Want to stop working someday and retire? It takes money to make that happen. If you don’t know how much you will need, you’re in the majority.
A 2019 study from Northwestern Mutual that polled 2,003 American adults found that 56% didn’t know how much money they’ll need to retire. The same study found that 22% had less than $5,000 saved, and 15% of those surveyed had no retirement savings at all.
“I think most people have a tough time planning 20 and 30 years out, which is why most people don’t do it,” said Andrew Barnett, a certified financial planner with GFA Wealth Design based in Fort Myers, Florida. “Most people put it off, because it’s something that’s so far out. They say well, I’ll save next year.”
How Much Do I Need to Retire?
When you do a quick search, the numbers $1 million to $1.5 million or 10 to 12 times your current income float around a lot as how much most people will need to save to retire comfortably.
What you need will depend on when you plan to retire. Traditional retirement age is 65 to 67. If that is your targeted age, plan on funding your retirement for about 25 to 30 years. If there is a family history of longevity, make sure to plan for longer, maybe even to age 100 or beyond.
The ultimate goal is to save enough so you can withdraw a portion each year and keep the rest invested and growing to fund future years. If you withdraw about 4% annually, you should not be significantly impacting the principal since it is hopefully earning more than 4%.
There are several well-known formulas, rules and guidelines to help you figure out how much you might need to save, including:
25 times rule: Take your annual expenses and multiply them by 25.
70%-80% rule: Many experts say you will need about 70% to 80% of your average income during your working years annually to fund your retirement.
15% rule: If you start at the beginning of a career, saving 15% of income should be enough to fund your retirement.
Barnett is not a big fan of hard and fast rules.
“I don’t really know where those numbers come from,” he said. “They come from every article that you read, experts say X percent. But everybody’s different, which is why I would advise anybody to do a budget, figure out what they spend and on what, and then draw your own conclusions about what you need in retirement.”
Do. Not. Panic.
Those numbers are guidelines and might not be what works for you. There is no magic number that is the perfect target for everyone’s retirement. The amount is based on several factors.
The age you plan to retire. There is a big difference between retiring in your 40s and your 70s.
Where you live. Some places have a higher cost of living than others. Several states have no state income taxes.
Health care costs: These will likely increase as you age, even with Medicare. Dental and long-term care are not part of Medicare.
Current age and life expectancy: It is easy to underestimate how long you might live.
Savings and spending habits.
Future markets and investment performance.
To answer the “how much do I need to retire?” question, you need to figure out what you want out of your retirement.
“I ask [new clients] to tell me a little bit what their vision of retirement is first, before we get to the money stuff,” Barnett said. “[I ask] what does retirement look like [to you], do you want to keep working, do you want to work part time, do you want to play golf, do you want to travel the world, do you want to eat Burger King or caviar?”
Barnett also asks these basic questions when he works with new clients:
When would you like to retire?
How much does it cost you to live?
What have you saved so far?
What other sources of income will you have in retirement?
“If you know those basic things, you can give somebody a pretty clear picture of what they would be capable of doing in retirement,” Barnett said.
There are several online calculators that will help you figure out how much you will need. To use them, you will need simple information like your age, pre-tax income, the current amount you have saved, and how much you currently save on a monthly basis.
Once you plug in the numbers, the calculators will show you whether or not you are on track. Since many of these online tools are linked to specific financial companies, the advice they give will be based on the products they have.
Barnett has a warning, though: “The problems that I see with those calculators is that they’re oftentimes a little bit simplistic and they miss things like inflation and taxes,” he said. “And they ask you things like how much have you saved, but they don’t ask you what type of savings.”
That matters because many retirement accounts grow tax-free, while others are funded with after-tax money. Most calculators also do not ask about when you plan to start collecting Social Security and your longevity, Barnett added.
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A Guide to Estimating Your Future Needs
A good place to start when figuring out how much you might need in the future is to track what you spend now.
Look at how much you spend for:
“Get your bank statement out and look at all the pluses every month, and add up all the minuses every month,” Barnett said. “Do that for three months in a row and you have a pretty good handle on what you’re what you’re doing, what comes in and what goes out.”
Now think about what you want to change when you retire. Do you want to travel more? Buy a property? Eat out more? Add those amounts to your current spending. Also, add money for irregular expenses, like home and vehicle repairs.
Now, take away things you will no longer need to do when you are retired. You won’t be setting aside money for retirement anymore since you’ll already be retired. You might have your mortgage paid off, so that will not be an expense. If you won’t be working at all, you won’t have payroll taxes to pay. However, you will be taxed on money you take out of your 401(k) and some other retirement accounts.
Once you know your monthly expenses, you can begin to figure out how much you need to save to give yourself at least that much when you retire.
Remember, the replacement income can come from a variety of places, not just savings and retirement accounts. Other sources include Social Security, part-time work, pensions and rental income.
If you have worked outside the home, use the Social Security Administration’s calculator to figure out how much your estimated benefit will be when you retire. To use this calculator, you will need to create an online account.
How to Save for Retirement
The 401(k) is the most popular way to save for retirement, mostly because it is an employment benefit and many employers offer a match of the amount an employee contributes.
In a June 2019 survey, Charles Schw [...]
If you’ve heard ads for Medi-Share, you might be intrigued by its promises to cover your health care costs.
Curious? We looked into the details to find out how Medi-Share works — and whether it’s a good option for you. Here’s our honest, unbiased review of the program.
What is Medi-Share?
Medi-Share is a health-care sharing ministry made up of members united by their faith.
This program and similar medical-sharing ministries rely on their members to take care of one another through financial contributions, as well as prayer.
The details work much like typical health insurance. Like having a deductible, members choose an amount they’ll contribute as a household before they can submit bills to the community for payment assistance.
A monthly share payment works like a premium, ensuring your eligibility for assistance, should you need it.
There’s no guarantee your medical expenses will be covered through Medi-Share, and there are plenty of exemptions to consider before you apply.
But if you’re particularly religious — and healthy — you may want to consider this alternative to traditional health insurance.
How Much Does Medi-Share Cost?
First, the up-front costs: It costs $50 to apply, and you’ll pay a $120 one-time member fee with your first monthly payment. You’ll pay another one-time fee of $2 to set up your “sharing account.”
As for your monthly payment options, Medi-Share’s system is sort of like choosing a health insurance deductible and monthly premium.
As an example, we calculated costs for a 30-year-old woman seeking membership for herself only. Share amounts change annually, based on the oldest member of the household.
If she chose a $1,750 annual household portion — the amount of medical bills you have to pay completely before you’re eligible for sharing — her standard monthly share would be $311.
If she met certain health and fitness requirements, she could qualify for a Healthy Monthly Share, which would lower her cost to $277 per month.
When you need medical care and visit a Medi-Share provider, you pay $35 for doctor visits and hospitalizations, and $200 for emergency room visits.
You submit the rest of your bills to Private Healthcare Systems (PHCS) for payment consideration.
“We do not collect premiums, make promise of payment, or guarantee that your medical bills will be paid,” the Medi-Share website explains. “Sharing of medical bills is completely voluntary.”
Christian Care Ministry, which operates Medi-Share, is a 501(c)3, but your payments aren’t tax-deductible.
Do You Need to Be Religious to Use Medi-Share?
Just as Medi-Share embraces the idea of a community of members supporting one another, it also believes in having a membership that embraces Christian lifestyles.
The organization may even interview a church leader to verify your involvement before granting you membership. In addition to eschewing tobacco and illegal drug use, applicants “must only engage in sexual relations within a Biblical Christian Marriage.”
And as you might suspect, Medi-Share doesn’t cover abortions or treatment for sexually transmitted infections.
Medi-Share also assumes that if you’re willing to take care of your Christian community by sharing the burden of medical bills, you’ll do your best to take pretty good care of yourself.
Some health conditions, like obesity, high cholesterol or diabetes, put applicants in the mandatory Health Partnership Program, which pairs you with a health coach and costs an extra $99 per month.
What If You Have an Ongoing Health Condition?
While this might be an appealing option if you’re healthy, anyone who suffers from a chronic health issue is probably better off turning to an ACA health insurance program for coverage.
“The primary purpose of Medi-Share is to help share members’ burdens,” the program explains. “Burdens are those unexpected medical bills you are unable to plan for (ie. broken bones, cancer, etc). Low monthly share amounts enable you to budget for your family’s routine care, which can be planned.”
Prescription drugs can be eligible for cost-sharing, but only for up to six months for the lifetime of the member.
Behavioral and mental health care are also ineligible for coverage. This includes psychiatric or psychological care, as well as “counseling or care for learning deficiencies or behavioral problems,” such as ADD or autism.
But here’s the big catch: Routine health screenings aren’t eligible for cost-sharing either.
Well-patient care like annual physicals, pap smears and well-child checkups aren’t included. Dental and vision care aren’t eligible, either.
For instance, if your doctor recommends getting a colonoscopy because you’ve reached a certain age, you can’t submit the test for Medi-Share payment. If you have symptoms warranting the same test, the program might grant payment.
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So, Is Medi-Share Legit?
Here’s our conclusion: Medi-Share isn’t a scam.
It’s totally legal and there’s a strong membership base to support it and similar programs.
But it’s likely not the most affordable health care option for most people. The ideal candidate for Medi-Share is in excellent health and also has a robust savings account to pay out of pocket for routine medical care.
One risk: Medi-Share and other cost-sharing programs aren’t subject to regulation like typical ACA programs.
So while a typical health insurance benefits booklet might clearly explain what’s covered and guarantee coverage up to a certain amount or percentage, Medi-Share participants might not be able to figure out ahead of time which medical bills will be paid by the program.
While Medi-Share probably isn’t the best financial choice for most people, it does at least serve as an option for anyone who doesn’t have access to a job-sponsored health insurance plan or who finds individual ACA coverage options prohibitively expensive.
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. [...]
The way you spend travel rewards on airlines will be changing soon. Lufthansa, one of Europe’s largest air carriers, announced earlier this spring that it is looking into shifting its Miles & More rewards program to a dynamic pricing method. This means that the value of your rewards miles can change depending on a variety of...
Curtis Sprung is a writer at NerdWallet. Email: firstname.lastname@example.org.
The article Lufthansa En Route to Dynamic Award Pricing originally appeared on NerdWallet. [...]
On May 30, the Securities Exchange Commission approved amendments to the Financial Industry Regulatory Authority’s customer and industry arbitration rules to expand the time period for non-parties to respond to arbitration subpoenas and orders of appearance of witnesses or production of documents.
FINRA’s Codes of Arbitration Procedure for Customer and Industry Disputes (Codes) allow parties who seek discovery from a non-party to request that the panel issue an order of appearance of witnesses or production of documents if the non-party is subject to FINRA’s jurisdiction. Arbitrators are also authorized to issue a subpoena if the non-party is not subject to FINRA’s jurisdiction. If the panel decides to issue the order or subpoena, FINRA will transmit the signed order or subpoena to the moving party to serve on the non-party. If a non-party receiving an order or a subpoena objects to the scope or propriety of the order or subpoena, they may file written objections through the director of the Office of Dispute Resolution within 10 calendar days of receiving the order or subpoena.
The amendments extend the response time for non-parties to object to an order or subpoena from 10 calendar days of service to 15 calendar days of receipt of the order or subpoena. In addition, first-class mail is excluded as an option to serve documents on the non-party and as an option for the non-party to file the objection to the scope or propriety of the order or subpoena. Lastly, the amendments codify the current practice that the director send, at the same time, objections and responses to the panel after the reply date has elapsed, unless otherwise directed by the panel.
The amendments are effective for cases filed on or after July 1. FINRA’s regulatory notice is available here.