Retirement seems like it’s a long way off. But it will be around the corner before you know it. In fact, It could even come sooner than you expect: A significant number of Americans are forced to retire ahead of schedule, due to a variety of factors. 

But let’s assume you’ll retire on schedule in 30, 40 or 50 years at age 67 – the current “full retirement age” for Social Security. Most financial planners recommend you have at least 10 times your income at retirement age stashed away in retirement accounts. 

Retirement Milestones

Are you on schedule? Or are you slipping off the pace? 

Well, let’s make some assumptions: 

You’ll retire at age 67
You’ll allocate at least 50 percent of your retirement savings to stocks and stock funds for long-term growth. 
You start saving soon after college, at age 25. 

Fidelity Investments crunched some numbers, assumed historic returns for equities, bonds, and cash equivalents. Here’s what they came up with: 

To stay on track to have 10 times your income put away by age 67, you should be hitting the following milestones: 

            Age 30:            1 times income

            Age 35:            2 times income

            Age 40:            3 times income

            Age 45:            4 times income

            Age 50:            6 times income

            Age 55:            7 times income

            Age 60:            8 times income

       ***Age 67:            10 times income***

Image: Fidelity

Given the historic stock market performance and some reasonable expectations of market returns, this timeline should be reasonably attainable for workers who start saving at least 15 percent of their incomes in tax-advantaged retirement plans (IRAs, 401(k)s, 403(b)s, Thrift Savings Plans and the like).

Are you on track? Studies show that most people are falling behind. For example, the average college graduate with student loans graduates with a balance of $30,000. So that puts many new grads in a minus 0.5 times income to minus 2 times income hole.

With student loan payments increasingly causing young workers to put off saving for retirement, many younger workers will be falling behind this timeline.

Don’t try to keep up with your neighbors’ lifestyle

Your neighbors are broke. 

The ugly truth is that the median household has only about $5,000 in retirement savings. And even the median couple in their 50s or 60s has less than $20,000 saved up. They should already have between six and ten times their income put away, but they’ve only saved a fraction of one year’s income, and they are about to retire.

Don’t let yourself become like them. 

How to catch up 

First, buy some term life insurance. If you have a family, this locks in a lifetime of financial contributions to your family’s well-being even if you aren’t around to see it. 

If you are 25 and you died tomorrow your life insurance would have to replace 42 years of income, together with pay raises and bonuses (minus what it doesn’t cost to feed you anymore!) so 12 to 20 times your income in life insurance is not unreasonable for someone just starting out.

Second, buy some disability income insurance. This is insurance that replaces up to 50 to 65 percent of your income if you are disabled and can’t work anymore. Why do you need it? Because according to statistics from the Social Security Administration, More than one in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach the normal retirement age. 

And the average disability insurance claim lasts 34.6 months, according to the Council for Disability Awareness.

If you don’t have three years of income in emergency savings, you’re going to zero out your retirement savings just trying to cover basic living expenses during that time. 

Those two basic financial planning measures will help cover you against the most disastrous scenarios – and protect your family’s long-term financial security even if you aren’t able to work. 

You can recover from just about anything else. But you and your family can’t recover from your death or sudden end to your career because of disability. So cover these risks first.

Pick up at least your 401(k) match. 

If your employer matches 401(k) contributions, contribute at least enough to pick up the company match. This is usually a better payoff than paying down debts or any investments you’re likely to make on your own: No mutual fund or annuity is going to guarantee you 50 cents to a dollar of return for every dollar you invest. But your 401(k) matching program might. The median 401(k) plan sponsor matches up to 3 percent of your annual income from that employer. So tighten your belt, contribute and take advantage of it. 

Ask your employer if they have a student loan repayment assistance benefit. 

Some employers recognize that younger workers (and some older ones) appreciate help paying down student loan debt, and make some form of assistance available as an employee benefit.

It doesn’t just benefit employees. There are many important advantages to employers who offer student loan repayment benefits as well.

If you have student loans and your employer offers a student loan repayment benefit, sign up as soon as you’re eligible. 

It may make sense to refinance your student loans if you can get a much better interest rate. But read this first before you refinance a federal student loan.

Savagely attack credit card and consumer debt. 

With average interest rates 3-4 times what a federally-guaranteed student loan costs, and more than twice what most regard as a reasonably-expected long-term return on stock mutual funds and anything you’re likely to buy in a retirement account, credit cards, sub-prime car loans, and other debts are a cancer on your long-term financial future. 

After your basic necessities are taken care of and you have a bit of cushion for emergencies, throw every dollar you can against your credit card, car loans, retail store cards, gas cards and other forms of consumer debt. 

You can use the debt snowball method (smallest debts first) or the avalanche method (highest interest rate debt first). Either works. Pick one and put your shoulder to the wheel and power through it. The sooner you get all your non-mortgage debt zeroed out, the sooner you can begin to make real progress on your long term financial goals.

Invest at least 15% of your income for the long term. 

Fidelity’s milestones are based on a savings rate of 15 percent of a worker’s annual income. However, if you’ve fallen off the mark, you should be saving even more if you want to have a good chance of catching up. 

Take full advantage of tax-advantaged retirement accounts:

IRAs
Roth IRAs
401(k)s and 403(b)s
SIMPLE IRAs
SEPs
Health Savings Accounts (if you have a high-deductible health plan (HDHP). The money you don’t spend on health care gets treated like a traditional IRA when you turn 65, so money in HSA can do double duty: it’s there to help pay for health care if you need it, and if you don’t, it’s another resource for retirement.

Don’t assume you can just delay retirement.

Many people assume that they can simply keep working well into their senior years, and keep saving. It’s great if it works out – and if you enjoy what you do for a living.

But assuming you can simply stay in the workforce into your 70s and 80s earning what you’re accustomed to may turn out to be a bad bet: A majority of retirees over 55 report they were forced into retirement earlier than expected. You may not have a choice.

The post Millennials and Gen Xers: How Much Should You Have Saved for Retirement by Now? appeared first on LoanGifting.

Original Source: blog.loangifting.com

There were lots of fantastic questions on the last post so it made the most sense to lay it all out in the same place especially since there may be lots of folks who are considering long term trips right now.

Q – Have you considered renting out your home while you are gone?

A – Yes. There are some big problems with this idea though. First, there are 6 of us in 1,200 sq. ft. and we homeschool. The prospective money we could make off AirBnBing our home didn’t offset the cost/burden of moving out the school room set-up and our personal belongings. That, and in the time of COVID, the liability/risk factor is high. If someone got COVID, could they say it was because we didn’t adequately clean the home between renters? Lots of hassle. Very little reward.

Q – Does your health insurance cover you out of state? Will you get stuck with a huge hospital bill?

A – We have the worst, best insurance out there. We have an HSA which means we pay 100% of all medical expenses out of pocket until we hit our deductible (that’s the bad part). Once we hit our out-of-pocket maximum, our insurance pays 100% of medical and prescription drug costs for the rest of the year (that’s the good part). The out-of-pocket maximum is less than our emergency fund. This would be the same whether we were in-state or out of state but it’s something everyone should look into when traveling, particularly during a pandemic.

Q – Should you use the trip money to pay down your mortgage instead?

A – This is a hard call. We saved up money for a fall trip and my husband got some unexpected side jobs so we aren’t going into our emergency fund or stealing from another budget bucket BUT, I recognize this experience won’t be what it would have been had we not been knee deep in a pandemic. There will be no stops at amusement parks or zoos. There won’t be family dinners at fun restaurants. That makes me sad. But at the same time, I also recognize that I’m in a situation that is unlikely to happen again (please Lord, I HOPE IT WON’T!). I have a huge chunk of time to watch my kids fish in lakes and rivers and explore backcountry. I’ll pay my mortgage for two months longer to take advantage of this opportunity.

Q – Would you like to get into a debate about traveling during a pandemic?

A – As fun as that sounds… No. ; ) I understand that we all have strong opinions and I respect them but I’m not open for a debate. I’ll explain the finances related to traveling during a pandemic but not about the pandemic itself.

A couple more things I think are important when trip planning…

Double Check Your Insurance Coverage

Yes, look at your healthcare but also look at your home insurance and your car insurance. Are the limits right? Do you feel comfortable with your deductibles? Do you have enough insurance? Do you have roadside assistance?

Make Sure Your Affairs Are in Order

Yup. I’m getting morbid on you. Chris and I have very detailed wills. They outline what to do in lots of situations. What happens if we both die? Who gets the kids? Who is the executor? What are our health directives? It’s all there. Before we leave on big trips, we double check to make sure everything is still the way we want it and we call my mom to remind her where the information is. We don’t do it because we are morbid, we do it because the last thing I want my loved ones worrying about when dealing with loss is trying to figure out what to do with my kids or my house or my car. You should have this in place NOW but you should regularly revisit to make sure it’s accurate. Travel is a good reminder to double check.

The post Long Distance/Long Term Travel and Finances appeared first on Blogging Away Debt.

Original Source: bloggingawaydebt.com