I still remember when I was little, my parents often gave me a piggy bank made of clay with a simple dome shape. The goal is simple, to save pocket money until December is solved and used to buy new clothes or shoes. Usually, my parents buy it for 6 months even since the previous year, which is January.
I remember, breaking every savings from the clay became a long-awaited habit at Christmas because I knew I would get a lot of money, my size as a child 7-9 years old, to buy my own Christmas present! Fair enough for my parents, I think.
Now, I already have 2 toddlers, and I think maybe later I will apply this too. Actually my husband and I have bought our first child who is now 4 years old piggy bank, but because of his unique model, only one has been saved for more or less a year even if only by entering coins. Now there is one but my husband is filling it. Maybe, next year when my child is 5 years old, he will understand enough to save his money, we will try again to teach my child to save by buying another piggy bank or can go directly to the local bank in our area.
Kids Can Start At 5
According to George Washington University Professor Annamaria Lusardi, “We have to make sure the next generation is well-equipped and parents must set an example. They must teach kids about money.
Lusardi is one of the nation’s foremost authorities on debt management and prudent financial practices. She thinks too many parents are counting on schools, employers or even peers to teach personal finance education and that is not going well.
Parents can teach their children to save money starting at age 5, according to research from the Consumer Financial Protection Bureau.
The Simple Step
So tips for parents to teach their kids to save money are: 1. Be a role model Like my simple experience when I was a child, but it really made an impression on me was to give our children a good example of saving 2. They learn to be patient When your child saves, you indirectly teach them the meaning of waiting and being patient. If there are expensive toys or gadgets that are quite expensive, they can learn the meaning of trying and be patient through saving in a piggy bank or in a bank. 3. Look for information about child savings at the bank This teaches them also a modern way to save at the same time simple transactions that occur in banks as money-saving institutions in addition to their simple piggy bank.
If you have planning to invest your money in the stock market, you need to read this carefully. It cannot be denied that every investment has its own risk. Today’s article gives an overview of the situation in the stock market today and the prediction about what will happen in the future.
Client meetings over the past year have been quite sanguine. Investments and assets are up. People seem to feel better about job security. The housing market is slowly recovering, and retirement projections look rosier. Strong stock market performance is good, in that it gets us closer to our goals; however, it can also breed a false sense of complacency.
Valuations are high and reaching points not seen since 2007, 1929, and by some metrics, even 2000.
Overvalued Stock Market
Stock markets become overvalued when stock prices rise at a much faster rate than earnings, which is what has occurred for the past several years due to the belief that the Federal Reserve’s quantitative easing policies will continue to force investors into stocks in order to get a decent return on their money; low-interest rates punish savers and cause them to seek yield by investing in increasingly speculative investments. But even members of the Federal Reserve are warning about frothy segments of the market as they tiptoe toward shutting off the quantitative easing spigot.
debt is increasingly being purchased on the basis of yield rather
than the careful evaluation of repayment prospects. John Hussman Hussman
The Cycles In Financial Markets
It is important to remember that financial markets move in cycles, and just because this multiyear stock market advance has been rewarding, it does not mean that it can continue indefinitely. In fact, the longer it persists, the greater the chance of a severe correction.
One way to evaluate whether or not the market is expensive is to look at the current PE10 or CAPE ratio. This valuation method was developed by Robert Shiller from Yale, and it historically has been helpful in forecasting market crashes as well as future rates of return.
This article in the WSJ “Yes, Virginia, You Can Time the Market” explains that, although no one can time the market with precision, using the Shiller PE as a method to modify your stock exposure by overweighting or underweighting by up to 30 percentage points has resulted in stellar returns since 1926.
The Prediction of Bubbles
It is a strategy, however, that requires patience. A high CAPE ratio can persist for years. It tends to have a better success rate for predicting 10-year future returns and is less accurate in predicting returns less than 5 years out. In fact, in 2000 it was over five years early in diagnosing an overvalued market. The article acknowledges that extreme market timing by moving all of your assets in and out of the market based on certain parameters is very difficult and not a recommended strategy. Using Shiller’s ratio, though, can provide some guidance in dialing down equities when markets are overvalued and dialing up exposure when markets are undervalued, thus protecting investors from large corrections and enhancing long-range returns. See the chart to the left.
John Hussman has been warning about stock valuations for years as the Shiller PE, as well as his additional proprietary methods, indicate that returns over the next decade will be roughly 2%, before inflation. His weekly commentaries are a must-read.
Make no mistake – this is an equity bubble, and a highly advanced
one. On the most historically reliable measures, it is easily beyond
1972 and 1987, beyond 1929 and 2007, and is now within about 15% of the
2000 extreme. The main difference between the current episode and that
of 2000 is that the 2000 bubble was strikingly obvious in technology,
whereas the present one is diffused across all sectors in a way that
makes valuations for most stocks actually worse than in 2000.
The question a rational and prudent investor should as himself is this, “ is it prudent for me to take additional risk in the stock market at this juncture, given such dismal future returns?” This is a particularly important consideration for those people who are looking to retire in the next 7-10 years, as well as those how have recently retired.
For more information on the Shiller PE and market valuations you may want to read the following:
If you know that you are not in complete control of your life, it is a good idea to listen to the discussion in the following article. Life is hectic. Day to day chores, work, and family obligations can keep us from our longer term aspirations. We may have goals that we set up at the beginning of the year or a timeline that we want to accomplish as we move through certain stages of our life, but these targets can seem elusive, if we do not occasionally take a realistic assessment of our progress. Perhaps, a quick 10 minute financial audit is a good place to start.
Take ten to reflect on your financial life and measure your financial “pulse” to see if you are in decent financial shape. Here are a few quick and easy questions for you to ask yourself to complete the review:
First, are you prepared for a catastrophe?
We all have family members, coworkers, and friends who have
experienced a job loss, death, or disability. We tend to think naively
that a similar event would never happen to us; but unfortunately, we are
not immune from hardship. Ask yourself the following specific
Is your job secure? If not, do you have at least 6 months cash to cover your expenses until you can find employment?
If you or your loved one were to die, would there be sufficient
insurance to cover your future living expenses such that you could
maintain your current lifestyle?
Do you have an updated will and other estate planning documents or
would there be chaos or confusion among your family members upon your
death or incapacity?
If the primary earner was to become disabled, how would you cover the lost income from his or her salary?
If you have group disability, will the after tax benefit be
sufficient to pay your monthly living expenses? (Disability benefits for
which premiums are paid with pretax dollars are taxable, whereas
benefits paid with after tax dollars are tax free).
Even if you were to cover the basics through a disability policy, would you be able to still save for retirement?
These are tough questions to ponder, but very important to consider,
just in case the unthinkable happens. The probability of a disability is
very real. Statistics show that just over 1 in 4 of today’s 20
year-olds will become disabled before they retire, and that of the 37
million disabled Americans(in 2013), 50% are in their working years (age
In fact, a typical non-smoking female, age 35, 5’4″, 125 pounds, who
works in an office job with some outdoor physical responsibilities, and
who leads a healthy lifestyle, has a 24% chance of becoming disabled for
3 months or longer during her career with a 38% chance that the
disability will last 5 years or longer. The typical male has a 21%
chance of becoming disabled with the same rate as females of a long term
disability (38%).* Of course, the risks are higher for people who do
not live a healthy lifestyle.
If you can’t answer the questions above, or you are concerned that
you are not protected in the event of an unforeseen circumstance, you
need to focus on risk management. You should immediately look into
additional insurance coverage to protect against these events.
Second, are you moving closer to your important life goals?
If you need to purchase a car or other large purchase in the near
future, are you gradually saving money in a separate savings account so
that you can pay for your purchase in cash?
Are you contributing annually to your kids’ college funding
accounts? It is best to start as early as possible so that you save
less each year. If you wait until the kids are in high school, there are
fewer years to save and the process will be much more onerous. Time and
dollar compounding make the process easier requiring that you save less
Are you saving at least 10% of your salary (not including your
employer contribution) for retirement and are you on track to retire? (A
basic rule of thumb is for a retiree to amass roughly 15 times their
income by age 65. By age 50, you should have about 6 times your income
saved; and at 40, 2.5 times your income saved.) If you are behind, you
will need to save more than 10%.
Third, do you understand what your invested in and why?
You should primarily be aware of how much exposure to the stock
market you have and if that makes sense given your age, goals, and
investing personality. Ultimately, you should have a low cost,
diversified portfolio of funds that you can stick with, even in the
event of a very large market correction.
You should also not be paying high fees for investment management and
for “active” funds. If you think you are paying too much or are worried
you have too many accounts that are spread over several investment
companies, you would likely benefit from cost reduction, consolidation,
Finally, do you have anxiety over any aspect of your financial life?
If there is something that is bothering you, it is important to
address it quickly and thoroughly so that you can sleep better at night.
Furthermore, if you are the kind of person that would find it hard to
quickly pull together your key financial documents such as recent tax
forms, investment statements, and insurance policies, you will likely
benefit from some financial housekeeping and coaching. Awareness and
intention are important elements for financial success. To this end,
you may find that working with a financial advisor or coach is a great
way to improve and enhance your financial security.
The financial planning process is a great way to create a roadmap for
your financial life. Working with a fee only CERTIFIED FINANCIAL
PLANNERTM professional is a great place to start. The planner can put
together a comprehensive plan and then meet with you to review the plan
on at least an annual basis. For my clients, each year I provide a
color coded financial “report card” that measures progress toward
specific financial goals in all areas of their financial life—insurance,
cash flows, college planning, retirement planning and estate planning.
We also review their portfolio, and discuss market valuations and the
very real and ongoing potential for markets to correct. This ensures
that the client is mentally and emotionally prepared for market
volatility and protects them against irrational behavior at market peaks
and troughs. A tax checklist is also reviewed to see if there are
opportunities to reduce taxes, both in the short and long term.
Annual reviews are an essential part of the financial planning
process. They provide feedback on progress and direction in response to
changes in financial markets and retirement and tax legislation. Most
importantly, they provide moral support and encouragement for the
client. The review forces clients to focus on their finances in an
I once told one of my long term clients that since she had been
coming in for years and her plan was in good shape, we could move to
less frequent reviews, say every other year, if she wanted. She
commented that she was happy to pay the fee for more frequent reviews,
as it forced her to pull her information together and give it a good
look every year. This annual exercise was meaningful for her and well
worth the time and investment.
At this middle age you might have thought about what you will become in 10 years, 20 years, even when you retire. However, for some people, they might just simply lead a life without a clear direction even if they are nearing their retirement age.
Many Baby Boomers are working long and hard in stress-filled jobs. After 20-plus years laboring in the same industry, performing the same duties day in and day out, they have gradually lost the passion they once had for their career. In a “flight or fright” response, they are reflexively expressing a desire to retire early and rid themselves of their daily toil.
This knee-jerk desire to tell their boss to “take this job and shove
it” often occurs due to a lack of purpose and passion in their everyday
life. Perhaps, rather than trying to retire at the age of “50
something”, these frustrated workers should instead consider redesigning
their work life such that it aligns with their core values. In doing
so, they may find work to be a source of pleasure and excitement as
opposed to a continued source of stress. Their physical health may
improve too, as studies show that continuing to work later in life can
significantly improve physical and mental well-being.
This blog was inspired by a presentation given by Randy Gardner, JD,
LLM, MBA, CPA, CFP(R) at the 19th annual Garrett Planning Network
retreat which I recently attended. Mr. Gardner emphasized that many
retirement plans, especially early retirement plans, fail because the
retiree does not have his or her “next step” configured.
A retiree’s ext step— Ask what am I retiring to?
A good question to ask oneself prior to retirement is, “what am I
retiring to?” It is extremely helpful to envision a typical day, week,
month in retirement. How will you fill your day? What is your purpose or
passion? And, better yet, why can’t you instill that passion in your
An early retirement can be hazardous to your health.
Gardner also cited research that suggests that an early retirement
may be hazardous to your health, as calling it quits early is highly
correlated to an increased risk of heart attacks as well as Alzheimer’s
In a study by the Institute of Psychiatry
at King’s college, London, researchers found that keeping the brain
active later in life reduce the chances of an early onset of
Alzheimer’s. In fact, there was a significant link between late
retirement and delayed symptoms. The researchers found no link between
education or employment and dementia risk, but found that those who
retired later prolonged their mental abilities above the threshold for
Furthermore, mortality rates increase with a reduction in the retirement age.
In a study out of the University of Zurich researchers found that a
reduction in the retirement age causes a significant increase in the
risk of premature death – defined as death before age 67—particularly
for males. According to the study, one additional year of early retirement, causes an increase in the risk of premature death of 2.4 percentage points.
Losing daily structure can lead to boredom, and chronic boredom is bad for your health.
Experts purport that the root cause of declining health in retirement
is due to a lack of purpose. Having a long and successful career
provides structure for the week and gives us all a reason to get out of
bed in the morning. Losing that structure can lead to boredom, and
chronic boredom is bad for your health.
In addition to these non- financial risks, the risk of longevity,
increased taxation, legislative changes to entitlement programs, and
poor market returns can hamper a retiree’s ability to receive adequate
Plus, let’s face it; the math of an early retirement can be daunting.
It is hard to work for 30 years and live off of your savings for
possibly the next 50 years. There is a good chance that you will need
to downscale your lifestyle in order to make your assets last.
How can a generation of burnt out Boomers respond to these ongoing pangs for an early retirement?
“Purpose perhaps is more important than exercise.”
Rather than retire early, Gardner suggests that burnt-out workers
instead instill purpose in their lives. In fact, he believes that
purpose is “perhaps more important than exercise.” Frustrated workers of
all ages owe it to themselves to design a career that engages them in
the things that they are passionate about. Since only 20% of workers
find their jobs to be engaging, they need to commit to strategies that
improve their work responsibilities and environment.
Mr. Gardner recommends that people engage in “job-crafting.”
Job-crafting is the process of redesigning your job in order to engage
in tasks, relationships, and intellectual pursuits that engage, excite and interest you.
Here are some tips I put together based on the job crafting concept
that will hopefully help you get started in creating your purposeful
career and life.
Find out which tasks you enjoy and try to incorporate them into your work.
If you would like to write, start a blog or newsletter for your company or industry. If you enjoy working in a team or competitive environment, see if there is an opportunity to join a task force in your company. If you enjoy working with your hands to create things, start a small business that allows you to do this or add these activities to your weekend to do list. During your vacations, engage in the pursuits that energize you. This will refresh you when you return to work.
Determine which relationships are most important to you and try to build these within your work day
It could mean that you need more time with peers whom you work with, or perhaps, you crave a connection with a more experienced mentor. You may need a study group or network of people outside your company but within your trade or industry to connect with. Increasing these connections can make you feel part of a larger group and also help you build bridges with colleagues across the country.
You may crave relationships that are outside of the workplace during
the week, so you should take the time to meet with friends for lunch or
dinner after work in order to get a break from the people you work with
Maybe you work by yourself in a home office and you need to be more
intentional about getting out and connecting with other professionals
like yourself. The point is that with some soul searching, you can
identify the things that frustrate you about your job and try to refine
them so that they work for you.
Although I am a solo practitioner, I really value the relationships I
have built over the years with other financial planners and industry
professionals I have met through the Garrett Network. They make me feel
like I am not alone and less isolated. I connect and engage with them
through webinars, study groups, and our annual meeting.
Re-engineering your work functions could give you a renewed perspective.
Finally, we are driven by curiosity and intellect toward various
careers or pursuits; periodically we need to be stimulated to nurture
our creativity and sharpen our intuitive skills. Performing our job
functions in the same way day in and out can make our skills stale.
Re-engineering your work functions can give you a renewed perspective.
Mentoring a younger employee new to the organization may also provide
you with a fresh outlook on your job as well as foster camaraderie.
Complete This “Passion” Exercise
In order to create you ideal career and personal life, I encourage you to:
Create long list of all of the things that you are passionate about. Compile this for all the areas of your life.
Pick the top ten things you are most passionate about from the list
Ask yourself—why do I enjoy this pursuit? Mr. Gardner encourages
people to be as specific and exhaustive about what aspects of their
passions they enjoy, as opposed to focusing on the activities
themselves. This particular step can provide rich insight into what
really excites us and makes us tick.
Create a long term plan to infuse your life with elements from your
passion list. We tend to get bogged down in short term thinking, which
can make us irrational and depressed when we don’t reach our goals
quickly. People who are able to think and plan longer term tend to be
more optimistic about their situation. In short, create a plan for the
next few decades as opposed to the next 365 days.
A valuable tool I recommend to my clients which helps them identify
their passions, is the Highlands Ability Battery test. Its premise is
that the skills or abilities that come naturally to you, tend to be the
ones that you enjoy. The function of the Highlands Ability Battery test
is to define each of your abilities and then determine the patterns or
“clusters” into which they fall. Armed with this knowledge, individuals
are able to avoid stress and achieve satisfaction with work.
Finally, remember that some stress can be a good thing. Stress is a
necessary emotion and intermittent stressful events are probably what
keep the brain more alert and enable you to perform better. Here is a related article on how successful people manage their stress.
Don’t plan your retirement to fail; instead, plan for passion. Not
only will your work seem like play, but it will also help you achieve
the financial independence you now crave.
Addressing a large and unresolved issue that had pended since 2008,
the Securities and Exchange Commission yesterday imposed new
restrictions on money-market mutual funds. The rules will perform a sort
of balancing act, reducing the risk of the $2.6 trillion industry, but
keeping intact the prime utility of the product. Asset management
companies, as well as the five-member SEC committee, have given the move
mixed reviews, with two members of the latter voting against the new
The SEC Commission has approved rules that require institutional
money market funds to implement floating share values and other
restrictions, such as restricting withdrawals and imposing redemption
fees of up to 2% if fund assets drop below prescribed levels. The
shares would float based on changes to NAV (changes to the underlying
market value of the fund’s assets). Currently, these funds have a fixed
price of $1 per share.
The New Rules
According to Mary Jo White, SEC chairwoman, these rules “will reduce the risk of runs in money market funds and provide important new tools that will help further protect investors and the financial system.” She went on: “Together, this strong reform package will make our markets more resilient and enhance transparency and fairness of these products for America’s investors.”
Wall Street Positively Affected
Wall Street seemed on the whole satisfied with the final results – which are a significant shift from the 2012 proposal. Then, former SEC Chairwoman Mary L. Schapiro wanted all funds to adopt the floating NAV practice or hold capital to absorb losses of any kind.
The rules were crafted in response to the 2008 financial crisis, when
corporate lending markets seized up in response to a lack of
liquidity. The new restrictions will hopefully help maintain capital
levels and keep markets operating smoothly during times of stress.
Individual Money Market Funds Not Affected
While the new floating share rules apply to institutional funds (both prime and tax exempt), they will not impact government and retail funds that are sold to individual investors. (Note that they will apply to institutional municipal money markets.) However, provisions for liquidity fees and redemption gates do apply to all funds, both institutional and retail.
For a definition of government and retail money market funds, the SEC provides this detail via a press release on their website:
Government and Retail Money Market Funds – Government and retail
money market funds would be allowed to continue using the amortized cost
method and/or penny rounding method of pricing to seek to maintain a
stable share price. A government money market fund would be defined as
any money market fund that invests 99.5 percent (formerly 80 percent) or
more of its total assets in cash, government securities and/or
repurchase agreements that are collateralized solely by government
securities or cash. A retail money market fund would be defined as a
money market fund that has policies and procedures reasonably designed
to limit all beneficial owners of the money market fund to natural
persons. A municipal (or tax-exempt) fund would be required to transact
at a floating NAV unless the fund meets the definition of a retail
money market fund, in which case it would be allowed to use the
amortized cost method and/or penny rounding method of pricing to seek to
maintain a stable share price.
One way this might affect individuals, is if they invest in
institutional money market funds through their 401K. It is likely that
most retirement plans will choose retail money market funds as a plan
option for this reason. This will affect small and large businesses
that use these accounts as short term funding for their day to day and
week to week operations.
The new rules will not go into effect immediately. Fund companies have two years to comply with the new restrictions.
Do you ever thought that your medical check up will change? I think, we all do and of course government has done it. They have tried to make some solutions. Health insurance has been made by government also private insurance company. And you can choose what is suit for you.
According to the Center for Medicare and Medicaid services, 70% of people over 65 will need long term care support at some point. Since health insurance and Medisupp policies do not pay for long term custodial care (Medicare only pays for up to 100 days of care in a skilled nursing facility), it is important that you have a plan to fund these costs, which can be exorbitant. You can choose to self-fund by spending your own assets or purchase a long term care policy. A less desirable option would be to rely on family members.
Is Medicaid The Solution?
Many people also incorrectly believe that they can rely on the
government through Medicaid to take care of them should they require
long term care. Unfortunately, this option is also not favorable. In
order to qualify for Medicaid eligibility, a patient must demonstrate
that they have very little income and limited assets. This will occur
once they spend down almost all of their cash and investments. If they
have a spouse, he or she will be left destitute. In addition, the
Medicare facilities that are available in your state, may not be ideally
located cost to family members nor provide the quality care you desire.
In order to gain some insight into the potential cost for care, Genworth publishes an annual cost study.
Given the above costs and the average length of a long term care event (3 years), a 65 year old couple from SC will need roughly $180,000 in extra assets now to fund the possibility that one of them will need nursing home care. This assumes 6% rate or return and 5% LTC inflation.
Baby Boomers Age Need More
As the Baby Boomers age, we will see an epidemic of dementia
patients. According to a recent article in Investment News, one out of
ten men and one out of five women will suffer from some form of
dementia. Furthermore, half of individuals over 85 are at risk of
developing Alzheimer’s. Future medical advances may help reduce the
risk, but at this point, there is no cure for Alzheimer’s. It is also
much harder to care for an Alzheimer’s patient and can require 24 hour
nursing care in the latter stages of the disease.
Although we don’t want to talk about being old and fragile and we
don’t believe we will ever be infirm, it is important to have this
discussion with our spouse or family members in order to determine the
best plan, if and when we do need care.
It is not easy to live in this life diffrent from many people. Especially if it about tradition, including how you spent your money on holiday. With the holiday shopping season well underway, the spirit of giving to family, friends and just causes comes with a high cost.
According to creditcards.com, the total U.S. consumer debt stands at $2.43 trillion for 2019, and falling into debt during the holidays is a reality for many. In fact, the National Retail Federation found that Americans spent $52 billion on Black Friday shopping this year.
Beware of the phony debt collector…
These days, falling behind on some bills is the new normal since so
many people are juggling unemployment checks or part time salaries. But
that opens the door for fake collectors to scam people out of credit
card numbers and bank account information. According to the Fair Debt
Collection Practices Act, a debt collector cannot threaten arrest, call
you after 9 p.m., at your place of work or contact others regarding your
debt. If so, that person may very well be a scam artist.
Don’t be ‘naughty’ with your credit cards…
Credit cards can be useful tools for consumers, but you have to be
careful not to abuse them during the holiday season. They can spell a
quick slide into unmanageable debt if misused. Creditcards.com reported
that the average credit card debt per household was $15,799 and the
average annual percentage rate on credit card with a balance on it was
13.10 percent, as of May 2019
Have no fear; help is on the way…
Not paying off debt can have other consequences besides having to
dole out extra cash due to a high interest rate. A lowered credit score
can affect your ability to snag a great deal on your next car,
appliance, home or other purchases – or may prevent you from obtaining
future credit altogether. According to the Consumer Financial Protection
Bureau, 70% of consumers surveyed say they have noticed new credit card
disclosures on their bills. But fewer than one-third say this caused
them to make bigger payments or stop charging up their cards.
The South Carolina Future Scholar 529 plan
is an excellent way for parents to save for college, but there are some
important rules to understand in order to ensure that you make only
“qualifying “ distributions, so that you don’t have a surprise tax
First and most importantly, make sure that you time distributions to coincide with expenses paid. The regulations are such that money not spent within a calendar year that it is withdrawn may be subject to taxes and penalties.
For example, say Pete Sr. receives Pete Jr.’s college bill in late November of 2013 for $10,000 for the Spring semester that starts January 15th, 2014. He decides to pay the bill in December, but with the hectic holiday schedule he forgets to withdraw the 529 funds in 2013. Instead, he requests the 529 distribution in 2014. His expenses don’t match the withdrawals for 2013 or for 2014. He will not be able to claim the distribution for the 2013 as it was disbursed in 2014 and the 2014 distributions will also not be qualified, as the expenses were paid in 2013. So if $10,000 was disbursed in 2014 and $3,000 of that was earnings*, the $3,000 would be taxable and a 10% penalty would be assessed.
Reimbursement Are Qualified
Second, you want to make sure that the expenses you are seeking
reimbursement for are qualified and are net of any scholarships or other
tax credits. Qualified expenses include tuition, books, and mandatory
fees and supplies in conjunction with enrollment in all eligible
institution. The student must also attend school at least halftime.
Say Mary Alice attends USC full time and her tuition, books, room and board are $10,000 a year for one semester. She also, however, receives $2,000 of scholarships a semester. Her parents should only withdraw $8,000, not $10,000.
Rent Is Consistent
Note: Rent for off-campus apartments is qualified as long as the rent
is consistent with on campus housing. If a student prefers cooking in
her apartment instead of the cafeteria, she can get reimbursed for meals
as long as the expenses are in line with the school’s cafeteria plan
charges. She will also want to keep receipts for any food and dining
expenditures in case of an audit.
Any taxable distributions are subject to a 10% penalty, but there are
exceptions. The 10% penalty will not be assessed if the distribution is
due to a death or disability. A more common exception is that no
penalty is assessed on any tax-free scholarships or fellowships. So,
although the earnings portion of any distribution will be taxed, the
penalty will be waived for an amount equivalent to scholarships or
grants received by the student.
So from the example with Mary Alice above, she will pay taxes on the
$2,000 of earnings if her parents withdraw the full $10,000, but no
penalty will be incurred.
*you don’t pay taxes or penalties on contributions, as they were
already taxed. 529 contributions are made with post tax dollars.
One of the most important aspects of retirement is traveling. It is a
number one priority for most of my clients and they often have very
ambitious plans. As part of my exercise to better understand client
bucket lists and goals I have them list the things they want to see, do,
and experience before they die.
Some common responses include travel to all the continents, visit all
of the state parks in the US, spend a month each year in Europe, and
travel in an RV around the country. Some of the more exotic destinations
that they want to explore are Bora Bora, Fiji, and the Galapagos
As people prepare for retirement, they need to put together a
realistic assessment and estimate of annual travel costs. Travel
expenses of $20K a year have a far different impact on your yearly cash
flow than $7K a year—and cash flow is king in retirement! A $10K
increase in spending can make a huge difference in whether or not you
will outlive your funds during your lifetime. Thus, it is essential to
be realistic about your goals, but also to try to save money on your
travel pursuits. Here are some tips and considerations for cutting your
First, determine how you will travel in retirement.
Will you go on a large overseas trip every three years with domestic travel in the off years? How many trips will you go on each year and for how long? Do you prefer several trips that span a long 4 day weekend or one large ten day trip? Would you rather have a second home in retirement and primarily travel to and from both locations, forgoing any additional travel? How much of your travel budget will be designated for visiting your children and grandchildren? Can you stay with family or friends when you travel to save money?
Use the information above to budget what your anticipated annual
costs will be in retirement. You can look at your current travel
spending and adjust your budget up accordingly based on your plans. If
you spend roughly $7,000 a year in travel and expect to double that in
retirement your budget would be at least $14,000 a year.
Remember that as we age we may not be as able or willing to travel.
You may want to decrease your budget in your 80s and possibly assume
that no major travel will be necessary in your 90s. This enables you to
“front load” your travel plans in the early years of retirement.
Regarding cutting costs, if you and your spouse or partner are both retired, you can travel at a moment’s notice and are generally more flexible regarding the times and dates. Considerable savings can be realized if you travel outside the peak time periods. Consider this when booking trips and flights.
Save Money on airfare
Use websites such as kayak.com and airfarewatchdog.com to comparison
shop airfares and book either well in advance to lock in low rates or
last minute to take advantage of timely deals. If you tend to fly a
specific airline for most of your flights, consider signing up for an
annual pass to their lounge. This will provide you with a comfortable
place to wait if your flights are delayed as well as provide you with
complimentary snacks and beverages. Use a credit card that provides
mileage bonuses or pays for baggage fees.
Save on accommodations
One site that features high end resort properties at deep discounts
is jetsetter.com. You can sign up for their newsletter to receive weekly
deals. Cruise lines also offer special deals to previous travelers if
they are under-booked, so make sure to get on their email list.
Another popular way to save serious money on accommodations is to
house or apartment swap with someone else. If you want to explore that
option, look into Homeexchange.com.
Airbnb.com also offers you lodging from private owners and has become
popular in high rent cities such as New York and San Francisco.
Another interesting app called Hotel Tonight allows you go book
unsold rooms last minute for that day at deeply discounted prices.
Of course never forget to use your AAA or AARP discount if you are a
member, and research your hotels and other lodging at Tripadvisor.com. I
find that the reviews are generally very accurate and can help you plan
a trip that fits your tastes and your budget. You can even check out
restaurant reviews to plan your meals.
Another fun planning tool is to create a board on Pinterest. You can
add all of your desired destinations to one board or create a board for
Finally, don’t hesitate to use a travel agent or service that
specializes in the destination you are interested in as they can often
provide you with an insiders’ perspective and save your time and money.
Perhaps, the word minimalism has become part of modern life today. Starting from the things in your home, even become one of the current home models. Modern minimalism is one of the words that you often find if you open a magazine or website about real estate you often get the word.
Start To Live Simple Life
Talking about the word minimalist, actually lifestyle can be included in that category. This time I will share my own life experiences that might be suitable to be called a minimalist modern lifestyle.
For a long time I have thought about giving away everything I own and starting over. Complete liquidation of assets — the creation of a tabula rasa for a capitalist system.
Living by only buying what I need
Somehow, I think you don’t miss the little things when you have nothing at all. “Boy, I sure would like to listen to my The Get Up Kids CD. Oh wait, I don’t have any CD’s.”
My parents really need to take this mentality to their refrigerator.
Just throw everything away, for chrissake — the dead fruits and
vegetables, the forgotten jars of relish and preserves. Begin again from
square one: “I would like to have eggs and orange juice for breakfast
tomorrow. I will go out and buy eggs and orange juice.”
Next day: “I would like to have hamburgers for dinner. I will go to the store and buy meat and bread and cheese and ketchup.” Then the next time you want hamburgers, you already have ketchup. When that bottle runs out, you go buy a new one, as opposed to having two already open and barren bottles somewhere in the fridge that nobody wants to use, coupled with the brand new bottle that was bought in ignorance of the first two (please tell me everyone else’s parents do this too).
Imagine approaching your entire life like this — “I need a car to get
to work. I will go buy a car. Oh wait, I need clothes to wear to work. I
will go to the mall and buy clothes.” Granted, you spend a few days
walking around town hungry and naked until everything falls into place,
but isn’t that a small price to play for a lifestyle of minimal
Just think about it-no more dozens of unworn T-shirts cluttering up
your drawers. No more stacks of unread books and magazines. If you need
something it’s there waiting for you. Otherwise, well, what good was it
doing you anyway?
When I figure out how to get people to buy all the crap I have accumulated in two decades, you all will be the first to know.