My husband and I have been married for 25 years. We do not have children together, but he has children from a previous marriage.
We are retired now, and he bought property in Florida for us to live in. My name is not on the deed of the property, and he has not made a will yet. I keep complaining to him about it.
If he should die without a will, will his adult children and grandchildren be entitled to the property and house? Hopefully, you will be able to answer this question and set my mind at ease.
Your husband appears to have control issues at worst or, at best, problems with being direct and transparent. This is not the way to deal with a family property, especially after 25 years of marriage. If your husband wants his children to inherit his estate when he is gone, he should discuss it with you like a man (or woman), face to face, and you should outline a plan for your future together. But this game of cat and mouse, where he makes unilateral decisions about your future, is not a respectful or helpful way to conduct a 25-year marriage.
Not knowing if youâre going to have a place to live after your husband dies, assuming he predeceases you, creates a constant feeling of unease. The whole point of saving for retirement and being fortunate enough to retire comfortably is that you can see out your final years together with the knowledge that you will both be financially secure. Only one person in this relationship knows what that feels like â and, given that you have raised this issue with him, he is aware that you do not enjoy that same peace of mind.
Florida is an equitable distribution state and, for the most part, divides property 50/50. Hereâs the legal interpretation fromÂ Schnauss Naugle LawÂ in Jacksonville, Fla.: âIf the decedentâs homestead property was titled in the decedentâs name alone, and if the decedent was survived by a spouse and descendants, the surviving spouse will have the use of the homestead property for his or her lifetime only (or a life estate), with the decedentâs descendants to receive the decedentsâ homestead property only after the surviving spouse dies.â
You will have the right to live in this property for the remainder of your life. If you divorce, however, anything purchased during your marriage is considered marital property, and even though this home was purchased in your husbandâs name only, it would be divided 50/50. In Florida, âequitable distributionâ is mostly treated as âequal distribution.â According to this interpretation of family law in Florida byÂ Arwani Law: âEven if he purchases the car with his own money and puts the car title in his wifeâs name, it is still considered marital property.â
And as most lawyers will tell you, a lack of communication is one way of buying a ticket to divorce.
The post My Husband Bought a Retirement Property, but Only Put His Name on the Deed. Will His Adult Children Inherit This Home? appeared first on Real Estate News & Insights | realtor.comÂ®.
If you’re thinking about how much is enough for retirement, you’re probably contemplating a retirement and need to know how to pay for it. If you are, that’s good because one of the challenges we face is how we’re going to fund our retirement.
Determining then how much retirement savings is enough depends on a number of factors, including your lifestyle and your current income. Either way, you want to make sure that you have plenty of money in your retirement savings so you don’t work too hard, or work at all, during your golden years.
If you’re already thinking about retirement and you’re not sure whether your savings is in good shape, it may make sense to speak with a financial advisor to help you set up a savings plan.
Check Out Now
5 Tips to Optimize Your Retirement Account Withdrawals Read Now
People Who Retire Comfortably Avoid These Financial Advisor Mistakes
How Much Is Enough For Retirement?
Your needs and expectations might be different in retirement than others. Because of that, there’s no magic number out there. In other words, how much is enough for retirement depends on a myriad of personal factors.
However, the conventional wisdom out there is that you should have $1 million to $1.5 million, or that your retirement savings should be 10 to 12 times your current income.
Even $1 million may not be enough to retire comfortably. According to a report from a major personal finance website, GoBankingRates, you could easily blow $1 million in as little as 12 years.
GoBankingRates concludes that a better way to figure out how long $1 million will last you largely depends on your state. For example, if you live in California, the report found, “$1 Million will last you 14 years, 3 months, 7 days.” Whereas if you live in Mississippi, “$1 Million will last you 23 years, 2 months, 2 days.” In other words, how much is enough for retirement largely depends on the state you reside.
For some, coming up with that much money to retire comfortably can be scary, especially if you haven’t saved any money for retirement, or, if your savings is not where it’s supposed to be.
How to Become a 401(k) Millionaire
Early Retirement: 7 Steps to Retire Early
5 Reasons Why You Will Retire Broke
Your current lifestyle and expected lifestyle?
What is your current lifestyle? To determine how much you need to save for retirement, you should determine how much your expenses are currently now and whether you intend to keep the current lifestyle during retirement.
So, if you’re making $110,000 and live off of $90,000, then multiply $90,000 by 20 ($1,800,000). With that number in mind, start working toward a retirement saving goals. However, if you intend to eat and spend lavishly during retirement, then you’ll obviously have to save more. And the same is true if you intend to reduce your expenses during retirement: you can save less money now.
The best way to start saving for retirement is to contribute to a tax-advantaged retirement account. It can be a Roth IRA, a traditional IRA or a 401(k) account. A 401k account should be your best choice, because the amount you can contribute every year is much more than a Roth IRA and traditional IRA.
1. See if you can max out your 401k. If you’re lucky enough to have a 401k plan at your job, you should contribute to it or max it out if you’re able to. The contribution limit for a 401k plan if you’re under 50 years old is $19,000 in 2019. If you’re funding a Roth IRA or a traditional IRA, the limit is $6,000. For more information, see How to Become a 401(k) Millionaire.
2. Automate your retirement savings. If you’re contributing to an employer 401k plan, that money automatically gets deducted from your paycheck. But if you’re funding a Roth IRA or a traditional IRA, you have to do it yourself. So set up an automatic deposit for your retirement account from a savings account. If your employer offers direct deposit, you can have a portion of your paycheck deposited directly into that savings account.
Related: The Best 5 Places For Your Savings Account.
How long do you expect to live? Have your parents or grandparents lived through 80’s or 90’s or 100’s? If so, there is a chance you might live longer in retirement if you’re in good health. Therefore, you need to adjust your savings goal higher.
Consider seeking financial advice.
Saving money for retirement may not be your strong suit. Therefore, you may need to work with a financial advisor to boost your retirement income. For example, if you have a lot of money sitting in your retirement savings account, a financial advisor can help with investment options.
Figuring out how much is enough for retirement depends on how much retirement will cost you and what lifestyle you intend to have. Once you know the answer to these two questions, you can start working towards your savings goal.
How much money you will need in retirement? Use this retirement calculator below to determine whether you are on tract and determine how much you’ll need to save a month.
More on retirement:
Find Out Now 7 Questions People Forget to Ask Their Financial Advisors
7 Mistakes Everyone Makes When Hiring a Financial Advisor
Compare Fiduciary Financial Advisors — Start Here for Free.
7 Situations When You Need a Financial Advisor â Plus How to Find One Read More
5 Tips to Optimize Your Retirement Account Withdrawals Read Now
People Who Retire Comfortably Avoid These Financial Advisor Mistakes
Working With The Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post How Much Is Enough For Retirement? appeared first on GrowthRapidly.
Iâm a 34-year-old man who just started saving for retirement last year after getting married. My husband is 39 and has been saving for some time. My question is about Social Security. Should someone in our age group expect to receive it at all? Iâm always hearing about how Social Security is going broke.Â
Weâre both somewhat behind on where we should be on retirement. If we canât rely on getting Social Security checks when weâre older, how much more should we be saving? We donât want to live on rice and beans in retirement, but we also want to have enough money to enjoy life now.
Of all the things that keep me up at night, Social Securityâs solvency isnât one of them. At 37, Iâm just a tad older than you. I expect to get benefits someday, and you and your husband should, too.
Thereâs a kernel of truth to the stories you hear about Social Security running dry. Itâs starting to pay out more than it takes in, thanks mostly to people living longer and having fewer children who eventually pay in. Widespread job losses due to the pandemic probably accelerated things a bit.
But weâre still funding Social Security with our payroll taxes. Itâs just that if Social Securityâs reserves were completely depleted, our payroll taxes would only fund about 79% of obligations through 2090. Thatâs in the event that Congress takes zero action to shore up more money, which is highly unlikely given that Social Security is the most sacred of all social programs.
My bigger worry for young-ish workers like us is that our benefits wonât go very far. Even for our parents and grandparents who currently receive benefits, Social Security by itself makes for a meager retirement. The average retiree benefit in January 2021 is just $1,543 per month, or $18,516 annually. Social Security estimates that current benefits cover about 40% of an average workerâs pre-retirement income.
Those benefits buy less and less every year. Health care costs, which eat up a huge chunk of retireesâ budgets, rise way faster than Social Security benefits.
The 2021 cost-of-living adjustment was just 1.3%. Ask any retiree whether thatâs adequate to cover their rising living costs. The younger you are, the less of your income you should expect your benefits to replace.
So while I think you should expect to receive Social Security someday, I donât think it should factor into how much you save today. Knowing nothing about your budget or spending, Iâll give you the standard recommendation: Aim to save 15% of your pre-tax income for retirement. If you get an employer 401(k) match, make sure you contribute to enough to get your companyâs full contribution. Once youâve done that, make sure you have at least three monthsâ worth of emergency savings before you invest more for retirement. That protects your retirement funds so you donât have to tap them when times are tough.
If you can comfortably save more, great. If 15% isnât doable right now, figure out whatâs manageable and work your way up. For example, you could commit to putting half of your next raise toward your retirement account.
Unfortunately, thereâs no level of savings that guarantees you wonât have a rice and beans retirement. The younger you are, the more guesswork goes into retirement planning.
My life plans, at least as told to my Roth IRA brokerage, are as follows: work until age 67, delay Social Security until 70, die at 92. If everything goes as planned, Iâll die with millions. But really all of the above is just wishful thinking on my part. The picture changes drastically if Iâm forced to retire early, take Social Security sooner and stretch my savings over more years than I expected. Or if a prolonged bear market hits right as Iâm starting to withdraw my retirement money.
All that certainly supports the argument that you should save as much as you can muster as early as possible. But too often in personal finance, we only focus on the retirement years, assuming that theyâre guaranteed. The truth is, life can be snatched from us at any moment. So I also want you to have enough room to spend so that you can enjoy life now.
That doesnât mean you get free rein to spend. But if you focus on what really matters to you, I think you can strike that balance.
Youâre 34. You donât have to figure out your entire retirement plan right now. Focus on making saving a regular habit, and you can figure out the specific pieces as retirement gets closer.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to AskPenny@thepennyhoarder.com.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Can you retire at 50? On average, people usually retire at 65. But what if you want to retire 15 years earlier than that likeÂ at 50? Is it doable? Below are 10 easy steps to take to retire at 50.Â Retiring early can be challenging. Therefore, SmartAsset’s free tool can match you with Â a financial advisor who can help to work out and implement a retirement income strategy for you to maximize your money.
10 Easy & Simple Steps to Retire at 50:
1. How much you will need in retirement.
The first thing to consider is to determine how much you will need to retire at 50. This will vary depending on the lifestyle you want to have during retirement. If you desire a lavish one, you will certainly need a lot.
But according to a study by SmartAsset, 500k was found to be enough money to retire comfortably. But again that will depends on several factor.
For example, you will need to take into account where you want to live, the cost of living, how long you expect to live, etc.
Read: Can I Retire at 60 With 500k? Is It Enough?
A good way to know if 500k is possible to retire on is to consider the 4% rule. This rule is used to figure out how much a retiree should withdraw from his or her retirement account.
The 4% rule states that the money in your retirement savings account should last you through 30 years of retirement if you take out 4% of your retirement portfolio annually and then adjust each year thereafter for inflation.
So, if you plan on retiring at 50 with 500k for 30 years, using the 4% rule you will need to live on $20,000 a year.Â
Again, this is just an estimation out there. You may need less or more depending on the factors mentioned above. For example, if you’re in good health and expect to live 40+ years after retiring at 50, $500,000 may not be enough to retire on. That’s why it’s crucial to work with a financial advisor.
Get Matched With 3 Fiduciary Financial Advisors
Managing your finances can be overwhelming. We recommend speaking with aÂ financial advisor. TheÂ SmartAssetâs free matching toolÂ will pair you with up to 3 financial advisors in your area.
Hereâs how it works:
1.Â Answer these few easy questionsÂ about your current financial situation
2. In just under one minute, the tool will match you with up to three financial advisors based on your need.
3. Review the financial advisors profiles, interview them either by phone or in person, and choose the one that suits yourâ needs.
Get Started Now>>>
2. Maximize your tax-advantaged retirement accounts.
Once you have an idea of how much you need in order to retire at 50, your next step is to save as much as possible at a faster rate. If you are employed and you have a 401k plan available to you, you should definitely participate in it. Nothing can grow your retirement savings account faster than a 401k account.
See: How to Become a 401k Millionaire.
That means, you will need to maximize your 401k contributions, for example. In 2020, and for people under 50, the 401k contribution limit is $19,500. Also, take advantage of your company match if your employee offers a match.
In addition to the maximum contribution of $19,500, your employer also contributes. Sometimes, they match dollar for dollar or 50 cents for each dollar the worker pays in.
In addition to a 401k plan, open or maximize your Roth or traditional IRA. For an IRA, it is $6,000. So, by maximizing your retirement accounts every year, your money will grow faster.
3. Invest in mutual or index funds. Apart from your retirement accounts (401k, Roth or Traditional IRA, SEP IRA, etc), you should invest in individual stocks or preferably in mutual funds.Â
4. Cut out unnecessary expenses.
Someone with the goal of retiring at 50 needs to keep an eye on their spending and keep them as low as possible. We all know the phrase, “the best way to save money is to spend less.”
Well, this is true when it comes to retiring 15 years early than the average. So, if you don’t watch TV, cancel Netflix or cable TV. If your cell phone bill is high, change plans or switch to another carrier. Don’t go to lavish vacations.
5. Keep an eye on taxes.
Taxes can eat away your profit. The more you can save from taxes, the more money you will have. Retirement accounts are a good way to save on taxes. Besides your company 401k plan, open a Roth or Traditional IRA.
6. Make more money.
Spending less is a great way to save money. But increasing your income is even better. If you need to retire at 50, you’ll need to be more aggressive. And the more money you earn, the more you will be able to save. And the faster you can reach your early retirement goal.
7. Speak with a financial advisor.
Consulting with a financial advisor can help you create a plan to. More specifically, a financial advisor specializing in retirement planning can help you achieve your goals of retiring at 50. They can help put in a place an investment strategy to put you in the right track to retire at 50. You can easily find one in your local area by using SmartAsset’s free tool. It matches users with financial advisors in just under 5 minutes.
8. Decide how you will spend your time in retirement.
If you will spend a lot of time travelling during retirement, then make sure you do research. Some countries like the Dominican Republic, Mexico, Panama, the Philippines, and so many others are good places to travel to in retirement because the cost of living is relatively cheap.
While other countries in Europe can be very expensive to travel to, which can eat away your retirement money. If you decide to downsize or sell your home, you can free up more money to spend.
9. Financing the first 10 years.
There is a penalty of 10% if you cash out your retirement accounts before you reach the age of 59 1/2. Therefore, if you retire at 50, you’ll need to use money in other accounts like traditional savings or brokerage accounts.
10.Put your Bonus, Raise, & Tax Refunds towards your retirement savings.
If retiring at 50 years old is really your goal, then you should put all extra money towards your retirement savings. That means, if you receive a raise at work, put some of it towards your savings account.
If you get a tax refund or a bonus, use some of that money towards your retirement savings account. They can add up quickly and make retiring at 50 more of a reality than a dream.
Retiring at 50: The Bottom Line:
So can I retire at 50? Retiring at 50 is possible. However, it’s not easy. After all, you’re trying to grow more money in less time. So, it will be challenging and will involve years of sacrifices, years living below your means and making tough financial decisions. However, it will be worth it in the long run.
How Much Is Enough For Retirement
How to Grow Your 401k Account
People Who Retire Comfortably Avoid These Financial Advisor Mistakes
5 Simple Warning Signs Youâre Definitely Not Ready for Retirement
Speak with the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning to retire at 50, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post How To Retire At 50: 10 Easy Steps To Consider appeared first on GrowthRapidly.
For those who are caring for their aging parents and raising kids at the same time, it can often seem like there’s never enough time, money, or energy to provide for all the family members who need you. In particular, handling finances when two different generations are relying on you can feel like an impossible balancing act — not to mention an exercise in feeling guilty no matter what you do.
But being the caregiver sandwiched between two generations makes it even more important for you to prioritize your own financial needs, especially when it comes to retirement planning. By protecting your retirement during this difficult season of your life, you’ll be in a better place to remain independent as you age, launch your kids into a more secure adulthood, and offer ongoing support to your parents.
Sound impossible? It’s not. Here’s how you can protect your retirement if you’re a member of the sandwich generation.
Retirement savings comes first
Retirement savings should get priority ahead of putting money into your kids’ college funds. You know that already. Your kids can take on loans for college, but there are no loans available to pay for your retirement.
The more difficult decision is prioritizing retirement savings ahead of paying for long-term care for your parents. That can feel like a heartless choice, but it is a necessary one to keep from passing money problems from one generation to the next. Forgoing your retirement savings during your 40s and 50s means you’ll miss out on long-term growth and the benefits of compound interest. By making sure that you continue to set aside money for retirement, you can make sure your kids won’t feel financially squeezed as you get older.
Instead of personally bankrolling your parents’ care, use their assets for as long as they last. That will not only allow you to make the best use of programs like Medicaid (which requires long-term care recipients to have exhausted their own assets before it kicks in), but it will also protect your future.
Communication is key
Part of the stress of being in the sandwich generation is feeling like the financial burdens of two generations (as well as your own) are resting entirely on your shoulders. You feel like you’ll be letting down the vulnerable people you love if you can’t do it all. But the truth is that you can’t do it all. And you shouldn’t expect that of yourself, nor should your family expect it of you. So communicating with your loved ones about what they can expect can help you draw important boundaries around what you’re able to offer them.
This conversation will be somewhat simpler with your children. You can let them know what kind of financial help they can expect from you for college and beyond, and simply leave it at that.
The conversation is a little tougher with your parents, in part because you need to ask them about nitty-gritty details about their finances. Whether or not money is a taboo subject in your family, it can be tough for your parents to let you in on important financial conversations — to them it feels like they were changing your diapers only a few short years ago.
Being in the loop on what your parents have saved, where it is, what plans they have for the future, and who they trust as their financial adviser, will help protect their money and yours. You’ll be better able to make decisions for them in case of an emergency, and being included in financial decisions means you can help protect them from scams. (See also: 5 Money Strategies for the Sandwich Generation)
Insurance is a necessity
Having adequate disability insurance in place is an important fail-safe for any worker, but it’s especially important for those who are caring for aging parents and young children. The Council for Disability Awareness reports that nearly one in four workers will be out of work for at least a year because of a disabling condition. With parents and children counting on your income, even a short-term disability could spell disaster, and force you to dip into your retirement savings to keep things going. Making sure you have sufficient disability income insurance coverage can help make sure you protect your family and your retirement if you become disabled.
Life insurance is another area where you don’t want to skimp. With two generations counting on you, it’s important to have enough life insurance to make sure your family will be okay if something happens to you. This is true even if you’re a full-time unpaid caregiver for either your parents or your children, since your family will need to pay for the care you provide even if they aren’t counting on your income.
It’s also a good idea to talk to your parents about life insurance for them, if they’re able to qualify. For aging parents who know they will draw down their assets for long-term care, a life insurance policy can be a savvy way to ensure they leave some kind of inheritance. If your parents are anxious about their ability to leave an inheritance, a life insurance policy can help to relieve that money stress and potentially make it emotionally easier for them to draw down their own assets.
Become a Social Security and Medicare expert
Spending time reading up on Social Security, Medicare, and other programs can help you to make better financial decisions for your parents and yourself. There are a number of misconceptions, myths, and misunderstandings masquerading as facts about these programs, and knowing exactly what your parents (and eventually you) will be entitled to can help make sure you don’t leave money on the table or make decisions based on bad information.
The eligibility questionnaires at benefits.gov can help you determine what benefits are available and whether your parents qualify. In addition, it’s a good idea to sign up for a my Social Security account for yourself. This site will provide you with personalized estimates of future benefits based on your lifetime earnings, which can better help you prepare for your own retirement.
Don’t be afraid to ask for help
Caring for children and parents at the same time is exhausting. Don’t compound the problem by thinking you have to make financial decisions all by yourself. Consider interviewing and hiring a financial adviser to help you make sense of the tough choices. He or she can help you figure out the best way to preserve your assets, help your parents enjoy their twilight years with dignity, and plan for your children’s future.
Even if a traditional financial adviser isn’t in the cards for you, don’t forget that you can ask for help among your extended family and network of friends. There’s no need to pretend that juggling it all is easy. Family can potentially offer financial or caregiving support. Knowledgeable friends can steer you toward the best resources to help you make decisions. Relying on your network means you’re less likely to burn out and make disordered financial decisions. (See also: 9 Simple Acts of Self-Care for the Sandwich Generation)
Like this article? Pin it!
This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:
5 Ways Gig Economy Workers Can Save for Retirement
How to Save for Retirement While Caring for Kids and Parents
401K or IRA? You Need Both
7 Retirement Planning Steps Late Starters Must Make
The age of the pension has swiftly declined since the 1980s, and more Americans than ever before must invest in their own retirement. Retirement planning and investing is crucial, as it can help you get through your golden years comfortably.
When you have many other financial obligations, it can be difficult to set aside funds for retirement. But some credit cards can help by earning rewards that can be redeemed directly into an investment account.
Here are three credit cards with retirement or investing rewards.
Fidelity Rewards Visa Signature Credit Card
Rewards: Two points per dollar spent on all purchases.
Sign-Up Bonus: None
Annual Fee: $0
Annual Percentage Rate (APR): Variable 15.24% APR on purchases and balance transfers.
Why We Picked It: You can redeem your rewards directly into Fidelity retirement accounts. For Your Retirement: Every purchase earns two rewards points on the dollar. Points can be redeemed as deposits into eligible Fidelity retirement accounts, including a Traditional IRA, Roth IRA, Rollover IRA, or SEP IRA. Every $2,500 you spend is worth a $50 rewards deposit. Drawbacks: If you arenât a Fidelity member, you wonât see much value from this card.
Bank Americard Cash Rewards Credit Card
Rewards: 3% cash back on gas and 2% cash back at grocery stores and wholesale clubs on up to $2,500 in purchases each quarter; 1% back on all other purchases.
Signup Bonus: $150 bonus cash if you spend $500 in the first 90 days. Annual Fee: None
APR: 0% APR for 12 months on purchases and balance transfers, then variable 14.24% to 24.24% APR.
Why We Picked It: Merrill Lynch investors can use this card to boost their investments. For Your Retirement: If you use a Merrill Lynch Cash Management Account to invest in your retirement, this card can help you increase your contributions. Cash back can be redeemed for an electronic deposit into an eligible Cash Management Account, and those redemption types earn an extra 10% bonus every time you redeem. Drawbacks: If you donât have an eligible Bank of America or Merrill Lynch account, youâll lose out on the 10% redemption bonus.
Edward Jones World Card
Rewards: One point per dollar spent on all purchases.
Signup Bonus: $100 account deposit if you spend $500 in the first 90 days. Annual Fee: None
APR: Variable 14.24% APR on purchases; 0% APR for 12 months on balance transfers, then variable 14.24% APR.
Why We Picked It: Edward Jones members can redeem rewards for account deposits. For Your Retirement: Every purchase you make earns one point on the dollar. Your points can be redeemed for cash deposits into an eligible Edward Jones account, including IRAs. Drawbacks: You can only access this card if youâre an Edward Jones customer.
Choosing a Credit Card to Help You Save for Retirement
There are many ways to save for retirement: 401(k) plans, IRAs, and more. If you arenât saving for retirement yet (or you think you need to save more), the time to start is now. The earlier you begin, the better shot you have of reaching your retirement goals. Until you decide on the best investment strategy, credit cards should be a secondary concern at best.
When you set up an investment account, you should understand all the different ways you can contribute, and find out if credit card rewards are an option (some investment accounts are more flexible than others).
Credit cards that let you directly redeem your rewards for an investment deposit are convenient, but theyâre not the only way to contribute rewards to retirement. If you have a retirement account that accepts cash contributions, you can simply redeem any credit cardâs cash back rewards for a check or bank deposit, then turn around and put that money in your account.
Whether you choose a rewards card with investment redemptions or not, try to find one that fits your spending habits. If you spend the most money at one or two merchant types, you should try to find a card that rewards those purchases. If your spending is unpredictable, you should find a card with a flat rewards rate on every purchase.
What Is Required to Get a Credit Card for Retirement Investing?
The best rewards cards require good or excellent credit. Before you apply, you should check your credit score to see if youâll make the cut. You can check your credit score for free at Credit.com.
You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.
Note: Itâs important to remember that interest rates, fees, and terms for credit cards, loans, and other financial products frequently change. As a result, rates, fees, and terms for credit cards, loans, and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees, and terms with credit card issuers, banks, or other financial institutions directly.
The post 3 Credit Cards for Retirement Investing appeared first on Credit.com.
You probably donât need us to tell you that the earlier you start saving for retirement, the better. But letâs face it: For a lot of people, the problem isnât that they donât understand how compounding works. They start saving late because their paychecks will only stretch so far.
Whether youâre in your 20s or your golden years are fast-approaching, saving and investing whatever you can will help make your retirement more comfortable. Weâll discuss how to save for retirement during each decade, along with the hurdles you may face at different stages of life.
How Much Should You Save for Retirement?
A good rule of thumb is to save between 10% and 20% of pre-tax income for retirement. But the truth is, the actual amount you need to save for retirement depends on a lot of factors, including:
Your age. If you get a late start, youâll need to save more.
Whether your employer matches contributions. The 10% to 20% guideline includes your employerâs match. So if your employer matches your contributions dollar-for-dollar, you may be able to get away with less.
How aggressively you invest. Taking more risk usually leads to larger returns, but your losses will be steeper if the stock market tanks.
How long you plan to spend in retirement. Itâs impossible to predict how long youâll be able to work or how long youâll live. But if you plan to retire early or people in your family often live into their mid-90s, youâll want to save more.
How to Save for Retirement at Every Age
Now that youâre ready to start saving, hereâs a decade-by-decade breakdown of savings strategies and how to make your retirement a priority.
Saving for Retirement in Your 20s
A dollar invested in your 20s is worth more than a dollar invested in your 30s or 40s. The problem: When youâre living on an entry-level salary, you just donât have that many dollars to invest, particularly if you have student loan debt.
Prioritize Your 401(k) Match
If your company offers a 401(k) plan, a 403(b) plan or any retirement account with matching contributions, contribute enough to get the full match â unless of course you wouldnât be able to pay bills as a result. The stock market delivers annual returns of about 8% on average. But if your employer gives you a 50% match, youâre getting a 50% return on your contribution before your money is even invested. Thatâs free money no investor would ever pass up.
Pay off High-Interest Debt
After getting that employer match, focus on tackling any high-interest debt. Those 8% average annual stock market returns pale in comparison to the average 16% interest rate for people who have credit card debt. In a typical year, youâd expect aÂ $100 investment could earn you $8. Put that $100 toward your balance? Youâre guaranteed to save $16.
Take More Risks
Look, weâre not telling you to throw your money into risky investments like bitcoin or the penny stock your cousin wonât shut up about. But when you start investing, youâll probably answer some questions to assess your risk tolerance. Take on as much risk as you can mentally handle, which means youâll invest mostly in stocks with a small percentage in bonds. Donât worry too much about a stock market crash. Missing out on growth is a bigger concern right now.
Build Your Emergency Fund
Building an emergency fund that could cover your expenses for three to six months is a great way to safeguard your retirement savings. That way you wonât need to tap your growing nest egg in a cash crunch. This isnât money you should have invested, though. Keep it in a high-yield savings account, a money market account or a certificate of deposit (CD).
Tame Lifestyle Inflation
We want you to enjoy those much-deserved raises ahead of you â but keep lifestyle inflation in check. Donât spend every dollar each time your paycheck gets higher. Commit to investing a certain percentage of each raise and then use the rest as you please.
Saving for Retirement in Your 30s
If youâre just starting to save in your 30s, the picture isnât too dire. You still have about three decades left until retirement, but itâs essential not to delay any further. Saving may be a challenge now, though, if youâve added kids and homeownership to the mix.
Invest in an IRA
Opening a Roth IRA is a great way to supplement your savings if youâve only been investing in your 401(k) thus far. A Roth IRA is a solid bet because youâll get tax-free money in retirement.
In both 2020 and 2021, you can contribute up to $6,000, or $7,000 if youâre over 50. The deadline to contribute isnât until tax day for any given year, so you can still make 2020 contributions until April 15, 2021. If you earn too much to fund a Roth IRA, or you want the tax break now (even though it means paying taxes in retirement), you can contribute to a traditional IRA.
Your investment options with a 401(k) are limited. But with an IRA, you can invest in whatever stocks, bonds, mutual funds or exchange-traded funds (ETFs) you choose.
If you or your spouse isnât working but you can afford to save for retirement, consider a spousal IRA. Itâs a regular IRA, but the working spouse funds it for the non-earning spouse.Â
Avoid Mixing Retirement Money With Other Savings
Youâre allowed to take a 401(k) loan for a home purchase. The Roth IRA rules give you the flexibility to use your investment money for a first-time home purchase or college tuition. Youâre also allowed to withdraw your contributions whenever you want. Wait, though. That doesnât mean you should.
The obvious drawback is that youâre taking money out of the market before itâs had time to compound. But thereâs another downside. Itâs hard to figure out if youâre on track for your retirement goals when your Roth IRA is doing double duty as a college savings account or down payment fund.
Start a 529 Plan While Your Kids Are Young
Saving for your own future takes higher priority than saving for your kidsâ college. But if your retirement funds are in shipshape, opening a 529 plan to save for your childrenâs education is a smart move. Not only will you keep the money separate from your nest egg, but by planning for their education early, youâll avoid having to tap your savings for their needs later on.
Keep Investing When the Stock Market Crashes
The stock market has a major meltdown like the March 2020 COVID-19 crash about once a decade. But when a crash happens in your 30s, itâs often the first time you have enough invested to see your net worth take a hit. Donât let panic take over. No cashing out. Commit to dollar-cost averaging and keep investing as usual, even when youâre terrified.
Saving for Retirement in Your 40s
If youâre in your 40s and started saving early, you may have a healthy nest egg by now. But if youâre behind on your retirement goals, now is the time to ramp things up. You still have plenty of time to save, but youâve missed out on those early years of compounding.
Continue Taking Enough Risk
You may feel like you can afford less investment risk in your 40s, but you still realistically have another two decades left until retirement. Your money still has â and needs â plenty of time to grow. Stay invested mostly in stocks, even if itâs more unnerving than ever when you see the stock market tank.
Put Your Retirement Above Your Kidsâ College Fund
You can only afford to pay for your kidsâ college if youâre on track for retirement. Talk to your kids early on about what you can afford, as well their options for avoiding massive student loan debt, including attending a cheaper school, getting financial aid, and working while going to school. Your options for funding your retirement are much more limited.
Keep Your Mortgage
Mortgage rates are historically low â well below 3% as of December 2020. Your potential returns are much higher for investing, so youâre better off putting extra money into your retirement accounts. If you havenât already done so, consider refinancing your mortgage to get the lowest rate.
Invest Even More
Now is the time to invest even more if you can afford to. Keep getting that full employer 401(k) match. Beyond that, try to max out your IRA contributions. If you have extra money to invest on top of that, consider allocating more to your 401(k). Or you could invest in a taxable brokerage account if you want more flexibility on how to invest.
Meet With a Financial Adviser
Youâre about halfway through your working years when youâre in your 40s. Now is a good time to meet with a financial adviser. If you canât afford one, a financial counselor is typically less expensive. Theyâll focus on fundamentals like budgeting and paying off debt, rather than giving investment advice.
Saving for Retirement in Your 50s
By your 50s, those retirement years that once seemed like they were an eternity away are getting closer. Maybe thatâs an exciting prospect â or perhaps it fills you with dread. Whether you want to keep working forever or retirement canât come soon enough, now is the perfect time to start setting goals for when you want to retire and what you want your retirement to look like.
Review Your Asset Allocation
In your 50s, you may want to start shifting more into safe assets, like bonds or CDs. Your money has less time to recover from a stock market crash. Be careful, though. You still want to be invested in stocks so you can earn returns that will keep your money growing. With interest rates likely to stay low through 2023, bonds and CDs probably wonât earn enough to keep pace with inflation.
Take Advantage of Catch-up Contributions
If youâre behind on retirement savings, give your funds a boost using catch-up contributions. In 2020 and 2021, you can contribute:
$1,000 extra to a Roth or traditional IRA (or split the money between the two) once youâre 50
$6,500 extra to your 401(k) once youâre 50
$1,000 extra to a health savings account (HSA) once youâre 55.
Work More if Youâre Behind
Your window for catching up on retirement savings is getting smaller now. So if youâre behind, consider your options for earning extra money to put into your nest egg. You could take on a side hustle, take on freelance work or work overtime if thatâs a possibility to bring in extra cash. Even if you intend to work for another decade or two, many people are forced to retire earlier than they planned. Itâs essential that you earn as much as possible while you can.
Pay off Your Remaining Debt
Since your 50s is often when you start shifting away from high-growth mode and into safer investments, now is a good time to use extra money to pay off lower-interest debt, including your mortgage. Retirement will be much more relaxing if you can enjoy it debt-free.
FROM THE RETIREMENT FORUM
Re-locating 1/5/21 @ 2:53 PM
Military pension & SS 1/5/21 @ 2:55 PM
TSP and mortgage 12/23/20 @ 2:41 PM
See more in Retirement or ask a money question
Saving for Retirement in Your 60s
Hooray, youâve made it! Hopefully your retirement goals are looking attainable by now after working for decades to get here. But you still have some big decisions to make. Someone in their 60s in 2021 could easily spend another two to three decades in retirement. Your challenge now is to make that hard-earned money last as long as possible.
Make a Retirement Budget
Start planning your retirement budget at least a couple years before you actually retire. Financial planners generally recommend replacing about 70% to 80% of your pre-retirement income. Common income sources for seniors include:
Social Security benefits. Monthly benefits replace about 40% of pre-retirement income for the average senior.
Retirement account withdrawals. Money you take out from your retirement accounts, like your 401(k) and IRA.
Defined-benefit pensions. These are increasingly rare in the private sector, but still somewhat common for those retiring from a career in public service.
Annuities. Though controversial in the personal finance world, an annuity could make sense if youâre worried about outliving your savings.
Other investment income. Some seniors supplement their retirement and Social Security income with earnings from real estate investments or dividend stocks, for example.
Part-time work. A part-time job can help you delay dipping into your retirement savings account, giving your money more time to grow.
You can plan on some expenses going away. You wonât be paying payroll taxes or making retirement contributions, for example, and maybe your mortgage will be paid off. But you generally donât want to plan for any budget cuts that are too drastic.
Even though some of your expenses will decrease, health care costs eat up a large chunk of senior income, even once youâre eligible for Medicare coverage â and they usually increase much faster than inflation.
Develop Your Social Security Strategy
You can take your Social Security benefits as early as 62 or as late as age 70. But the earlier you take benefits, the lower your monthly benefits will be. If your retirement funds are lacking, delaying as long as you can is usually the best solution. Taking your benefit at 70 vs. 62 will result in monthly checks that are about 76% higher. However, if you have significant health problems, taking benefits earlier may pay off.
Use Social Securityâs Retirement Estimator to estimate what your monthly benefit will be.
Figure Out How Much You Can Afford to Withdraw
Once youâve made your retirement budget and estimated how much Social Security youâll receive, you can estimate how much youâll be able to safely withdraw from your retirement accounts. A common retirement planning guideline is the 4% rule: You withdraw no more than 4% of your retirement savings in the first year, then adjust the amount for inflation.
If you have a Roth IRA, you can let that money grow as long as you want and then enjoy it tax-free. But youâll have to take required minimum distributions, or RMDs, beginning at age 72 if you have a 401(k) or a traditional IRA. These are mandatory distributions based on your life expectancy. The penalties for not taking them are stiff: Youâll owe the IRS 50% of the amount you were supposed to withdraw.
Keep Investing While Youâre Working
Avoid taking money out of your retirement accounts while youâre still working. Once youâre over age 59 Â½, you wonât pay an early withdrawal penalty, but you want to avoid touching your retirement funds for as long as possible.
Instead, continue to invest in your retirement plans as long as youâre still earning money. But do so cautiously. Keep money out of the stock market if youâll need it in the next five years or so, since your money doesnât have much time to recover from a stock market crash in your 60s.
A Final Thought: Make Your Retirement About You
Whether youâre still working or youâre already enjoying your golden years, this part is essential: You need to prioritize you. That means your retirement savings goals need to come before bailing out family members, or paying for college for your children and grandchildren. After all, no one else is going to come to the rescue if you get to retirement with no savings.
If youâre like most people, youâll work for decades to get to retirement. The earlier you start planning for it, the more stress-free it will be.
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to DearPenny@thepennyhoarder.com.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Over the past three months, the stock market has been on a roller coaster. Investment portfolios have followed suit, which could be particularly concerning for those who are counting on those funds for retirement.
For those close to retirement, a lack of savings may mean monthly expenses go unpaid. As a result, retirees may be considering a reverse mortgage to bring in much-needed cash.
âRetirement accounts have been suffering under the macroeconomic conditions that we see out there today. People are looking at the use of home equity to absorb some of those shocks in their retirement plans,â says Steve Irwin, president of the National Reverse Mortgage Lenders Association.
Because there’s a long lead time for a reverse mortgage, Irwin says it’s too early to tell if the numbers are up. However, a leading indicator shows we might be on the edge of a wave of reverse mortgages.
NRMLA data shows an uptick in consumers who’ve taken the initial step and completed the financial counseling needed to proceed with a reverse mortgage. Irwin says counseling sessions in the month of March were up 25% compared with the year before.
Before homeowners can apply for a reverse mortgage or complete a final application, they must complete independent third-party counseling, he notes, adding that those counseling sessions are up significantly in the first quarter.
Historically, those counseling sessions had to be done in-person, but because of the COVID-19 pandemic, some states have allowed online sessions.
Reverse mortgage basics
Since the first reverse mortgage in 1990, over a million have been issued and currently about 550,000 are outstanding, according to the NRMLA. Unlike a forward mortgage, in which you pay down a loan to live in your home, a reverse mortgage draws from the equity you’ve built up in your home.
To qualify for a reverse mortgage you must meet the following criteria:
Be aged 62 or older
Own your property outright or owe a small amount on a traditional mortgage
Live in the home as your primary residence
Not be delinquent on any federal debt
Meet with an approved counselor
Most reverse mortgages are backed by the Federal Housing Administration as part of the Home Equity Conversion Mortgage program. Once approved, a borrower can withdraw funds as a lump sum, a fixed monthly amount, a line of credit, or a combination of these options. The loan comes due when the borrower either moves out or dies.
And although the instant hit of cash may be a welcome development, the homeowner is still responsible for other monthly payments.
âKeep in mind with reverse mortgages … you still have to have the financial resources to live in the house,â says Mary Bell Carlson, the accredited financial counselor behind the Chief Financial Mom. âYou’re going to be living in the house, you still owe the property taxes, you still owe the insurance, the HOA, and all the maintenance on the home while you’re living there.â
One other note: As with a traditional mortgage, there are fees and upfront costs.
Is now a good time for a reverse mortgage?
Keep in mind, a reverse mortgage will hand you money, but the lender uses the equity in your home to give you that money.
âThe amount of funds available through a reverse mortgage are calculated based on the age of the borrower, or in the case of a couple, the youngest personâs age, the homeâs value, and the interest rates in effect at the time,â Irwin explains. âThe lower the interest rate, the greater percentage of equity that can be made available.â
Currently, interest rates are at historic lows.
âWe understand a lot of people have been looking at the reverse mortgage and just havenât decided whether or not to move forward. But they understand that responsible use of home equity can absorb different shocks to peopleâs income streams,â Irwin says.
Another pandemic-related factor in play? Nursing homes and assisted-care facilities aren’t exactly an appealing option in the current climate. This may partly be why some seniors are opting to stay put in their own homes.
âWe know that people want to age in place, and I think many senior homeowners who may have been considering moving or moving to a care facility are almost hesitant and reluctant to go anywhere right now,â says Irwin.
Before contemplating a reverse mortgage in the current environment, you must consider if you can still pay the expenses that come with owning a home. Lower interest rates will mean more cash in your hand, but if you don’t have funds set aside to cover needed repairs, maintenance, and other expenses of homeownership, pause for a moment to suss out your best option.
âA [reverse mortgage] doesn’t mean that [borrowers] just live scot-free in the home. They still have to have some kind of cash flow to keep up the home, and they can’t let the home fall into complete disrepair. That is a violation of the contract, and they could lose the house for that,â Carlson says.
Irwin says the answer depends on each homeowner’s situation.
âThis is an individual case-by-case decision, and we want to ensure that it is a decision that’s carefully considered and discussed with trusted advisers and family members. But from strictly the available amount of proceeds given the current interest rate, yes, it is a good time.â
The future of reverse mortgages
Irwin says he expects more seniors to look at reverse mortgages as the pandemic-fueled financial crisis continues.
âItâs a needs-based transaction. They need to augment their financial stability,â Irwin explains. âThey need to augment whatever retirement funding they have in place, or they need to relieve themselves of the burden of monthly principal and interest payments of a regular mortgage. I think that we will see more and more the use of the reverse mortgage as part of a more comprehensive financial plan in retirement.â
The post As Markets Wobble, Will We See a Wave of Reverse Mortgages? appeared first on Real Estate News & Insights | realtor.comÂ®.