American retirees are screwed. The 401(k) experiment has failed. Social Security’s going bust. Savers haven’t saved nearly enough and don’t have the means to improve the situation.
However hyperbolic, this is the message that has been sent and, for many, is indeed the way it feels. But how do the facts feel?
- Many companies have abdicated the role they once played in helping support employees’ retirements through defined benefit pension plans by promoting and then under-supporting defined contribution plans, like the 401(k).
- Most pensions that remain — even those run by states and municipalities — are “upside down,” lacking sufficient funds to pay what they’ve promised. The entity conceived to insure underfunded pension plans is also underfunded.
- Some large financial firms have filled many of the 401(k) plans they manage with overpriced, underperforming funds, and offered little in the form of substantive education for the masses now left to their own devices.
- After a six-year effort to ensure that financial advisors who manage retirement assets would be required to act in the best interests of their clients, there’s a corporate and political movement afoot for firms to reclaim potential lost profits if they were forced to do right by their clients.
- Even some of the individuals who initially conceived the 401(k) concept and lobbied for it have recanted their support, regretting it ever started.
Social Security Facts:
- The program intended only to be a safety net has become the primary financial resource in retirement for too many.
- The surplus funds received when the huge baby boomer generation paid in — which are now being used to help replace the inherent shortfall of smaller generations — are projected to run out in 2034, thereby reducing the system’s ability to pay benefits by 25 percent.
There — how does that feel, now?
Big bank fees are at an all-time high while the interest they pay is at an all-time low. Worse yet, evidence recently has come to light of the criminal abuse of a practice common among large banks since the fall of Glass-Steagall: cross-selling.
Cross-selling is rooted in consumer research that large financial institutions tend to salivate over. It shows that customers are more profitable for longer when they own more products. How else could they get us to settle for deposit products for which we pay them? Does this absurdity leave you wanting to bolt the big banks?
Fortunately, you have alternatives. Here are the top four:
1) A good option for most is to flee the big brick-and-mortar bank for its younger virtual sibling: the online bank. Online banks, which lack the overhead of their more traditional rivals, can offer higher interest rates, lower fees, free ATM withdrawals and low or no minimum balance requirements. And they do.
I’ve been using an online bank for several years now and haven’t paid a single ATM fee for that entire time—and I can go to any ATM in the known universe (seriously). In the past year alone, I’ve received more than $200 in ATM fee rebates!
I recommend that you choose an online bank that best serves your needs and lifestyle. Mine, for example, offers unlimited ATM reimbursement, but others will cap the reimbursement amount or restrict you to a (typically large) number of “free” ATMs. Those banks, however, may pay a higher level of interest than my bank. Nerdwallet did an excellent job summarizing the best online checking accounts of 2016.
Unfortunately, personal finance has been reduced to a short list of “Dos” and a long (long) list of “Don’ts” typically based on someone else’s priorities in life, not yours.
But personal finance is actually more personal than it is finance.
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That’s why what works great for someone else may not work as well for you. Money management is complex because we are complex. Therefore, it is in better understanding ourselves—our history with money and what we value most—that we are able to bring clarity to even the most confounding decisions in money and life. As an advisor, speaker and author, I’ve made a career out of demystifying complex financial concepts into understandable, doable actions. In this practical book, I’ll show you how to
- find contentment by redefining “wealth”
- establish your priorities, articulate your goals, and find your calling
- design a personal budgeting system you can (almost) enjoy
- create a simple, world-class investment portfolio that has beaten the pros
- manage risk—with and without insurance
- ditch the traditional concept of retirement and plan for financial independence
- cheat death and build a legacy
- and more
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The problem with so much personal finance advice is that it’s unnecessarily complicated, often with the goal of selling you things you don’t need. Tim Maurer never plays that game. His straightforward, candid and yes — simple — prescriptions are always right on target. Jean Chatzky
financial editor of NBC's 'Today Show'
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“Reading this book is like having your own personal financial advisor.”—Kimberly Palmer, senior money editor at US News & World Report; author of The Economy of You
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“Maurer teaches us how to literally redefine wealth in a way that will both honor your life values and priorities while simultaneously reducing your stress.”—Manisha Thakor, CFA, director of wealth strategies for women for the BAM Alliance; writer for The Wall Street Journal
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I think we’ve been looking at Social Security retirement benefits all wrong. In the long-running debate about when to take Social Security — as early as age 62 or as late as age 70 — the focus has been on timing your claim to get the most money, in total, out of the social safety net.
This is a circular argument that will never be fully decided until the Social Security recipient in question dies. So let’s shift the focus from the question “How do we get the most out of Social Security?” to “How do we get Social Security when we need it most?”
Simply put, you’re more likely to run out of money at the end of retirement than at the beginning.
In a new CNBC series on which I’ll be a regular contributor, I offered some “Straight Talk” on Social Security retirement benefit strategies that, while simple, are all too often missed.
It should be no surprise, because Social Security is an incredibly complex animal. Did you know that each U.S. married household represents potentially thousands of different Social Security options? It’s likely that you’ll need to confer with a financial advisor specializing in Social Security distributions in order to determine how you can get your maximum benefit.
I’m a speaker, author, wealth advisor and director of personal finance for Buckingham and the BAM Alliance. Connect with me on Twitter, Google+, and click HERE to receive my weekly post via email.
April is National Financial Literacy Month, and while I would never argue against financial literacy, I have a fundamental problem with the moniker. Who, after all, would willingly step forward and proudly announce themselves illiterate—at anything?
Unfortunately, I believe that’s what fully embracing the financial literacy movement requires. It positions financial educators as the Dickenses of currency and those who struggle with money as the collective Oliver Twist. Yes, it’s unfortunately true that too many Americans lack optimal—and perhaps even sufficient—personal financial education. But a sweeping declaration that labels the majority of the country financially illiterate does little to advance the cause. And it may even slow the progress we seek.
As the kids head back to school, many of us are getting back to work on our personal financial plan. I talked with Susie Gharib about the most important considerations for Millennials, Gens X & Y and Empty Nesters on the Nightly Business Report on PBS (produced by CNBC):
The U.S. Department of Agriculture (USDA) recently released its annual “Cost of Raising a Child” report. The news from it is really no news at all to us parents—kids are stinking expensive and growing even more so. However, if you read between the lines, there are three extremely important points that don’t show up in the executive summary:
1) Parents still have a choice. The USDA estimates that households with less than $61,530 in income will spend a total of $176,550 per child. Meanwhile, “middle-income parents” making between $61,530 and $106,540 each year can anticipate spending $245,340 per kid. Those blessed with household income over $106,540 should expect to spend $407,820.
Here’s how I read these numbers: It likely costs approximately $175,000 to care for a child’s needs in today’s dollars. Beyond that, it’s our choice as parents if and how we spend additional money on our progeny. When your household income jumps from $106,000 to $107,000, the USDA isn’t holding a gun to your head and demanding that you spend an additional $162,480 per child.
It’s completely up to you, and you may choose to spend more or less than some of the USDA estimates. For example, you may choose (wisely) to spend more on one child than another for various, justifiable reasons, including each individual child’s own gifts and weaknesses. If you choose to put even one child through private school, from kindergarten through a graduate degree, you could easily spend a million bucks just for education—and college isn’t even included in the USDA’s numbers.
There is no shortage of receptacles clamoring for your money each day. No matter how much money you have or make, it could never keep up with all the seemingly urgent invitations to part with it.
Separating true financial priorities from flash impulses is an increasing challenge, even when you’re trying to do the right thing with your moola — like saving for the future, insuring against catastrophic risks and otherwise improving your financial standing. And while every individual and household is in some way unique, the following list of financial priorities for your next available dollar is a reliable guide for most.
Once you’ve spent the money necessary to cover your fixed and variable living expenses (and yes, I realize that’s no easy task for many) consider spending your additional dollars in this order: