We are often asked, how do we teach children about credit issues? When do you start educating them on how to manage their income and expenses?
Come February 2010, credit card companies will no longer allow your child to open a credit card account under the age of 21 unless you personally sign to be liable. Finally students will not come out of school deeply in debt from student loans and credit card balances. To help students many parents add the child/children to their account once they show they can manage their own funds. Some guidelines to help your children get started: 1) Discuss finances early, in grade school. Mention the amount of money needed for food at home and/or dining out and when you use that up, there is no extra money to buy takeout until next month/payday, whichever your budget timeframe . 2) Pay for chores and personal responsibility, no allowances if work is not done, consider this their first job. They need to allocate how much to Save, Spend and Give.
3) In High School, the savings the student has accumulated can be accessed via a debit card. Using his/her own funds as they see fit,is the child's choice, once funds are gone, child must wait for next month/payday same as adults.
4) In college if student shows good management of funds via debit card, consider adding to your credit card account to assist in developing a credit rating. Limit amount to $200. max, if student misuses, cancel access and they must wait until 21 to get their own card. Sound harsh? Not at all, if financial literacy were a component of a school's curriculum, fewer adults would be in the mess they are today. Discussing the consequences prior to debit/credit card use will go a long way to building a comfortable life.
A Safe Haven For Your Money Question:
I am 51 years old. I have some money in my 401(k) and IRAs (about $300,000) plus another $100,000 in savings. My question is, where do I start? What should I be doing now to prepare for retirement? Answer: Retirement isn't just about investments. It's a bit like having two railroad tracks meet in the middle of nowhere. The hard part is lining up your retirement income with your retirement spending. If the two are "on track," you'll have a comfortable retirement. If your spending regularly exceeds the capacity of your resources, you'll have an anxious retirement. So here is a short checklist of what you can be doing over the next 11 to 16 years: Pay attention to your Social Security statement. If you're like most people, your benefits will be an important part of your retirement income. Get familiar with the Social Security Web site. Use its online calculators if you are thinking of retiring early, or late, to estimate your future benefits. Get serious about paying off debt. For most people, debt is a major danger in retirement. It may also cause you to pay higher taxes, because most of your income will be taxable withdrawals from qualified plans. Get meticulous about your spending habits. This means using software like Quicken or Microsoft Money to track where and how you spend your money. Start estimating whether your anticipated future spending will be covered by your anticipated retirement income. Start researching alternatives to your current living arrangements if you imagine major changes in retirement. If you dream of retiring to Mexico, Costa Rica or Panama, start visiting and learning. If you dream of living in another state, start vacationing there. This will help you avoid a future disappointment if it isn't what you hope ? or it will make you fully prepared when you actually make the change. If you aren't already, start taking your health and "personal maintenance" very seriously. Your health, or lack of it, is the biggest monkey wrench that can be thrown into any careful plan. Note that none of this requires you to be an investment expert. But all of it offers powerful leverage on your retirement.
What Exactly Are ETFS, And How Can I Use Them In My Portfolio?
Exchange-traded funds ETF's are baskets of stocks, bonds or other securities that are divided up into many shares that you buy and sell at any time during the trading day. They are simple and transparent investment vehicles. For example, the Dow Diamonds ETF (AMEX:DIA) holds all 30 stocks in the DJ Industrial Average and moves up and down from minute to minute, just like the Dow. Since first introduced in 1993, there are now more than 766 ETF's in the US and 320 currently on the shelf waiting for approval from the SEC. No other type of security lets you participate so effortlessly in any economic sector or region of the world. In some cases, ETF's are the only way to participate in a particularly exotic marketor commodity.
TUITION TIME: Which Account To Tap First?
With your Children heading off to College, you may be thinking which college savings account to use first for tuition. If your children are 18-23, you may want to cash out at least some of that child's taxable assets before tapping a 529 account because of a recent change to the kiddie tax law. Beginning in 2008, the kiddie tax age will be extended to include children under 24 whose earned income does not exceed one-half of their support. Of a childs investment income in 2009:
The first $900. is not-taxed
The next $901-1800. is taxed at child?s rate.
In excess of $1800. is taxed at parents? rate.
Why do I need a plan?
Education: A plan will help you figure out how to pay for your children's education, even if you only pay half.
Parents: Will your parents be able to take care of themselves financially including their health care costs? Will you be able to help them get along and make up the difference they may need for living expenses?
Documents: Do you have a will? Even if your assets are in the accumulation stage, you want to choose the disposition of your home and your belongings, the state won't know what you would want done with cherished items. POA (Power of Attorney for Healthcare) who will decide what measures you would want taken in an emergency?
Social Security: With the projected increases in longevity we all must prepare for 20-30 years in retirement. Consider Social Security as gravy as it will only provide basic needs as long as you live within the amount you receive. Check your earnings statement mailed just before your Birthday each year to see your expected benefit. Compare that amount to your fixed expenses. Do you have the funds to continue your standard of living? Do you want to travel, turn a hobby into a part-time business, or golf?
Insurance: Long-term care is a must to provide the funds needed for care either in your home or elsewhere, unless you want to live with your children. Also, plan ahead for the cost of Medical Insurance if you retire before age 65 when Medicare benefits kick in.
Addressing these items is a good start. A Financial Plan will help you make many of these decisions a reality. So, plan well, to ensure you Live Well!
How much could I really save for retirement?
If you want to have $1 million dollars at age 65, depending on your age and your willingness to cut your current spending, at age 45, you would need to save $3500 a month and earn 7% a year.
If you have 40 years until retirement, you only need to save $400 a month. An easy way to save is to simply save a percentage of your salary in your 401k at work. As your salary increases, your contribution also increases.
If you are 25 years old and save 5% of your salary of $35,000, you save about $146 a month. At age 65 you will have about $635,000. If your company match is $.50 on every dollar, you'll retire at 65 with $1.4 million.
Set a goal, execute, monitor and you too can retire with a mountain of cash!!!
How Do I Safely Withdrawl Funds From My Retirement Savings Without Depleting My Nest Egg? In order to safely withdrawl spending money you need to be well allocated and you need to plan your withdrawls as carefully as you plan your investment strategies. Taking money out of equities or other volatile investments on a periodic basis can reduce the life of your portfolio by as much as 50%. The latest volatility in the market has proven this once again. The remedy is to take periodic income from either dividend income or separate Money Market funds. This is the time to be well diversified so as to eliminate the need to withdraw from equities when the market experiences a downturn. Need help reallocating to a more defensive stance? Call or email SGA for a no obligation get aquainted meeting so you too can "Plan well, to live well!"
I Work For A Small Business Without A Retirement Plan, What Can I Do?
If you are one of the 75 million people currently working for a small business and the owner feels a plan would be too expensive and cumbersome to manage, Capitol Hill is bandying about to come up with a plan for you. It's called the Automatic Ira, Auto-Ira for short. With no cost to the employer, contributions can be deducted from your check each payday and deposited into an individual retirement account for you. You may opt-out if you choose, however, if you don't save enough on your own, you will end up with little more than Social Security to support yourself in your old age.
Elements include: All employers who have been in business more than 2 years
Any individual worker could choose not to participate
Workers could select the amount to be deducted from each paycheck and forwarded to a Mutual Fund Company or Financial Institution.
Contribution amounts would be 3% or more of the worker's pay
The account can be a traditional Ira, where contributions are tax-deductible but withdrawals are taxable when withdrawn.
Worker's own their own account and can move it when they change jobs.
Employers would be offered tax credits to help offset the cost of setting up the system, and they would be protected from liability on investment performance as long as any employer-chosen investment met certain standards for diversity and cost.
What is the best retirement plan for a business with volatile profits and low turnover?
A Simplified Employee Ira (SEP IRA) could be the answer.
Advantages:
Simplicity, flexibility and low administrative costs.
No complex paperwork or IRS filings.
All employer contributions are tax-deductible for the business.
Contributions have the opportunity to grow tax deferred.
Keep in Mind:
Does not allow employees to save through payroll deductions
Contributions are immediately 100% vested
You must be willing to contribute for part-time employees.
Employee Eligibility
Employer may exclude employees who are:
Younger than age 21
Not employed by the business during any part of three of the previous five years.
Covered under a collective bargaining agreement.
Nonresident aliens receiving no U.S. earned income.
Compensation for eligibility and contribution limits are indexed annually.
Calculations for contributions are based on the plan documents.
Managing Income in Retirement is More Difficult Now than Ever Before. Why? Increasing life expectancies. Americans are living longer than ever before, that could mean living 20 or 30 years without receiving a paycheck! You need adequate assets to generate the potential for income in retirement in order to maintain your lifestyle.
Inadequate Social Security benefits. The maximum monthly benefit for an individual who reached full retirement age in 2007 and earned the maximum wage base amount for the last 35 years is $2,116. Can you manage your household on $25,392 a year? Can you rely on Social Security? Will it be there?
The impact of inflation. As you plan for your long-term goals, it is important to remember that inflation can eat away at your savings and affect your ability to maintain your lifestyle in retirement. You need to make sure you maintain your purchasing power during your retirement years. Inflation affects all services, products and goods. In fact you can expect your living expenses to double every 10 years if the annual rate of inflation averages 4% and 5%.