Category Archives: income

How $1,000 Invested at Birth Could Change Everything

 

KidSave’ accounts may be part of a long-term solution to the retirement income problem.

In the presidential debates, we’ve heard more about Donald Trump’s anatomy than what may be the most pressing financial issue directly in front of millions of boomers: Where will they find monthly retirement income that is guaranteed for life?

The retirement industry can talk about almost nothing else, which in hindsight seems a predictable turn. Did we really believe Americans would manage their 401(k) plans well enough to stash away 25 years of post-career financial security? We haven’t come close, and in this sense the 401(k) has been a colossal failure. Now the first wave of pensionless retirees is about to land, and politicians have almostnothing to say on the subject.

One reason is that there are no quick fixes, which is why it may be time to dust off a long-term solution first floated in the 1990s and still championed by one of its architects, Bob Kerrey, the former democratic senator from Nebraska. He would like every child born in the U.S. to receive $1,000 in a “KidSave” account that would compound over 65 years before being tapped. “For most people it’s not income that matters,” says Kerry, now with investment firm Allen & Co. “It’s wealth accumulation.”

In other words, retirement security is less about what you earn and more about how much and how soon you save. Compound growth over seven decades can do a lot of heavy lifting.

Kerrey reiterated his support for what he calls “wealth accounts” last week during a discussion on the financial impact of longevity, hosted by Bank of America Merrill Lynch at the Museum of American Finance in New York. These wealth accounts would be funded at every child’s birth through a government loan, to be repaid when the child enters the workforce some 25 years later.

The initial $1,000 by itself wouldn’t make a huge difference: at 6% a year over 65 years it would produce just $44,145 in tax-deferred savings. But the existence of a wealth account from birth would encourage more saving, Kerrey believes. These accounts would be strictly off limits for 65 years and in his estimation could be enough to guarantee adequate income that will never run out later in life. If parents or grandparents, say, kicked in $20 a month for 20 years the nest egg would swell to more than $240,000 at the child’s retirement.

KidSave accounts enjoyed bipartisan support years ago but stalled amid efforts to boost other types of savings accounts and shore up Social Security. As previously envisioned, the initial deposit might be $2,000, indexed annually for inflation. That alone might produce $250,000 at age 65, Heritage Foundation found in its assessment of the program nearly two decades ago. Another version of the program called for $1,000 at birth and five annual payments of $500, which could generate a nest egg of nearly $140,000.

Why dust off KidSave accounts now? They are a relatively painless way to address a retirement income shortfall in the, yes, distant future. But as the youngest boomers and then Gen Xers retire with virtually no guaranteed income other than Social Security, the shortfall will only grow. Everything is on the table now as policymakers try to fix the retirement income issue via things like expanded Social Security, guaranteed retirement accounts, 401(k) annuities, better home reverse mortgages, and breaking down legal barriers to working longer.

Kerrey noted that without change every American now under age 40 will receive a 25% cut in Social Security benefits at retirement. We need interim steps. But we also need a long-term plan. The candidates have touched on ways to fix Social Security and cut ballooning student debt.

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Being rich is all about having the right habits

Being rich is all about having the right habits. That’s the message from Tom Corley, who spent five years observing how rich and poor people lived, worked, and even slept. Then, Corley wrote about his research in a book called “Rich Habits: The Daily Success Habits of Wealthy Individuals.”

Here’s what he found:

First: Be an early bird. Because among people making six-figures a year, about half wake up at least three hours before they have to be at work. Then, Corley says they use that extra morning time to focus on self-improvement like reading and exercising, because those things help them be more productive at work.
Another daily habit that can make you rich:Don’t gossip. According to Corley’s research, wealthy people are a whopping 14 times less likely to say they spread gossip, compared to people earning less than $30,000 a year.


Also: Spend less time using the Internet. Corley says most people who struggle with money spend at least an hour a day surfing the Web, or watching TV. But rich people are HALF as likely to go online every day. Instead, they spend that extra hour connecting with others in the “real world,” doing things like networking, socializing, and volunteering.


Another helpful habit: Make more “to-do” lists. Because wealthy people say they cross off 70% percent of the tasks on their to-do list every day – including short-term and long-term goals, meaning, rich people love getting stuff done.


Finally: According to the book, wealthy people are calorie counters. They generally limit alcoholic consumption, keep their junk food snacks to less than 300 calories per day, and weigh less. And it makes sense that successful people would weight less, 75% of executives in a recent survey said that being overweight is a “serious career impediment.” Overweight people are 3,000 times more likely to get passed over for a promotion. And fair or not, overweight applicants get turned down for jobs more than any other group.

http://www.tesh.com

Things that we all need to think about…

Some investors think that saving for retirement is too much of a burden
By not saving now, investors will suffer a 72% decline in standard of living in retirement
Financial pros recommend investors save at least 15% of income for retirement
USA TODAY markets reporter Matt Krantz – mkrantz@usatoday.com.

Q: What can investors do who cannot afford to save a dime for retirement?

A: Investing for retirement is a sacrifice. Investors are foregoing spending now so they’ll have money to spend in the future.

Some investors say saving for retirement is one thing they cannot afford or choose not to do it. The problem is that if investors don’t cut their current standard of living now, to invest for retirement, they’re going to be forced to cut it in the future.

The basic rule of thumb is that investors must, on average, put aside 15% of their paychecks if they want to have a fighting chance of having any money left over when they turn 95, says Stuart Ritter, financial planner at T. Rowe Price.

Just saving a small amount, say 3%, just isn’t going to cut it. Even if a 30-year-old saves 3% of income toward retirement, the chances that nest egg will last through their 95th birthday is just 1%. A person who saves nothing for retirement now will likely, on average, suffer a 72% decline in standard of living in retirement, Stuart says.

So the question isn’t whether to save now or not. It’s really a matter of deciding to give up income now, or give it up to the point of struggling later.

Feeling stressed, tense, worried?

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You know, we’ve all been there in one way or another: we’ve been tense and focused on money, maybe stressed, maybe short with our spouse, maybe short with our kids….and in that moment when we’re stressing about money, we’re missing the world around us.

You know what I mean when I say “That awful feeling in the pit of your stomach because you feel like you have to worry about running out of money at the end of the month.”

I’ve been there, then back on “top”, then stressed again, a few times in my life.

I heard a funny thing the other day; someone was saying how they thought ‘rich people’ always think about money and ‘rich people’ are all shallow.

Maybe some are shallow, but in my experience and from what I read, when you had enough money to pay the bills and to live in a decent way, you’re NOT thinking about money much at all. When you have enough to cover the bills, you can think about fun things, about things that you WANT to do in your job and career, and things that you can do for or contribute to others – you can choose to enjoy life a little more.

When I was struggling with income and bills, and when I observe others that have the same struggle to pay bills and meet their obligations, they think about money all day long.

There is a great book that I highly recommend called “Bridges out of Poverty”. It helps explain how people struggling in poverty are constantly thinking about how they are paying the bills, food on the table, tires on the car, utility bills, etc.

Even if we aren’t at the poverty level, we can sometimes have some traits of the poverty mindset……we worry about money, about paying the mortgage, about our jobs, etc. This never creates a good feeling inside, does it?

Again, as someone that has been back and forth, here is some wisdom that I’ve learned from a few others and I believe that it really can help:

  • Focus on what you want, not what you don’t want – instead of focusing on the bills and lack of cash, focus on the things that you really want, the freedom, peace of mind, better health, better relationships, enjoying life, security for your family, etc.

  • Watch your self-talk- we all talk to ourselves and ask ourselves questions throughout the day. There is enough negativity in the world, don’t add to it by bringing yourself down. I was someone who beat myself up for many things and once in a while still do – if you do also, STOP. Reflect on accomplishments, look for references why you’re good at something, ask yourself questions like “Why do I deserve this?” and “Why am I so lucky?” instead of things like “Why can’t I earn more money” or ‘why is this such a struggle’ or ‘why don’t I ever win anything?”

  • Have a vision – ok maybe your life isn’t where you want it to be now and you want to improve – almost everyone does….create a vision. It doesn’t have to be a major complicated thing – something as simple as some bullet points or a paragraph or two is fine – create a simple story of you as you want to be – make the story in present tense as if you already have it – as if you are already “THERE” and you’re looking back on today, when you are struggling. Make sure that in the story you talk about how you’re proud of the steps you took, the hard work, the good attitude, and how you changed for the better. Remember, tell the ideal story of your life as if it is already done!

  • Enjoy the present, live in the moment – when we worry about the future or fret over the past, we miss moments and experiences right in front of us. I recall a time when my wife and I had time alone and I sat there worrrying about something that never even happened. Another time I recall worrying about something and basically ignoring my daughters when I had a free day with them. We all lost and nothing was gained. Take a moment to look around, be aware, and live today’s life. Things can happen in a moment. Look for miracles. You gotta celebrate life’s moments no matter what. There is no rehearsal.

  • Here’s something that can be the toughest for any of us – do the above each and everyday. We can all do things for a while or on occasion, or here and there. We have to ask the right questions, focus on the good stuff, reflect on our vision, and enjoy the present every day! We all must take action – even if they are just baby steps each day. Ask, ‘what thing, regardless how big or small, can I do today?” You don’t have to spend long on it – but at least 5 -10 minutes. Can you turn off the TV, put down the phone, or walk away from the computer or ipad for 10 minutes if it makes you better?

Remember, people with much less smarts, ability, education, opportunity have done great things, contributed, made money, helped others, and been successful , you have the ability, you have the power inside, you just need to take action.

http://www.onewebstrategy.com

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My Story, Chapter 4

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Continued…..

….so that fall I returned to college a new person….really I felt like a man for the first time ever. As I mentioned, people treated me differently. I had a new confidence and self-respect. I can tell you that my relationships, grades, and life were affected.

I went to the fitness center 4 or 5 times a week. I ate better. I worked in the office and carried a 90% load of schoolwork. My grades improved greatly. My professors noticed my change. I began to think differently.

My parents now went to Florida from January to April. They bought a small place there and had a great time – they deserved it. My dad played volleyball 4 or 5 days a week and softball once or twice a week. My mother and father rode there bikes around the park most of the day and they socialized. They looked and acted years younger.

Besides some basic challenges, the year went on well. My father had a minor set back the next year but recovered quickly. I continued to run the business mostly on my own, using my dad as a valuable consultant. I would bounce ideas and situations off of him and we’d work together. My father and I did travel together to some larger clients, some tradeshows and other business. I got to spend time with him as a boss, partner and for the first time friend. It was a great time and I am forever grateful for that time. As time went on, I began to inject more of my own ideas and personality into the business. I had much to learn.

The next year of college came and I continued to maintain the balance of work, school, and social life. I began to enjoy the bit of extra money that I started to gather. Life was good.

I began to really taste independence. When I say that, I mean it in a few ways….I tasted what it was like to earn money, to save money, and to invest it. I saw my money grow in my investments, so I understood the passive nature of investing.

By the nature of our business, we set up dealers, home centers, and distributors. They sold our products. We earned commission. That was pretty cool. We earned money whether we were golfing, driving, sleeping or whatever. Sure we had to offer support, service and coordinate deliveries….and yes set up new dealers, but it was cool when I understood that there was a recurring revenue of sorts happening there.

The other part of independence was that we were living one about 30 acres – about 10 acres of fields in front of the home and office, and the balance behind us in beautiful woods. There was a small hillside on the on side of the property so that we were in a nice little valley. Not far in the woods, we had a creek. You could sit in the office in mid-summer and open the windows to a great cool breeze. You could hear birds sing, hear the bubbling creek, and look out and see deer.

If you wanted to take a walk, go fishing, it was all possible. There was an independence so that we were not tied to a city building, hampered by a commute and traffic. We weren’t tied to one employer. We had the freedom of recurring income. The independence that all people experience when they first reach a certain level of income was there. Life was good.

Later in my life I got away from many of these things. I worked in the city and had a very long commute. I worked for controlling employers. I would spend years longing to get back to that independence – the feeling that I controlled my own life. I lost the recurring revenue and the almost passive nature of the income.  For many years, sometimes on purpose, sometimes because of circumstances around me, I lost independence. I can tell you this, it is much better, in so many ways, to be as independent as possible. I’ve had it and in some ways, I lost it.

As with any life event, I learned lessons. Among others, I learned the WORDS TO LIVE BY: Independence. Being free to act on your own, free to live where you want. I encourage you, define what independence means to you and what types of it are important to you.

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I really grew over a few years. I learned a lot. I took some risks. I made some mistakes. I had successes.

One of the companies was about 90% of our income. We were independent but when you looked at the finances of our business, we were very dependent on one company. It wasn’t by design but because that company had such a diverse nature of products and because of how the territory simply developed, we were tied to them.

One spring we got news that this company hired a new set of sales managers. We got the call that one was coming to our area and we had to set up some visits. We approached it with a great attitude but he was pretty tough to deal with. Even though he knew nothing of the industry, he came across as egotistical, typically interrupted people, and was not a pleasant guy to spend the guy with…..

….he came into town a few times that summer and he’d typically tick off clients wherever he visited. We’d ask for help solving problems but he never solved one of them. He often was late for appointments and was disrespectful to me and my father. Then one day he asked us to meet him somewhere far. So we got up at 5am, drove to see this guy and we got fired.

That year, that company let go of any and every representative like us across the country and they went with some in-house salaried people. (Within 12 months that company also let go that sales manager!) Things change. You must adapt!.

So we drove all the way home on that beautiful summer day. I could tell that my dad was very upset that suddenly the business had lost 90% of its cashflow and the legacy he wanted to leave was not going to be the same. We tried to enjoy the day and we discussed the exit strategy….we also began to think about what the next step would be………

….continued….

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