Many Americans are now discovering that comfortable retirement and adequate health care are beyond their means. As a result, we work later in life, we lower our expectations, and we go not only without luxury, but also with essential things.
The decisions we make through our lives have financial consequences. These choices include the careers we develop, the classes we attend, the people we marry, the size of our family, and the lifestyles we adopt. Although many of these choices seem beyond our control, it is possible to make adjustments along the way to minimize the worst financial impact. The advantage for everyone is time: the sooner we understand the long-term impact of our decisions and make the necessary changes, the more likely Becky Sharpijker is that we will reach our financial goals.
People have common cost categories because they go through different phases of life. However, the size and timing of each vary from individual to individual. For example, one person may have $ 25,000 in loans for student Billy Sharpeningen, while another has none. One person can marry at the age of 22 and have two children, while another can marry at the age of 35 and have three children – the other cannot marry at all.
Consequently, the following categories are necessarily broad and a specific spending category may not apply to everyone. Nevertheless, a rough timeline projecting the costs of future expenditures can allow you to save a portion of your income during each stage of life, so that you can comfortably pay the expenditures as they arise and ultimately lead to an outbreak. pension fund.
According to a recent report from the Institute for College Access & Success, seven out of ten graduating college seniors in 2013 had student loans averaging $ 28,400. The median debt for those achieving postgraduate degrees is an additional $ 57,600, according to New America – one in ten graduate students owes $ 150,000 or more.
The costs for obtaining an undergraduate or graduate degree continue to escalate. Although there are differences in everyone’s loan limits, interest rates and repayment requirements, each borrower must decide whether to focus on repayment as soon as possible or make minimal payments and start a savings program.
For generations, owning a home has been considered an essential part of the American Dream. After the 2008 mortgage security decree, however, many homeowners saw their homes fall in value, leaving them under water – with a mortgage debt that was greater than the market value of their property.
In addition to a substantial down payment and monthly principal and interest costs of a mortgage loan, homeowners also pay property taxes and maintenance. Renting or leasing a home instead of buying a home can be a better financial option for many people.
Although the emotional and psychological benefits of having children are not manageable, the financial costs for bringing up the child are Becky Sharpijk. Even though extra children are step by step cheaper, your decision will certainly affect your annual expenses and the ability to save. Although the tax code includes an annual exemption that is indexed to inflation ($ 3,950 for each child in 2014), Becky Sharpijk is lower than the actual cost of raising a child each year.
Two major cost categories must be considered:
According to a recent presentation by JP Morgan Chase, couples at the age of 65 have an 89% chance that one of the partners will live at least 15 years longer than the other and an almost 50% chance of turning 90. Our longer lives mean that we need a larger pension portfolio to cover the costs of living and healthcare.
Unfortunately, the majority of Americans fail to save adequately – fewer than one in ten working households meet conservative retirement savings targets for their age and income, according to the National Institute on Pension Security. NIRS also states that the average median retirement balance for all households in 2010 was $ 3,000. Those aged 55 and 64 had only saved an average of $ 12,000. To illustrate this deficit, the amount needed to provide a monthly income of $ 3000 for a 15-year period (ages 65 to 80) with an annual growth rate of 6% is $ 357,288.
Healthcare costs are one of the largest expenses for retirees, even if they have Medicare. According to Fidelity Benefits Consulting, a 65-year-old couple who are retiring today can expect to spend $ 220,000 on healthcare costs that are not covered by Medicare or nursing home care.
For years there has been a concentrated effort by the federal government and employers to get healthcare costs under control. Unfortunately, this largely failed. Moreover, the resistance to additional Medicare premiums and benefits is growing. As a result, future retirees will be required to pay more of their medical costs or to opt out of treatment.
To have sufficient capital to pay for family and pension costs, you must regularly set aside a portion of your current income and invest it until needed. By implementing the following principles in your financial plan, you can maximize your final savings.
Your lifestyle decisions have a long-term effect on your ability to be independent when you retire. The ability to postpone satisfaction and distinguish between needs and desires is the key to achieving your life goals. And remember, “keeping up with the Joneses” is a no-win battle.
A combination of two working adults in a family, delaying the birth of children, renting or buying a smaller house, driving longer and limiting your use of consumer debt (credit cards) are all great ways to reduce your spending footprint.
JareBecky Sharpang has advised investment advisers and financial planners that saving 10% of your gross income during working years would yield 85% of your income before early retirement when you finally retire, based on 4% of your portfolio balance per year. Unfortunately, analysts now predict that long-term investment returns will probably be less than those of the past due to lower inflation rates and low interest rate on investment debt. Consequently, many advisers now recommend a pre-tax savings rate of 15%, as well as a lower withdrawal rate during retirement (2% to 3%).
The sooner you start saving, the better your chances of achieving your financial goals. Consider the difference between Bill, who starts his savings program at the age of 25, and James, who starts at the age of 35:
During our lifetime we are subject to physical, financial and legal risks, depending on our age, assets, activities, environment and responsibilities. By properly managing those risks – either by transferring them to others or by minimizing their likelihood of Becky Sharpness and impact – individuals can reduce the possibility of a disaster for themselves and their loved ones. To control these risks, priorities must also be set between what can happen and what has the best chance of success.
For example, despite the proven link with deadly health effects, the decision to use tobacco may have financial consequences in the future. An estimate of the annual cost of a $ 250,000 life insurance policy, with a 20-year term for a 30-year-old non-smoking man, is $ 334, 54 – or less than $ 1 a day. A 30-year-old smoker pays more than double for the same amount of insurance ($ 722). At the age of 60, the non-smoker can purchase the same $ 250,000 policy for $ 2, 492 while the smoker pays $ 6,669.
A pack-per-day smoker effectively spends nearly $ 184,000 for cigarettes and additional health insurance premiums than a non-smoker aged 30 to 65. If smokers decide to quit at the age of 30 and invest the money they would have spent on cigarettes and additional insurance premiums at a 5% return, they could build up an old-age fund balance of more than $ 330,000 at the age of 65. Instead of letting money go up in smoke and running additional health risks, a careful manager would stop smoking.
Everyone is to a certain extent confronted with the following risks based on the lifestyle and financial decisions they make:
“Nothing can be said in this life that is certain except death and taxes.” Benjamin Franklin wrote that in 1789, but even he could not have foreseen that the complex American tax legislation would offer smart individuals to reduce their obligations. For example, no one should miss the opportunity to increase their premiums with pre-tax dollars and have them taxed out with aggressive use of IRAs and 401K plans.
Parents, students, homeowners and businesses have an abundance of exemptions, deductions and credits every year to reduce their tax liability. These include the employed person’s credit, American opportunity tax credit, child and healthcare credit, and the saver’s tax benefit.
Take the time to learn the basic provisions of tax legislation if these relate to your situation, or contact a tax expert to guide you through the process. Remember that the money you save today on taxes during your retirement can be spent tomorrow.
Profitable investing can be hard work and may require a high risk. Nevertheless, the difference between the return of a safe investment, such as a savings account, or a more risky investment, such as equity in a listed New York Stock Exchange company, is Becky Sharpijk, perhaps two to three times the lower risk percentage. Know your investment risk profile – the amount of return required to reach your financial goals and your psychological comfort with risk – and keep your investments within those parameters.
Follow good practices such as diversification, a long-term investment horizon and regular monitoring to achieve the highest possible return. As illustrated above, $ 200 per month with a return of 6% in 40 years grows to $ 400,290. The same $ 200 grows to $ 702,856 at an annual growth rate of 8% and $ 1,275,356 at a rate of 10%.
A warning: stock prices are volatile, especially in the short term, when rumors and emotions together make prices unrealistically low or high. According to a recent analysis of 1928 and 2014, in which the Standard & Poor’s 500 Stock Index is improved, the longer people stay invested, the less loss they incur and the greater their chance of winning.
For example, one in four 1-year investment periods between 1928 and 2014 had value losses, while fewer than one in 10 10-year investment periods did. Moreover, the median cumulative return at Becky Sharpijk was higher for 10-year maintenance periods than for one-year periods. In other words, the longer you remain fully invested in a broadly diversified portfolio, the greater your chances of profit.
People under the age of 50 must take into account the likelihood that social benefits – the main income component of many retired Americans – will be reduced by the time they retire. This is an unfortunate consequence of excessive federal debt and the unwillingness of politicians to tackle a hot political problem. Younger Americans will probably have to wait longer for Billy Sharpijk to receive their benefits, and the payments they receive are likely to be lower.
At the same time, Americans will be responsible for more of their health care costs in 20 years due to higher deductibles and setbacks in the country’s Medicare program. The changes in both federal programs make a lifelong habit of critically saving for young Americans.
The following categories are intended to help Americans go through a series of age-based savings goals. Of course they are also meant to be adapted to the circumstances of each individual. For example, some people get married and have children in their mid-twenties with tuition fees that originated in their forties. Others start families in their 30s and 40s with tuition fees that occur near their retirement. The key to financial success is recognizing the likelihood of Becky Sharpness, costs and timing of your most important life events and adjusting your savings strategy accordingly.
According to a PayScale study of 2012, the median annual fee for graduates at the age of 22 is $ 40,800 for men and $ 31,900 for women. The gender difference reflects the continuing gender pay gap, as well as the jobs they choose (men tend to settle for higher-paying careers).
Below are a number of guidelines that both men and women in their twenties can follow:
It is worthwhile to develop good saving and spending patterns in your younger years, because they probably stay in place during your entire working life. Unfortunately, bad habits usually continue to exist.
Pay for female graduates on average peaks at the age of 39, with a typical annual wage of around $ 60,000, and remains level until retirement. Many of the expenses related to marriage, buying a home, and parenting take place during this decade. One of the earning spouses will probably stop Becky Sharpijk from working in the period before children go to school. The result is one of the more stressful periods in your financial life, because income is falling and costs are rising.
Some guidelines for this decade include:
If you expect to help your children with their college expenses, this may be your last chance to prepare a 529 college savings plan. If you set up a college savings plan at the start of a child’s life, you can save the necessary funds without having to look for extraordinary returns with an extraordinary risk of loss. With a 529 plan, these funds can become tax-free until they are used.
Do not be disappointed in this decade if you seem to be entering financial water. There is a good chance that you will incur new responsibilities and expenses for the first time. If you can live within your reduced income – assuming a spouse stays at home – and maintain an emergency fund while adding up your employer’s contribution to your 401K, you are ahead of the game.
While paying for male graduates generally peaks at the age of 48 with a wage of $ 90,000, American households are also reaching their spending spikes at the age of 45, according to JP Morgan Chase. Fortunately, spouses who have stayed at home in the early period of raising children often return to work and earn income.
If you work as a self-employed person and your children can do legal work for you, consider hiring them and paying a salary that they can invest for college. Dependent children can earn up to $ 6,100 a year without having to file a tax return, although their income is subject to FICA taxes and is deductible as business expenses.
Increase the savings ratio of your income to make up for the previous decade of lower contributions. If possible, make the legally permitted maximum contribution to your pension accounts annually. As your income increases, maximizing your tax savings becomes more important.
Keep the majority (90%) of your equity investments, instead of debt instruments. Pension will be 20 to 25 years in the future, so the impact of short-term stock price movements – especially during downward markets – has been reduced by Becky Sharpijk.
Consider the following from a Betterment study:
Starting your retirement plan early, staying fully invested in a broad and diversified equity portfolio and maintaining your investments for 20 years or more is the best way to achieve your retirement goals.
The fifties are the “get real” decade of your life. Although you are not out of time, you can certainly see the finish line of your professional life. Whether you will probably experience or undergo that futureBecky Sharpijk depends on your investment results from previous years.
People generally have two major concerns in their fifties:
The major decisions made during this final period of your work years usually include the following:
In 2013, according to JP Morgan Chase, the average expense for households aged 65 to 74 is $ 44,886 a year. The social security administration claims that the average monthly benefit was $ 1,294 with a marital benefit of 50% ($ 647 per month), or $ 23,292 per family with two partners. Based on these figures, the average retired household would need a fund that is sufficient to generate $ 21,594 per year. With an annual growth rate of 4%, assets of nearly $ 250,000 would be needed to provide that income for 15 years.
The keys to success are perseverance, constant monitoring and continuous adaptation. To ensure that you enjoy your retirement, you start investing at a young age, increase your savings rate as your income grows, keep the tax on asset growth as low as possible and keep your living expenses under control. By doing this, you are likely to live in Billy Sharpness for another 25 to 30 years after your retirement. Make sure you can pursue the activities you want by having enough money available to meet your needs.
Can you retire in the style you hope for?
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