Posts Tagged ‘Retirement savings’

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Saving Money: Painlessly!

Thursday, September 8th, 2011

Painless Retirement Savings:

Kim over at Emergiblog wrote me the nicest note recently.

At my suggestion, she began adding the employee Federal Tax forgiveness of 2% into her 403b.  She coulda’ spent that money on a needless trinket or an extra cup of coffee, or a poster of her favorite Nascar driver, Kasey Kahne!

She said in her email that the money  had grown into a little nest egg she was proud of.  Part of her additional money was even matched by her employer-THAT’S FREE MONEY!

The great thing about this technique is it doesn’t require any change in lifestyle.

No suffering involved. No giving up your daily Latte,  lemonade,  or lunch out.

It looks as if the feds are going to repeat that experiment by continuing to wave the 2% this year.  If you aren’t currently putting away the maximum on your 403b/401k then take advantage of this painless way to improve your retirement savings.

(For a sexy review of retirement savings-see this post.)

No 403b? IRA it!

And if you don’t have a 401k or other work related retirement account, set up an IRA and have a direct deposit of the money.  Outta sight, outta mind!

An article in the WSJ this week highlighted the number of US elders continuing to work due to the level of debt they were carrying and their lack of adequate retirement savings.

  • Almost 40% of those between 60-64 were still carrying a mortgage, with up to 20% carrying a second mortgage or line of credit.
  • The average American approaching retirement has less than 25% of the savings needed to maintain current lifestyle in retirement.

Why is the continual siren call to living the so-called “high-life” prevent us from realizing the need to live a little under our means in order to put away cash for our future?

We would rather have short-term pleasure over long-term gain.

  • We want a new car smell over a paid off home.
  • We want a vacation today, rather than a 20 year comfortable retirement.
  • We want an iPad now over being able to give freely to our causes, our children,  and grand-children after our working years are over.
  • We want the latest smart-phone over a cruise around the world after the kids are grown with our mutually sacrificing life partner.

Take these opportunities of found money- whether it’s the governments gracious giving back of your own money, or your next raise- to increase your retirement savings.

When you are in your sixties or seventies and your peers are struggling, you’ll be able to say I told you so “how can I help you?”

Reader comments:

What say you?  Are you making the necessary sacrifices to be able to retire without a change in your lifestyle?  Or will you be hobbling to the mailbox paying your mortgage on your 100th birthday?

Shout out:

Thanks to Len from LenPenzo.com for his guest post Friday Follies last week, if you missed his attempt at gynecology, better check it out.

And thanks to the Nerdy Nurse for stepping up with a guest post on nursing salarys, and hosting the “Best In Nurse Blogs” series.

Friends, even cyber-friends, make life beautiful!

You guys are the best!

{photo credit: DigitalRedEye c.c.}

Speakin’ of Google + I’m there as  Dean Burke….they wouldn’t let me use Dr Dean…  Put me in one of your circles, I’ll feel so special….

Make sure you follow me on Twitter @DrDeanBurke- quick links on the side of the blog!  And let’s not miss a post-sign up for email special delivery or the RSS feed!

Friends, I love friends-check out my Facebook page, and I’m definitely Linked-In-use the shortcuts on the side-that’s why I paid my Web Master of the Universe-Ben-the big bucks to put ‘em there-saves you time!

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Posted in Personal Finance 101, Retirement savings | 4 Comments »

Retirement Savings: Keepin It Sexy!

Monday, February 28th, 2011

Saving for Retirement

Explain this: Everything you read reports without equivocation the US as a whole is not saving near enough for retirement.  We see commercials on retirement savings every day-but it seems those folks are wasting their dollars.

Even after the recent economic catastrophe, when we thought the world was going to end, it seems it didn’t get your attention.

This article in the Wall Street Journal confirms we are not putting near  enough money to live the kind of life we desire after our working years?

What is the disconnect?  Why do we worry more about Lady Gaga’s sex life then our future?

Retirement Conversation

How bout this conversation, does it ring a bell?

What is a comfortable retirement-what does that mean?

Most experts use the have enough money to “maintain your current lifestyle” as the basis for discussion.

If your cost of living for a year is $40,000 per year, then you need to have enough savings to be able to spend $40,000/year without running out of money before you die.

The problem with this simple equation is-WE DON’T KNOW WHEN WE WILL DIE!

The guru’s solve that problem with the recommendation that your money should be invested in some vehicle that will allow it to increase in value while it sits.

What happens when it doesn’t?

Over the last 100 years or so, the stock market has returned ~10%/year, but if your retirement was 10 years ago, the stock market hasn’t increased any, and of course at it’s bottom it was down 30 % depending on which index you compare.

When you retire, and what the market has done to your account recently matter, A LOT!

The stock market shouldn’t be the only place you hold retirement money for these reasons.

Well what about bonds-they confuse me?

Bonds historically have risen on a 5% per annum basis.  But lately that number is way down.  You can read more about bonds here, and how a company sells bonds here!

How about I just put cash in the bank?

Cash in the bank-either averages no growth or the  equivalent of the treasury bill yield-which is ~1%.  Cash investments lose money when  inflation is factored in.  Inflation’s historical average is 3 %.

I need $40,000/year to live comfortably during my retirement, what do I do?

Let’s look at three scenarios:

  1. You retire with nothing in savings and you earn $40,000/year now-you will receive only Social Security which will be about $12-15,000/year-in today’s dollars.  How does that sound?  Not anywhere close to 40 grand a year huh?
  2. You retire with  $55,000 in retirement savings (well above the national average)-you will get Social Security as above ~12+ grand and whatever amount you draw from that $55,000 every year.  Obviously you will not be able to stay at $40,000 per year very long before your money runs out.  You got a lotta lifestyle cuttin to do baby!
  3. You retire with $250,000 in retirement savings-your savings will run out by age 85 if you pay yourself ~$25,000-30,000 + your Social Security-if your money is earning 3-5%.  With luck, you can make your $40k lifestyle with this number-though I didn’t throw in taxes….

Retirement growth variables

Because there are so many variables, the most common reaction is-”Just forget about it, I will live for today and worry about

Retirement?

tomorrow, tomorrow.”

And if you don’t feel that way, what can you do?

Baby Steps To Starting Retirement Savings

Take these several  sexy steps this week:

  • Open a retirement account if you don’t have one available at work.
  • Begin participating in your work retirement account 401k or 403b if you aren’t now.
  • Begin making every purchase decision based on whether it will allow you to meet your retirement savings goal.
  • Have your retirement savings be automatic-set it up at work or through your bank.
  • Start slow and build up as your confidence grows.

Take these steps today.  And review your accounts every year with a professional to be sure you are hitting your targets.

Questions:

What is keeping you from saving for retirement?  What can I do to help?

Housekeeping: Remember the RSS feed in the upper right!  You can have our posts delivered however you like…

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(photo credit by martin c.c.)

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Posted in Personal Finance 101, Retirement savings | 6 Comments »

Painless Way To Increase Your Retirement Savings

Wednesday, January 12th, 2011

Easiest Way To Increase Your 401k

Part of the recent tax compromise was a 2% decrease in your Social Security tax withholding.

The Obama administration is counting on you running to Wal-Mart and spending this money, as part of the Stealth-Stimulus Plan of 2010 (my moniker).

Please, Please, Please stop what you are doing right now, and call your benefits administrator, or your personnel office at work.

Tell them to put that 2% towards your 401k, or 403b.  Don’t put it off, and don’t delay.

Found Money

This is found money, and you have no excuse for not putting this money away for retirement.  You won’t miss it, and it will get you into the habit of saving something in that plan.

When they ask you what to put the money in, find a generic choice that is a mixture of US Stocks, Bonds, and International.  Don’t put this off till you can ask your buddy what to invest in.  Make a quick choice and get it done.

I am all for studying the details and making wise investment choices.  But I want you to get this done, no muss, no fuss.

There’ll be time enuff for countin, when the dealin’s done-as Kenny Rogers famously sang!

No 403b?

If you don’t have a 403b or 401k option, then start an IRA right now. Again, it won’t take but a minute to do.

Then have the 2% direct deposited to that account.  Many IRA’s can be started with low minimums if you choose a direct monthly deposit option.

Make a conscious choice to increase your amount each quarter/6month intervals or at a minimum annually till you hit your maximum.

Doing this in small steps again will allow you to adjust your spending, making this retirement savings much less painful.

Additional Retirement Savings:

If you and your spouse are making $40 grand apiece, and you both added this 2% to your savings this year and continued it for the next 20 years, @ 6% return, that is an extra $65,000 towards retirement.  If you are 30 or even 40 years  away from retirement that money is in 6 figures….

Not too shabby for “found” money!

Call them now!

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Posted in Retirement savings | 5 Comments »

Roth IRA’s: The Millionaire Nurse Way!

Tuesday, March 2nd, 2010

Everyone knows what a Roth IRA is, don’t they?  No, even if you think you do, you probably  don’t-so let’s have a little ROTH IRA school.

Roth IRA’s got their name from  the late Senator Roth from Delaware.

The difference between Roth IRA’s and Traditional IRA’s:

  • You pay taxes on the money as it is deposited into a Roth IRA-with a traditional IRA, you take an income tax deduction at your current federal rate on the deposit.
  • The government  taxes withdrawals, and also tells you when you start to take money out of the traditional IRA.  Money taken out of a Roth is not taxed, and you can remove it when you want to-after 59 1/2.  (With some restrictions.)

Similarities:

  • They both allow investment in many different types of securities, stocks, bonds, and even real estate.
  • They both are limited in the amount you can deposit, based on age and income requirements.

So how do you decide what retirement vehicle to use? 401-K, Roth, or traditional IRA….

If you company matches- deposit up to the matching amount in your 401-K.  For most middle income folks, the next decision is the hardest-if you can afford to pay the taxes, I would deposit the next part of retirement savings in a Roth IRA.  When that was maxed, I would  save the rest in a traditional IRA.  (Until you reach at least 15% of your income.)

So what does this mean in the real world-lets say you are a married nurse, and your spouse makes the same 40,000bucks/ year for a gross income of $80,000 for you as a couple.  If your company matches 3% of your income in their 401-K then,  put $1200 in that account-(3%).   Now you can put up to $5,0000 in your Roth, if you are under 45-so let’s put your remaining $4800 in your Roth-which gets you to 15%.  With the company match, that gives you $7,200 in your retirement savings for the year.

Now remember, you have to pay taxes on the $4,800 you put in your Roth, at whatever your income tax rate is, both state and local.  However, when you remove that money, the balance and the growth from your investments can then be withdrawn tax free. WHEN YOU WANT TO-after retirement-not on the governments schedule, as a traditional IRA requires.

Now keep in mind, the example above includes estimates and generalizations, so to make your own decision you need to have your tax information handy.  And if you really want to dig into this further for all the exceptions/explanations, then check out Wikipedia’s Roth IRA section here.

“Dr Dean, Now that my head is spinning, what do I do?”  Well if you want to open a Roth IRA, then you need to talk to a discount, or  full-service broker and open an account. The brokers usually require a minimum investment,.  Many savers are successful having the money electronically deposited into the IRA, so they aren’t tempted to spend it.

So go get started on having a secure retirement.  You want to be eating steak, or asparagus during your retirement, not canned soup.  You want to travel the world, not your one bedroom apartment……

Let me know if you have questions.  That is what I am here for.

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401-K Class 101-For Millionaire Nurses-Continued!

Tuesday, February 2nd, 2010

This is the third edition of 401-K class for nurses, (and whoever else may be snooping-thanks for snooping!).  Now I know you would rather read about fun stuff-you would rather watch American Idol, Dancing with the Stars, or whatever your favorite program is, than read about boring 401-K stuff-but let me ask you a couple of questions:

  • Do you think Simon Cowell is going to be there for you when you want to retire???
  • Do you think NBC or CBS and their advertisers care whether you spend your retirement time watching a 52 inch HDTV, in your paid for house with no debts,  or watching the 12 inch tv with rabbbit ears down at the homeless shelter????
  • Do you think your kids are going to spring for your world travels when you retire from 40 years working the night shift in the ER????

No, I didn’t think so, so keep reading-or go continue to be stupid, and not pay attention to this till it is too late-YOU HAVE A CHOICE!!!!!

I want to discuss ACTIVELY managed mutual funds this week, after discussing index funds in our last class.

Actively managed funds, are just as described, they are managed by a person or group that makes investment decisions on which stocks to purchase.

One of the most famous fund managers/ funds, when you read about this in investing books,  is Peter Lynch, a past manager of Magellan-a Fidelity Mutual Fund.This fund had stellar returns during his management-that some would say has suffered since his retirement.  This has become the “poster child” for avoiding single manager funds.

When he or she retires, or is hired by another company for a huge raise, then where will your fund be?

Now, manager choice may  matter a lot when you are doing your own investing, but frequently in 401-K’s, the choice of funds available  are limited, in number and type,  to just a few funds.

So you may not be able to choose between a single or group manager. But I think it matters to at least know this information.

You can usually look this info up for free, by joining “Morningstar” or some other investment information site.  You give them info about yourself, to sign up, and then you are able to look up funds, and get other information-that for the most part is not slanted towards any one fund company.

You can also find out about the fund in your “prospectus”. This is the document that you get at least once a year in the mail from the fund company that you own in your 401-k.  It probably goes in the “circular file”-if you are like most nurses.  Next time you get one,think of me, and at least read the page that describes the type of fund, look at the list of stocks in their fund holdings, and read the paragraph or two from the fund manager about the past year’s results.

Now the next step, as mentioned above is finding the type  fund, you are currently investing.  The different types are numerous and somewhat complicated- mainly because the fund companies try to have a product for everyone’s needs.

They then end up with so many different funds-no one knows what is going on.  But here is a list of several common “actively managed” funds you may find in your 401-k and a little about them.

  • Growth funds-consists of companies expected to “grow” or increase in value faster than the market.
  • Value funds-consists of companies that the fund manager thinks are bargains-(cost less than the stock is worth).
  • Income funds-consists of stocks that pay dividends-this means they pay a percentage of the value of the stock quarterly to stock-holders instead of keeping profits in the company.  Some feel this results in less volatility (rapid rise and  fall in stock prices).
  • Balanced funds-funds that may hold growth and income stocks- (some balanced funds also hold bonds, we will discuss bonds and bond funds in another post).

I found this list of mutual fund terms on the Securities and Exchange Commission website.  * Glossary of Key Mutual Fund Terms.

So, we come to the end of another exciting version of 401-k class for “Millionaire Nurses“PS

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"PAD" Your Savings: It Should be "Planned, Automatic and Done!"

Monday, January 18th, 2010

Saving money, is not done just for the sake of saving.  To be most successful, develop a goal and plan.

In medicine we develop a treatment plan or guide.   If the diagnosis is heart failure  then doing a chest x-ray, blood gas, give diuretics and so on…..,

As circumstances and facts change, then adjust the treatment plan.

What happens in cases where there is no plan? Here is an example:

You have three doc’s consulting on the case, they all write conflicting orders, the nurses have no idea who is in charge.  At best, the remarkable being that made the human body comes through and the patient gets well anyway.  At worst, an injury or event occurs that slows down  progress-drug- drug interaction, allergy, or infection occurs. Frugal lawyers get involved….Makes me shudder to think about it.

So how does that compare to your personal finance and savings.  Those that have a plan, and direction will always win.  Doesn’t mean bumps in the road don’t occur, but you have plans in place to deal with them.

So what do I want you to do about the Savings part of your personal finances:

  1. Determine what your savings needs are-home down payment, car upgrade, new tires,  or retirement.
  2. Make sure your emergency fund is in place. See this post about my recommended Super-Duper Emergency Fund.
  3. Once you determine the need then decide on how fast you can meet the goal-10 bucks a week or 100 bucks a month.
  4. Make your savings automatic: your 401-k is usually painless, because it comes out without your thinking about it.  So do the same with all your savings-have the amounts you choose drafted right after you get paid, to the right accounts or sub accounts.
  5. Review every three months for adjustments.  If you gradually increase your savings rate, it is much easier to reach goals, without everyone in the family having a heart attack-”What do you mean, I can’t go to Old Navy this weekend?”

So go “PAD” your savings-”Planned, Automatic, and Done!”

Housekeeping:

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