Tag Archive Salary

ByCurtis Watts

Life Insurance Myths Debunked

Misconceptions and misunderstandings have perpetuated a number of life insurance myths over the years and prevented consumers from getting the cover they need. They see life insurance as something that it’s not, believing it to be out of their reach because of their lifestyle and their budget, or believing that it’s something it’s not.

If you have dependents, want them to live comfortably, and don’t have assets or funds to give them, you need life insurance coverage. And if you have been avoiding life insurance because of something you’ve been told or something you believe, it’s time to dispel those beliefs and get to the truth of the matter.

Myth 1: Life Insurance Premiums are Expensive

One of the most common myths concerning life insurance products is that they are too expensive. It only makes sense, to the uninitiated at least. After all, if they’re promising a death benefit of $200,000 over a twenty-year period, it stands to reason that they would seek to claim at least 25% of that balance to guarantee a profit.

In fact, a recent study found that consumers who had never purchased life insurance overestimated the premium costs by between 400% and 500%. That’s a massive difference.

If you’re in your 20s or 30s and are relatively healthy, you can get 20-year term insurance for less than $20 a month, and if anything happens during that term your beneficiaries will get $200,000. Life insurance companies can afford to offer such huge payouts and low premiums because the chances of a young person dying during that term are very slim.

Assuming you’re paying $20 a month for a 20-year term life insurance policy, this means you’re paying $4,800 over the term, or 2.4% of the total payout. However, the odds of a 20-year-old woman dying during this time are 1.42%, and these odds drop significantly if you remove smoking, drinking, risk-taking, and pre-existing conditions from the equation.

In other words, while it seems like a huge sum and a huge discrepancy, it still falls in favor of the life insurance company.

It’s a similar story for a 30-year-old. The odds of dying during the term are higher, but only just, as they are still less than 3%, leading to higher premiums but a great rate overall.

The older you get, the greater your risks become, but insurance companies want your money. They need you to sign on the dotted line, so they will continue to offer competitive prices. 

Keep this in mind the next time you purchase life insurance and are suspicious of the significant amount of coverage provided in relation to the cost.

Myth 2: It’s All About Money

Financial protection is important. You need a coverage amount that will cover the needs of your loved ones while also securing low premiums to make life easier for you. However, the generosity and cost of life insurance are the only factors to consider.

It’s important to consider the financial rating of the insurance company, which is acquired using a system such as A.M. Best and Moody’s. These ratings are used to determine the financial strength of a company, which is key, because you’re relying on them being around for many years to come and being rich enough to pay your death benefit when you die.

Myth 3: It’s All About the Death Benefit

While term life insurance policies are solely about the death benefit, which is paid upon the policyholder’s death, there are other options available. Whole life or permanent life insurance policies work like savings accounts as well as life insurance policies. They accumulate a cash value over the duration of the policy and the policyholder can cash this sum at any point.

If they do so, they will lose the potential death benefit and the policy will cease to exist, but it’s a good option to have if you ever find yourself in dire need of funds.

Myth 4: Insurers Find an Excuse Not to Pay

There was a time when pretty much all life insurance policies were reviewed upon the policyholder’s death. Thankfully, this changed with the introduction of a contestability period, which begins at the start of the policy and typically runs for up to 2 years.

If anything happens during this time, the policy can and will be reviewed and if any suspicions are raised, it will be contested. However, if this period passes, there is little the insurer can do. More importantly, if the policyholder was honest during the application process and the type of death is covered, the payout will be made.

The truth is that the vast majority of policies do not payout, but this is because the policies expire, the cash value is accepted, or the policyholder outlives the term. For policies that actually result in a death, the majority do payout. 

And why wouldn’t they? A life insurance company can expect to turn a profit via the underwriting process. It doesn’t need to use underhanded tactics or rob your loved ones of a payout to stay in the black.

Myth 5: My Dependents Will Survive Without Me

According to LIMRA, a research organization devoted to the insurance and financial sector, most Americans either have no coverage or not enough coverage. In both cases, they may assume their families will survive without a payout or that a small payout will be enough. There is some logic to this belief as it often comes after they perform a quick calculation, but that calculation is flawed.

Let’s imagine, for instance, that you’re a 35-year man with two children aged 5 and 7 and a 35-year-old wife. You earn $40,000 a year and your wife earns the same. You have a $150,000 house and a $100,000 mortgage.

After doing some quick calculations, you may assume that your wife’s salary will be enough to keep her going and ensure your children are looked after until they are old enough to care for themselves. You don’t have any debt to worry about and the only issue is the house, so you settle on a relatively small death benefit of $100,000.

But you’re making a lot of potentially dangerous assumptions here. Firstly, anything could happen between now and your death. On the one hand, you could comfortably pay off the mortgage, but on the other hand, inflation could rise to a point where $100,000 is a fraction of what it once was, and debts could accumulate. 

Your wife could also lose her job, and if that doesn’t happen when you’re alive and can get more cover, it might happen when you die, and she’s so overcome by grief and the stress of raising two children that she’s forced to give it up.

And then you have to think about your children. What if they want a college education? Can your wife afford that on her own? And what about your funeral or your children’s weddings? What happens if one of them falls ill and incurs huge medical expenses? 

$100,000 is a lot of money to receive as a lump sum, and if you only think in terms of lump sums you may never escape that mindset. But it’s not a single sum designed to be spent freely and enjoyed. It’s a sum designed to last your loved ones for many years and to ensure they are covered for most worst-case scenarios.

By the same token, you shouldn’t assume that your loved ones will survive without you just because you’re not the breadwinner or you have paid off your mortgage. Things can turn ugly very quickly. It only takes a few unexpected bills for things to go south, at which point that house could fall victim to an equity loan, a second mortgage, and eventually be owned by the bank when your loved ones fall behind.

Myth 6: Premiums are Tax Deductible

The premiums of an individual policy are not tax-deductible. However, there are exceptions if the individual is self-employed and using the coverage for asset protection. It’s also worth noting that the death benefit is completely tax free.

Myth 7: You Can’t Get Insurance Above a Certain Age

The older you are, the harder it is to get the financial protection that life insurance can provide. But it’s not impossible, just a little bit more expensive. Your insurance needs increase as you get older and life insurance companies have recognized this. They provide short-term policies specifically tailored to seniors. 

Known as Seniors Life Insurance or Final Expense Insurance, these policies provide a low lump sum payout, often less than $50,000, that can be used to pay for a funeral or to clear debts. You can even pay it directly to the funeral home and arrange your own funeral. 

You may also still qualify for a term life insurance policy. Of course, traditional whole life insurance policies are out of the question, and if you have a health condition you may be refused even a short term policy, but don’t give up before you do your research and check your options. 

This is something that most insurance agents will be happy to help you with.

Myth 8: Young People Don’t Need Life Insurance

Life insurance provides you with peace of mind. It aims to provide cover during a difficult time and ensures that your loved ones have financial support when dealing with your death. If you have dependents, then it doesn’t really matter how old you are. It’s true that you will probably outlive the term if you are young and healthy, but no one knows what’s around the corner.

Death is a certainty; the only question is when, not if. By not purchasing life insurance when you have dependents, you’re rolling the dice and placing their future at risk.

The younger you are, the cheaper the premiums will be and the less of an impact they will have on your finances. What’s more, you can also opt for whole life insurance, locking a rate in early and avoiding the inevitable regrets when you’re 60, don’t have any cover and are being quoted astronomical premiums.

Myth 9: You Won’t Qualify if you are in Bad Health

If you have been diagnosed with a terminal disease, it’s unlikely that any insurer would cover you. However, if you have survived a serious disease or have a pre-existing medical condition, you may still qualify.

It’s all about risk, and if the insurer determines you’re more likely to survive the term than not, they will offer you a policy based on those probabilities. The less healthy they consider you to be, the more premiums you will pay and the lower your death benefit will be. But you can still get a worthwhile policy and it might be a lot cheaper than you think.

Myth 10: If You Have Money, You Don’t Need Insurance

If you have assets to leave your heirs, a life insurance policy is not as important as it might be for a stay at home parent or a low-income couple. However, it still has its uses. 

For instance, many high-income households have a lot of debt, and while the assets can typically cover this debt, it will eat into the estate. There are also estate taxes and legal fees to consider, all of which can significantly reduce the value of the estate.

In this case, a short term policy can provide some additional coverage and ensure that those extra costs are covered.

Myth 11: The Money is Lost if there are no Beneficiaries

If you die with no beneficiaries, the money will likely go to your estate, at which point the probate process will begin. If you have a will, this process will be relatively quick and painless, and your designated heirs will get what they are owed. 

If not, things could get messy and the process will be slow. What’s more, if you have any debts, your creditors will take what they are owed from your estate, including your death benefit.

Adding a beneficiary will prevent all of this, but don’t expect the insurer to contact your beneficiary and let them know. They expect the beneficiary to come to them. It’s important, therefore, to assign at least one (and preferably more) beneficiary and to make sure they know of the existence of the policy.

Summary: Life Insurance Myths Debunked

Now that we’ve debunked the myths concerning life insurance, it’s time for you to get out there and get the cover you need. The type of life insurance you need, and the amount of death benefit you will receive, all depends on your personal circumstances and health. 

This is a subject we have discussed at length here at PocketYourDollars.com, so check out our other guides on the subject.

Life Insurance Myths Debunked is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

ByCurtis Watts

How I Invest

One of the most common questions I receive from readers like you—especially since Grow (Acorns + CNBC) published my story last week—asks me how I invest.

All this theoretical investing information is fine, Jesse. But can you please just tell me what you do with your money.

That’s what I’ll do today. Here’s a complete breakdown of how I invest, how the numbers line up, and why I make the choices I make.

Disclaimer

Of course, please take my advice with a grain of salt. Why?

My strategy is based upon my financial situation. It is not intended to be prescriptive of your financial situation.

I’ve hesitated writing this before because it feels one step removed from “How I Vote” and “How I Pray.” It’s personal. I don’t want to lead you down a path that’s wrong for you. And I don’t want to “show off” my own choices.

I’m an engineer and a writer, not a Wall Street professional. And even if I was a Wall Street pro, I hope my prior articles on stock picking and luck vs. skill in the stock market have convinced you that they aren’t as skilled as you might think.

All I can promise you today is transparency. I’ll be clear with you. I’ll answer any follow-up questions you have. And then you can decide for yourself what to do with that information.

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Are we clear? Let’s get to the good stuff.

How I Invest, and In What Accounts…?

In this section, I’ll detail how much I save for investing. Then the next two sections will describe why I use the investing accounts I use (e.g. 401(k), Roth IRA) and which investment choices I make (e.g. stocks, bonds).

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How much I save, and in what accounts:

  • 401(k)—The U.S. government has placed a limit of $19,500 on employee-deferred contributions in 2020 (for my age group). I aim to hit the full $19,500 limit.
  • 401(k) matching—My employer will match 100% of my 401(k) contributions until they’ve contributed 6% of my total salary. For the sake of round numbers, that equates to about $6,000.
  • Roth IRA—The U.S. government has placed a limit of $6,000 on Roth IRA contributions (for my earnings range) in 2020. I am aiming to hit the full $6,000 limit.
  • Health Savings Account—The U.S. government gives tremendous tax benefits for saving in Health Savings Accounts. And if you don’t use that money for medical reasons, you can use it like an investment account later in life. I aim to hit the full $3,500 limit in 2020.
  • Taxable brokerage account—After I achieved my emergency fund goal (about 6 months’ of living expenses saved in a high-yield savings account), I started putting some extra money towards my taxable brokerage account. My goal is to set aside about $500 per month in that brokerage account.

That’s $41,000 of investing per year. But a lot of that money is actually “free.” I’ll explain that below.

Why Those Accounts?

The 401(k) Account

First, let’s talk about why and how I invest using a 401(k) account. There are three huge reasons.

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First, I pay less tax—and so can you. Based on federal tax brackets and state tax brackets, my marginal tax rate is about 30%. For each additional dollar I earn, about 30 cents go directly to various government bodies. But by contributing to my 401(k), I get to save those dollars before taxes are removed. So I save about 30% of $19,500 = $5,850 off my tax bill.

Editor’s Note: The original version of this article incorrectly stated that 401(k) contributions are taken out prior to OASDI (a.k.a. social security) taxes. That claim was incorrect. 401(k) contributions occur only after OASDI taxes are assessed.

Many thanks to regular reader Nick for catching that error.

Second, the 401(k) contributions are removed before I ever see them. I’m never tempted to spend that money because I never see it in my bank account. This simple psychological trick makes saving easy to adhere to.

Third, I get 401(k) matching. This is free money from my employer. As I mentioned above, this equates to about $6,000 of free money for me.

Roth Individual Retirement Account (IRA)

Why do I also use a Roth IRA?

Unlike a 401(k), a Roth IRA is funded using post-tax dollars. I’ve already paid my 30% plus OASDI taxes, and then I put money into my Roth. But the Roth money grows tax-free.

Let’s fast-forward 30 years to when I want to access those Roth IRA savings and profits. I won’t pay any income tax (~30%) on any dividends. I won’t pay capital gains tax (~15%) if I sell the investments at a profit.

Tax GIFs | Tenor

I’m hoping my 30-year investment might grow by 8x (that’s based on historical market returns). That would grow this year’s $6000 contribution up to $48000—or about $42000 in profit. And what’s ~15% of $42000? About $6,300 in future tax savings.

Health Savings Account (H.S.A.)

The H.S.A. account has tax-breaks on the front (36.7%, for me) and on the back (15%, for me). I’m netting about $1300 up-front via an H.S.A, and $4,200 in the future (similar logic to the Roth IRA).

Taxable Brokerage Account

And finally, there’s the brokerage account, or taxable account. This is a “normal” investing account (mine is with Fidelity). There are no tax incentives, no matching funds from my employer. I pay normal taxes up front, and I’ll pay taxes on all the profits way out in the future. But I’d rather have money grow and be taxed than not grow at all.

Summary of How I Invest—Money Invested = Money Saved

In summary, I use 401(k) plus employer matching, Roth IRA, and H.S.A. accounts to save:

  • About $7,100 in tax dollars today
  • About $6,000 of free money today
  • And about $10,500 in future tax dollars, using reasonable investment growth assumptions

Don’t forget, I still get to access the investing principal of $41,000 and whatever returns those investments produce! That’s on top of the roughly $25,000 of savings mentioned above.

I choose to invest a lot today because I know it saves me money both today and tomorrow. That’s a high-level thought-process behind how I invest.

How I Invest: Which Investment Choices Do I Make?

We’ve now discussed 401(k) accounts, Roth IRAs, H.S.A. accounts, and taxable brokerage accounts. These accounts differ in their tax rules and withdrawal rules.

But within any of these accounts, one usually has different choices of investment assets. Typical assets include:

  • Stocks, like shares of Apple or General Electric.
  • Bonds, which are where someone else borrows your money and you earn interest on their debt. Common bonds give you access to Federal debt, state or municipality debt, or corporate debt.
  • Real estate, typically via real estate investment trusts (REITs)
  • Commodities, like gold, beef, oil or orange juice
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Here are the asset choices that I have access to in my various accounts:

  • 401(k)—my employer works with Fidelity to provide me with about 20 different mutual funds and index funds to invest in.
  • Roth IRA—this account is something that I set up. I can invest in just about anything I want to. Individual stocks, index funds, pork belly futures etc.
  • H.S.A.—this is through my employer, too. As such, I have limited options. But thankfully I have low-cost index fund options.
  • Taxable brokerage account—I set this account up. As such, I can invest in just about any asset I want to.

My Choice—Diversity2

How I invest and my personal choices involve two layers of diversification. A diverse investing portfolio aims to decrease risk while maintaining long-term investing profits.

The first level of diversification is that I utilize index funds. Regular readers will be intimately familiar with my feelings for index funds (here 28 unique articles where I’ve mentioned them).

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By nature, an index fund reduces the investor’s exposure to “too many eggs in one basket.” For example, my S&P 500 index fund invests in all S&P 500 companies, whether they have been performing well or not. One stellar or terrible company won’t have a drastic impact on my portfolio.

But, investing only in an S&P 500 index fund still carries risk. Namely, it’s the risk that that S&P 500 is full of “large” companies’ stocks—and history has proven that “large” companies tend to rise and fall together. They’re correlated to one another. That’s not diverse!

Lazy Portfolio

To battle this anti-diversity, how I invest is to choose a few different index funds. Specifically, my investments are split between:

  • Large U.S. stock index fund—about 40% of my portfolio
  • Mid and small U.S. stock index fund—about 20% of my portfolio
  • Bond index fund—about 20%
  • International stocks fund—about 20%

This is my “lazy portfolio.” I spread my money around four different asset class index funds, and let the economy take care of the rest.

Each year will likely see some asset classes doing great. Others doing poorly. Overall, the goal is to create a steady net increase.

Updating My Favorite Performance Chart For 2019
An asset class “quilt” chart from 2010-2019, showing how various asset classes perform each year.

Twice a year, I “re-balance” my portfolio. I adjust my assets’ percentages back to 40/20/20/20. This negates the potential for one “egg” in my basket growing too large. Re-balancing also acts as a natural mechanism to “sell high” and “buy low,” since I sell some of my “hottest” asset classes in order to purchase some of the “coldest” asset classes.

Any Other Investments?

In June 2019, I wrote a quick piece with some thoughts on cryptocurrency. As I stated then, I hold about $1000 worth of cryptocurrency, as a holdover from some—ahem—experimentation in 2016. I don’t include this in my long-term investing plans.

I am paying off a mortgage on my house. But I don’t consider my house to be an investment. I didn’t buy it to make money and won’t sell it in order to retire.

On the side, I own about $2000 worth of collectible cards. I am not planning my retirement around this. I do not include it in my portfolio. In my opinion, it’s like owning a classic car, old coins, or stamps. It’s fun. I like it. And if I can sell them in the future for profit, that’s just gravy on top.

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Summary of How I Invest

Let’s summarize some of the numbers from above.

Each year, I aim to save and invest about $41,000. But of that $41K, about $15K is completely free—that’s due to tax benefits and employer matching. And using reasonable investment growth, I think these investments can save me $15,000 per year in future tax dollars.

Plus, I eventually get access to the $41K itself and any investment profits that accrue.

I take that money and invest in index funds, via the following allocations:

  • 40% into a large-cap U.S. stock index fund
  • 20% into a medium- and small-cap U.S. stock index fund
  • 20% into an international stock index fund
  • And 20% into a bond index fund

The goal is to achieve long-term growth while spreading my eggs across a few different baskets.

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And that’s it! That’s how I invest. If you have any questions, please leave a comment below or drop me an email.

If you enjoyed this article and want to read more, I’d suggest checking out my Archive or Subscribing to get future articles emailed to your inbox.

This article—just like every other—is supported by readers like you.

Source: bestinterest.blog

ByCurtis Watts

Dear Penny: How Do I Save for Retirement on a Teacher’s Salary?

Dear Penny,

I’m 51 years old and don’t have a large nest egg. I’m a single parent with three kids. I’m a second career middle school teacher, so there is not a lot of money left over each month. 

How much money should I be saving to be able to retire in my 70s? Where should I invest that money?

-B.

Dear B.,

You still have 20 years to build your nest egg if all goes as planned. Sure, you’ve missed out on the extra years of compounding you’d have gotten had you accumulated substantial savings in your 20s and 30s. But that’s not uncommon. I’ve gotten plenty of letters from people in their 50s or 60s with nothing saved who are asking how they can retire next year.

I like that you’re already planning to work longer to make up for a late start. But here’s my nagging concern: What if you can’t work into your 70s?

The unfortunate reality is that a lot of workers are forced to retire early for a host of reasons. They lose their jobs, or they have to stop for health reasons or to care for a family member. So it’s essential to have a Plan B should you need to leave the workforce earlier than you’d hoped.

Retirement planning naturally comes with a ton of uncertainty. But since I don’t know what you earn, whether you have debt or how much you have saved, I’m going to have to respond to your question about how much to save with the vague and unsatisfying answer of: “As much as you can.”

Perhaps I can be more helpful if we work backward here. Instead of talking about how much you need to save, let’s talk about how much you need to retire. You can set savings goals from there.

The standard advice is that you need to replace about 70% to 80% of your pre-retirement income. Of course, if you can retire without a mortgage or any other debt, you could err on the lower side — perhaps even less.

For the average worker, Social Security benefits will replace about 40% of income. If you’re able to work for another two decades and get your maximum benefit at age 70, you can probably count on your benefit replacing substantially more. Your benefit will be up to 76% higher if you can delay until you’re 70 instead of claiming as early as possible at 62. That can make an enormous difference when you’re lacking in savings.

But since a Plan B is essential here, let’s only assume that your Social Security benefits will provide 40%. So you need at least enough savings to cover 30%.

If you have a retirement plan through your job with an employer match, getting that full contribution is your No. 1 goal. Once you’ve done that, try to max out your Roth IRA contribution. Since you’re over 50, you can contribute $7,000 in 2021, but for people younger than 50, the limit is $6,000.

If you maxed out your contributions under the current limits by investing $583 a month and earn 7% returns, you’d have $185,000 after 15 years. Do that for 20 years and you’d have a little more than $300,000. The benefit to saving in a Roth IRA is that the money will be tax-free when you retire.

The traditional rule of thumb is that you want to limit your retirement withdrawals to 4% each year to avoid outliving your savings. But that rule assumes you’ll be retired for 30 years. Of course, the longer you work and avoid tapping into your savings, the more you can withdraw later on.

Choosing what to invest in doesn’t need to be complicated. If you open an IRA through a major brokerage, they can use algorithms to automatically invest your money based on your age and when you want to retire.

By now you’re probably asking: How am I supposed to do all that as a single mom with a teacher’s salary? It pains me to say this, but yours may be a situation where even the most extreme budgeting isn’t enough to make your paycheck stretch as far as it needs to go. You may need to look at ways to earn additional income. Could you use the summertime or at least one weekend day each week to make extra money? Some teachers earn extra money by doing online tutoring or teaching English as a second language virtually, for example.

I hate even suggesting that. Anyone who teaches middle school truly deserves their time off. But unfortunately, I can’t change the fact that we underpay teachers. I want a solution for you that doesn’t involve working forever. That may mean you have to work more now.

Robin Hartill is a certified financial planner and a senior editor 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.

Source: thepennyhoarder.com

ByCurtis Watts

How to Increase Your Earning Potential

Every year presents new lessons we should incorporate on this life journey, and this one, in particular, is no exception. In a world that is ever-changing one thing that has to remain the same is our ability to pivot when necessary. Whenever life challenges arise, we often make changes and shift out of force rather than free choice. While this logic can be applied to every aspect of our lives it’s an especially crucial concept as it relates to our finances. There’s no need to wait until your employer needs to decrease headcount or reduce work hours to jumpstart your rediscovery process. Make the decision today that no matter what happens within the economy, you are making the strides to guarantee your earning power doesn’t rest in the hands of someone else.

Set yourself apart and strengthen your skills

Often times, the number one thing you can do before executing plans of any kind is focus on strengthening your skills. Are others able to depend on you?  If you desire to run your own business or be a high-performing, contributing employee – are you reliable? Being able to breakdown complex situations and produce viable solutions, paying special attention to detail, and asking the right questions at the right time are skills that many often have, but have yet to master. Focusing on any skills that may come naturally to you while achieving mastery, in the long run, will absolutely contribute to the opportunities you are afforded over other candidates. It’s not about competition, because what’s for you won’t pass you by. It’s about actively showcasing you are indeed the best candidate with the physical results to prove it.

Seek out new opportunities and expand your skillset

People believe there are only a few ways to bring in additional income – one being a side hustle. This isn’t necessarily the case. Seeking out opportunities within your current or new place of employment can be just what you need to make substantial strides in increasing your earnings as well as visibility. Make yourself familiar with the Human Resources policies for promotions and role transitions. Look into if there are side projects you can add to your workload that can increase your skillset while being introduced to a new audience of people; consider exploring that. Be sure to document the pros and cons of the newly added responsibilities while making sure it aligns with where you ultimately want to be. Don’t shy away from having a conversation with your manager and making your goals known.

Ask for more (and quantify it)

Employers have mid-year and end of year reviews to go over performance goals and ensure the work you’ve done over time aligns with the responsibilities of the team as well as the company. While this is protocol, as an employee you don’t have to wait until this designated time to discuss career goals. Not only does this conversation create awareness between you and your manager – it allows them to understand your desire for more. I’m sure we’ve all had less than desirable bosses, coworkers, and teams. We’ve also been in situations where we know that the work required of us was so much more than the actual amount of money we were taking home. To avoid the unfortunate cycle of being overworked and underpaid that many fall into, have an open and candid conversation with management. Be sure to quantify every task and tie a metric to it if possible. This helps to build your professional story while also making sure your resume stays current for all new opportunities as they arise.

Start a side hustle

When your friends, family, or peers often ask you to complete something and you enjoy doing it; what is that ‘thing’? What talents do you innately have that seem as if it doesn’t require a huge amount of effort? The answers to these questions should birth the idea of your new side hustle. As daunting as it may sound, take the time to loosely create a plan. Remember, this is scalable! Go at the pace that is most comfortable for you and can transition well into your lifestyle. Solicit the help of family and friends while using your larger network to advertise your talent. Social media and word of mouth can go a very long way – use all outlets to promote yourself and your services.

Never underestimate the power of networking

We all have a comfort zone and typically stay within those walls on a regular basis unless probed. However, do you consider the opportunities that could be available to you by adding several new people to your network? Utilize employee resource groups at your place of employment, various professional networks in your local cities, and other organizations that have a virtual platform. Do a quick Google search based on your preferred industry and start the journey of expanding your network. There’s a very familiar phrase we’ve all heard at some point, “it’s not what you know, it’s who you know.” LinkedIn is a great social media platform to engage with professionals all over the world on various subject matters and topics. Don’t be afraid to put yourself out there and make the connections that could lead you to new opportunities.

Become a lifelong learner

Make a commitment to yourself that no matter what happens, you will always seek knowledge, no matter the method. Explore personal and professional learning opportunities. This may be pursuing an advanced degree to expand opportunities. For others, it can be obtaining a certification within your desired field to land a better position – resulting in a salary increase. If either of those doesn’t sound appealing or fit within your current life circumstances, you can always attend conferences, listen to webinars, podcasts, and so many other cost-effective (or free) learning channels to keep your skills in top shape. This could be listening to an audible book while driving in your car or reading a new article every day related to your industry before getting your day started – learning is limitless!

The post How to Increase Your Earning Potential appeared first on MintLife Blog.

Source: mint.intuit.com

ByCurtis Watts

How to Save for Retirement in Your 20s, 30s, 40s, 50s and 60s

You probably don’t need us to tell you that the earlier you start saving for retirement, the better. But let’s face it: For a lot of people, the problem isn’t that they don’t understand how compounding works. They start saving late because their paychecks will only stretch so far.

Whether you’re in your 20s or your golden years are fast-approaching, saving and investing whatever you can will help make your retirement more comfortable. We’ll 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, you’ll need to save more.
  • Whether your employer matches contributions. The 10% to 20% guideline includes your employer’s 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. It’s impossible to predict how long you’ll be able to work or how long you’ll live. But if you plan to retire early or people in your family often live into their mid-90s, you’ll want to save more.

How to Save for Retirement at Every Age

Now that you’re ready to start saving, here’s 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 you’re living on an entry-level salary, you just don’t 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 — unless of course you wouldn’t 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, you’re getting a 50% return on your contribution before your money is even invested. That’s 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, you’d expect a  $100 investment could earn you $8. Put that $100 toward your balance? You’re guaranteed to save $16.

Take More Risks

Look, we’re not telling you to throw your money into risky investments like bitcoin or the penny stock your cousin won’t shut up about. But when you start investing, you’ll probably answer some questions to assess your risk tolerance. Take on as much risk as you can mentally handle, which means you’ll invest mostly in stocks with a small percentage in bonds. Don’t 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 won’t need to tap your growing nest egg in a cash crunch. This isn’t 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 — but keep lifestyle inflation in check. Don’t 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 you’re just starting to save in your 30s, the picture isn’t too dire. You still have about three decades left until retirement, but it’s essential not to delay any further. Saving may be a challenge now, though, if you’ve added kids and homeownership to the mix.

Invest in an IRA

Opening a Roth IRA is a great way to supplement your savings if you’ve only been investing in your 401(k) thus far. A Roth IRA is a solid bet because you’ll get tax-free money in retirement.

In both 2020 and 2021, you can contribute up to $6,000, or $7,000 if you’re over 50. The deadline to contribute isn’t 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.

Pro Tip

If you or your spouse isn’t working but you can afford to save for retirement, consider a spousal IRA. It’s a regular IRA, but the working spouse funds it for the non-earning spouse. 

Avoid Mixing Retirement Money With Other Savings

You’re 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. You’re also allowed to withdraw your contributions whenever you want. Wait, though. That doesn’t mean you should.

The obvious drawback is that you’re taking money out of the market before it’s had time to compound. But there’s another downside. It’s hard to figure out if you’re 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 kids’ college. But if your retirement funds are in shipshape, opening a 529 plan to save for your children’s education is a smart move. Not only will you keep the money separate from your nest egg, but by planning for their education early, you’ll 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, it’s often the first time you have enough invested to see your net worth take a hit. Don’t let panic take over. No cashing out. Commit to dollar-cost averaging and keep investing as usual, even when you’re terrified.

Saving for Retirement in Your 40s

If you’re in your 40s and started saving early, you may have a healthy nest egg by now. But if you’re behind on your retirement goals, now is the time to ramp things up. You still have plenty of time to save, but you’ve 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 — and needs — plenty of time to grow. Stay invested mostly in stocks, even if it’s more unnerving than ever when you see the stock market tank.

Put Your Retirement Above Your Kids’ College Fund

You can only afford to pay for your kids’ college if you’re 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 — well below 3% as of December 2020. Your potential returns are much higher for investing, so you’re better off putting extra money into your retirement accounts. If you haven’t 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

You’re about halfway through your working years when you’re in your 40s. Now is a good time to meet with a financial adviser. If you can’t afford one, a financial counselor is typically less expensive. They’ll focus on fundamentals like budgeting and paying off debt, rather than giving investment advice.

A woman waves her hands in the air as she overlooks a mountainous view in Alaska.

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 that’s an exciting prospect — or perhaps it fills you with dread. Whether you want to keep working forever or retirement can’t 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 won’t earn enough to keep pace with inflation.

Take Advantage of Catch-up Contributions

If you’re 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 you’re 50
  • $6,500 extra to your 401(k) once you’re 50
  • $1,000 extra to a health savings account (HSA) once you’re 55.

Work More if You’re Behind

Your window for catching up on retirement savings is getting smaller now. So if you’re 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 that’s 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. It’s 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
Military pension & SS
1/5/21 @ 2:55 PM
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Re-locating
1/5/21 @ 2:53 PM
Trish Young
TSP and mortgage
12/23/20 @ 2:41 PM
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Saving for Retirement in Your 60s

Hooray, you’ve 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 you’re 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 won’t be paying payroll taxes or making retirement contributions, for example, and maybe your mortgage will be paid off. But you generally don’t 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 you’re eligible for Medicare coverage — 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.

Pro Tip

Use Social Security’s Retirement Estimator to estimate what your monthly benefit will be.

Figure Out How Much You Can Afford to Withdraw

Once you’ve made your retirement budget and estimated how much Social Security you’ll receive, you can estimate how much you’ll 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 you’ll 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: You’ll owe the IRS 50% of the amount you were supposed to withdraw.

Keep Investing While You’re Working

Avoid taking money out of your retirement accounts while you’re still working. Once you’re over age 59 ½, you won’t 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 you’re still earning money. But do so cautiously. Keep money out of the stock market if you’ll need it in the next five years or so, since your money doesn’t have much time to recover from a stock market crash in your 60s.

A Final Thought: Make Your Retirement About You

Whether you’re still working or you’re 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 you’re like most people, you’ll 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.

Source: thepennyhoarder.com

ByCurtis Watts

The Average Salary of a Surgeon

The Average Salary of a Surgeon

Surgery is a prestigious field that requires a high degree of skill, dedication and hard work of its members. Not surprisingly, surgeons’ compensation reflects this fact, as the average salary of a surgeon was $255,110 in 2018. This figure can vary slightly depending on where you live and the type of institution at which you work. Moreover, the path to becoming a surgeon is long and involves a substantial amount of schooling, which might result in student loan debt.

Average Salary of a Surgeon: The Basics

According to the Bureau of Labor Statistics (BLS), the average salary of a surgeon was $255,110 per year in 2018. That comes out to an hourly wage of $122.65 per hour assuming a 40-hour work week – though the typical surgeon works longer hours than that. Even the lowest-paid 10% of surgeons earn $94,960 per year, so the chances are high that becoming a surgeon will result in a six-figure salary. The average salary of a surgeon is higher than the average salary of other doctors, with the exception of anesthesiologists, who earn roughly as much as surgeons.

The top-paying state for surgeons is Nebraska, with a mean annual salary of $287,890. Following Nebraska is Maine, New Jersey, Maryland and Kansas. Top-paying metro area for surgeons include Cincinnati, OH-KY-IN; Winchester, WV-VA; Albany-Schenectady-Troy, NY; New Orleans-Metairie, LA; and Bowling Green, KY.

Where Surgeons Work

The Average Salary of a Surgeon

According to BLS data, most of the surgeons in the U.S. work in physicians’ offices, where the mean annual wage for surgeons is $265,920. Second to physicians’ offices for the highest concentration of surgeons are General Medical and Surgical Hospitals, where the mean annual wage for surgeons is $225,700. Colleges, universities and professional schools are next up. There, surgeons earn an annual mean wage of $175,410. A smaller number of surgeons are employed in outpatient Care Centers, where the mean annual wage for surgeons is $277,670. Last up are special hospitals. There, the mean annual wage for surgeons is $235,770.

Becoming a Surgeon

You may have heard that the cost of becoming a doctor, including the cost of medical school and other expenses, has soared. Aspiring surgeons must first get a bachelor’s degree from an accredited college, preferably in a scientific field like biology.

Then comes the Medical College Acceptance Test (MCAT) and applications to medical schools. The application process can get expensive quickly, as many schools require in-person interviews without reimbursing applicants for travel expenses.

If accepted, you’ll then spend four years in medical school earning your M.D. Once you’ve accomplished that, you’ll almost certainly enter a residency program at a hospital. According to a 2018 survey by Medscape, the average medical resident earns a salary of $59,300, up $2,100 from the previous year. General surgery residents earned slightly less ($58,800), but more specialized residents like those practicing neurological surgery earned more ($61,800).

According to the American College of Surgeons, surgical residency programs last five years for general surgery. But some residency programs are longer than five years. For example, thoracic surgery and pediatric surgery both require residents to complete the five-year general surgery residency, plus two additional years of field-specific surgical residency.

Surgeons must also be licensed and certified. The fees for the licensing exam are the same regardless as specialty, but the application and exam fees for board certification vary by specialty. Maintenance of certification is also required. It’s not a set-it-and-forget-it qualification. The American Board of Surgery requires continuing education, as well as an exam at 10-year intervals.

Bottom Line

The Average Salary of a Surgeon

Surgeons earn some of the highest salaries in the country. However, the costs associated with becoming a surgeon are high, and student debt may eat into surgeons’ high salaries for years. The costs of maintaining certification and professional insurance are significant ongoing costs associated with being a surgeon.

Tips for Forging a Career Path

  • Your salary dictates a lot of your financial life, such as how much you can afford to pay in rent and the slice of your paycheck that goes to taxes. However, there are some principles that apply no matter your income bracket, like the importance of an emergency fund and a well-funded retirement account.
  • Whether you’re earning a six-figure surgeon’s salary or living on a more modest income, it’s smart to work with a financial advisor to manage your money. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.

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The post The Average Salary of a Surgeon appeared first on SmartAsset Blog.

Source: smartasset.com