Every now and again when I read through the headlines on my favorite money news sites, I see the same desperate-for-attention headlines proclaiming that “retirement is dead” and that we basically have no hope of ever saving enough money. How do they draw those conclusions? The usual suspects cited are the decline of pensions, the deflating of Social Security and the rise in costs as reasons why none of us can save and why we’ll all need to work until we are 80.
And then there is my personal favorite: The 401k. They talk about the 401k like it’s a James Bond villain. When they compare the pension vs 401k, they describe it as a horrible and inefficient means for retirement. Basically, their message is that the 401k killed retirement.
That is complete nonsense. The 401k didn’t destroy our chances at the American Dream … we did.
The tagline to My Money Design has always been designing financial freedom. For as long as I’ve been into reading financial books and blogs about money, I’ve seen a lot of them try to answer the question of what is financial freedom. However, I feel as though the weight of this term often gets lost or trivialized.
In this post, we’re going to layout a definition for financial freedom and explain where we need to focus in order to achieve it.
The following post was provided by guest contributor Angie Picardo of NerdWallet. If you are interested in being a guest contributor for My Money Design, please feel free to contact me.
It’s a responsibility that practically all of us have, not only to ourselves, but also to our families. A strong retirement plan now will literally pay dividends later. It’s not easy to fit it into your monthly budget at times, but it’s become a necessity. With continuing advancements in medicine and healthcare, the average life expectancy is consistently rising, and along with dwindling Social Security funds, it’s up to us to create a retirement saving strategy that fits our goals and creates enough income for us to live upon.
So how do we stop making excuses and get started?
Frequently when you think of planning for retirement or becoming financially free in general, you think about how much money you’ll need to save in order to generate the kind of income that you’re use to. For example, how can I save $1,250,000 so that I can draw 4% and take out $50,000 each year?
In this post, we’ll look at the other side of the coin. Instead, we’ll look for a way to reduce how much income you’ll actually need while on your own. And how will we do this? By focusing in on one of your largest expenses – your mortgage.
“Dolla-bills, ya’ll!” – Sorry about that gangsta-rap intro, but I’m really excited! I just received the refunded balance for my previous mortgage escrow account. Just slightly over $1,000!
As many of you know, I just completed a mortgage refinance about a month and a half ago. When you switch between the lenders, your old lender refunds any money that you had left over in their escrow account.
So in anticipation of this small windfall, I thought it might be fun to ask the question of what to do with $1000?
Category: Savings & Budgeting
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, what to do with $1000
If you have any hopes and dreams at all of retiring early, then you know that one of the biggest challenges you face is the fact that there are penalties for withdrawing your money too early from your retirement accounts. For most of them, this will be age 59 ½ (click here for a complete list). So one of the re-occurring questions that we keep asking on MyMoneyDesign is:
• How do I bridge the gap between early retirement and age 59 ½?
In previous posts, we’ve reviewed the following non-employment, investment-style options available:
• File for a 72t or “SEPP – Substantially Equal Periodic Payments” to get penalty free portions of your nest egg money out.
• Quit working at age 55 to get your 401k’s and 403b’s, but NOT earlier.
• Withdraw the principal (not the earnings) from your Roth IRA.
Although each of these options is a possibility, they’re not really outstanding because each one involves withdrawing from your retirement accounts sooner than later. As you can guess, the sooner you dip into your accounts, the higher your potential is for running out of money during retirement!
So what else can we do to try to add some low-cost income during early retirement?