, since I am 26,  I also used other thought when deciding which account was right for me, in case you’re interested at all.

I am 26 years old, and although I’d love to say I could retire  tomorrow, I most likely wont be able to do that, so I invest money when I can and enjoy, moving and playing with what I’ve accumulated. Within my portfolio mixture, I do have some money in a Target 2045 Fund with Vanguard.

I selected the 2045 Fund for a few reasons. I know that’s far away, but that is the fund associated with my age. Another reason,  I like it for me is because it is also more aggressive than let’s say a 2015 Fund. That’s because people that retire in 2015 will be retiring 30 years earlier than those at 2045. Therefore, their portfolio mix should be less aggressive since they don’t have as much time to ride out the ups and downs. That means that people retiring in 2015 would have much more bonds than stocks in their portfolio mix, whereas the opposite is true for 2045 retirees.

The above chart is just a recommendation. Heck you could be 26 and already retired. That’s why I’ve been thinking about becoming more aggressive and moving the money from my Target 2045 Fund to the 2050 fund, which would expose me to more stocks and less bonds.

Let’s take a peak at how the average asset allocation portfolio looks for the 2015 and 2045 Funds. Again,I’m using examples from Vanguard’s actual accounts.

  Target Retirement 2045 Target Retirement 2015
Effective Date 05/31/2008 05/31/2008
Stocks 89.73% 63.30%
Bonds 10.01% 36.69%
Short-Term Investments 0.26% 0.01%
Other 0.00% 0.00% —        

 

Notice the difference between the % of stocks vs bonds in each account. See how the 2015 account becomes less aggressive as you get closer to retirement?  There become more bonds and less stocks with time to help safeguard your money as you get closer to retirement.

**If you’d like to take this information to the next level, the breakdown of the specific funds this account invests in are listed below:    

                                                             2015 FUND’S INVESTMENTS:   

                                                                    As of: 5/31/2008                                   

          

Ranking By Percentage Fund Percentage
1 Vanguard Total Stock Market Index Fund 50.9%
2 Vanguard Total Bond Market Index Fund 36.7%
3 Vanguard European Stock Index Fund 6.8%
4 Vanguard Pacific Stock Index Fund 3.0%
5 Vanguard Emerging Markets Stock Index Fund 2.6%
Total 100.0%            

 

                                                                           2045 FUND’S INVESTMENTS:
                                                                                    As of: 5/31/2008   
Ranking By Percentage Fund Percentage
1 Vanguard Total Stock Market Index Fund 72.1%
2 Vanguard Total Bond Market Index Fund 10.0%
3 Vanguard European Stock Index Fund 9.7%
4 Vanguard Pacific Stock Index Fund 4.4%
5 Vanguard Emerging Markets Stock Index Fund 3.8%
Total 100.0%            

 

Now, let’s compare their returns. Here are some historicals on them:
Target Retirement 2045 Target Retirement 2015  
Year To Date –2.25%    
1 Year –3.51%    
3 Year 9.56%    
5 Year    
10 Year    
Since Inception 10.56%    
Inception Date 10/27/2003 10/27/2003
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INFLATION–Current Rate AND Keeping YOUR Purchasing Power…

Posted on July 10, 2008. Filed under: -- Building Wealth, -- For The Investor In YOU, -- Money Help (in simple terms), -- Saving Money And YOU, -- YOUR Retirement | Tags: , , , |


 

By Molly Greaves

If the inflation rate grows faster than your investment’s rate of return, it can cause your savings–and your purchasing power–to erode. To maintain your purchasing power, you need to earn a rate of return higher than the inflation rate. Currently, the US inflation rate is about 4%. 

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What is COMPOUNDING INTEREST and How It Can Benefit YOU!

Posted on July 10, 2008. Filed under: -- Building Wealth, -- For The Investor In YOU, -- Investing, -- Money Help (in simple terms), -- YOUR Retirement | Tags: , , , , |


 

By Molly Greaves

If read my posts regularly, you’ve probably noticed that I always say ” if time is on your side.” That’s because when you’re so lucky and don’t even realize the opportunities you have to create a large abundance of wealth. That’s because the sooner you start saving, the more time your money has to compound.

Compounding occurs when the money you invest earns money–such as interest in a savings account or returns on your 401(k) investments– and those earnings in turn earn money. In other words, the more you save now, the more compounding can increase your savings. 

Let’s apply it to real-life.

Start at 20, and set aside 15% of everything you earn (including gifts and such) and you will be in good shape at retirement. Wait until you’re 40, and it will be 25% or more of every dollar earned. Wait until 50, and it will be 45% of every dollar earned.

You can look at it this way too. If you invest $1,000 per year in a tax-deferred account that earns 7% a year beginning at age 25, you will end up with $199,635. If you invest the same amount, starting at age 40, and you’ll end up with only $63,249.

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WHY I LOVE ROTH IRAs!

Posted on July 10, 2008. Filed under: -- Building Wealth, -- For The Investor In YOU, -- Money Help (in simple terms), -- Saving Money And YOU, -- YOUR Retirement | Tags: , , , , |


by Molly Greaves

Unlike a 401(k) you get no tax break on the dollars you put into the Roth, but you get to withdraw your money tax-free when you retire.  I think it’s a great hedge against higher taxes in the future. I dont know about you, but I only see them continuing to rise as the years go by. 

Also, a Roth IRA is just about the best financial gift you could ever give to your kids. 

Here’s why: Your assets in your Roth dont have to be tapped at any time during your lifetime, should you be so lucky, and when your kids inherit them, they can withdraw the money tax-free.

Compare that to a regular IRA. If you own this investment vehicle, you’ll have to start taking out distributions from the account starting April 1 of the year AFTER you turn 70 1/2, even if you dont need the money. And then, once your kids inherit the money, they will have to pay income taxes on the money when they take it out. So, they’ll end up with a LOT less. 

If you’re already seeking an employer’s full match, I would recommend putting the rest in the Roth until that is maxed out.  More to be added to this topic…much more.

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Saving For Retirement Is As Important As Watching Your Health

Posted on July 7, 2008. Filed under: -- Building Wealth, -- Money Help (in simple terms), -- YOUR Retirement | Tags: , , , , |


By Molly Greaves

Saving for retirement is important for a future full of abundance and peace. People today are outliving their money more than ever before, so don’t let it happen to you.

Make time to think about your financial priorities and about how you can save more toward your future.  It’s as important as setting time aside each day to exercise and eat healthy. You are practicing “preventative care” as much as you can for your body, but don’t forget that you also need to think about, and set aside money for, all of the other things in life, like your home, bills, etc.  Think of it as “preventative measures” making sure you aren’t 89, starving and unable to afford air conditioning!

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Quick, Easy Advice for your 401(k)s and IRAs

Posted on July 7, 2008. Filed under: -- Building Wealth, -- Uncategorized, -- YOUR Retirement | Tags: , , , , , |


 

By Molly Greaves

MY ADVICE ON GROWING IT:

1. First put enough in to make sure that you receive your employer’s full company match. Their match is like getting a 100% return on your money. How else do you get that?

2. Then invest as much as you can in an IRA, in which case I recommend a Roth IRA.  The government sets a limit on how much you can contribute to a Roth. That limit is $5,000 in 2008.  You can contribute the full $5,000 in 2008 as long as your income falls below $101,000 if you’re single, and $159,000 if you’re married filing a joint tax return. 

***Get this…If a 25-year-old contributes $5,000 each year until she retires and makes an average annual return of 8% on her investment, she’ll have $1.4 million saved by the time she retires at age 65.  That’s just by saving $13.70 a day ($5,000 / 365= $13.70/per day). The BEST part is that the money is all hers — she won’t have to give the IRS a cent of her money because she already paid taxes upfront on her money, and the BEST PART of owning a Roth is that there are NO CAPITAL GAINS taxes!   Whoohoo, is that A BEAUTIFUL CONCEPT. 

3. If after you’ve put $5,000 in your Roth IRA, you can still squeeze more into your savings, congratulations to you. I’d pump your extra stash back into your 401(k) to get that maxed out too. The guidelines for 2008  401k contributions has a  $15,500 limit. And, yes, this is the same amount as in 2007, so don’t be confused. 

MY THOUGHTS ON HOW TO PROTECT AND KEEP YOUR MONEY

1. When you switch jobs, make sure you take your 401k stash with you—assuming you’re in the positive. You’ll be allowed to do what’s called a rollover, which is very simple and doesnt take much time at all, and the payoff is certainly worth your time. 

2. Know when it makes sense to convert to a Roth. You should note that you can ROLL your 401k money  into a new or existing ROTH IRA, and if you do so, the amount you ROLLOVER will NOT be considered part of your $5000 contribution limit.

You’d take your 401k money, and simply pay the taxes on it to get it properly into your ROTH IRA, which would be very simple, and worth doing. Takes just a few minutes on the phone with a friendly investment company like Vanguard, and they’ll get you all set up. It stinks that we have to pay those taxes to get it converted, but that’s what comes along with TAX-DEFERRED accounts. That’s why I LOVE the ROTH.

3. Try to never withdraw money from your retirement accounts, EVER.  AND Try to NEVER pay penalties. STOP SPENDING MONEY YOU DON’T HAVE.

My Thoughts On Cashing Out:

1. Unlike other retirement vehicles, you wont ever be forced to withdraw money from your Roth IRA, so tap this account last so it can stay compounding and growing for you.

2. Spend down your taxable savings first. Let your IRAs and 401(k)s keep on growing.

3. Move to tax-deferred accounts when you can. If you aren’t sure how to do this, seek professional help to make sure you are doing everything the most tax efficient way. I always use Vanguard. http://www.vanguard.com

 

http://www.irs.gov/publications/p590/ch02.html#d0e9113

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