Monday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: How to make saving for retirement less miserable. Also in the news: The best type of financial plan, refinancing your student loans, and four ways to cut the cost of life insurance.

How to Take the Misery Out of Saving for Retirement
It doesn’t have to be painful.

The Best Financial Plan is the One That Motivates You to Take Action
Motivation could be the key to success.

How to Decide If You Should Refinance Your Student Loans
Navigating the murky waters of refinancing.

4 Ways to Cut the Cost of Life Insurance
Don’t pay more than you have to.

What “secret millionaires” can teach us

Zemanta Related Posts ThumbnailThis column first appeared on DailyWorth under the headline “Lessons from secret millionaires.”

Eugenia Dodson grew up on a Minnesota farm, the daughter of poor Swedish immigrants. Her childhood poverty affected her so profoundly that even in her old age, she refused to replace a stove with only one working burner — even though by then she was worth tens of millions of dollars. Dodson, who left nearly $36 million to the University of Miami when she died in 2005 at age 100, is just one of many secretly wealthy people who live quiet, frugal lives and then leave unexpected fortunes to charity.

I’ve been collecting stories of such secret millionaires for years now. Some are men, though the women interest me more, as females usually earn less, invest more conservatively and wind up poorer in retirement. These women break that mold. Here’s what we can learn from them.

They’re not born rich

Secret millionaires can be farmers, school teachers or, in Dodson’s case, a hairdresser. Dodson eventually opened her own beauty shop after she moved to Miami in the 1920s at the urging of a high school friend, according to her attorney, Donald Kubit. She made it through the Great Depression living simply and frugally, habits she continued through her life. “I had no idea when I met her that she was a woman of such wealth,” says Kubit, who met Dodson in her nineties.

Buy and hold works

Secret millionaires are often heavily invested in stocks — the one type of investment that consistently beats inflation over time. Many favored well-known, blue-chip companies. Margaret Southern, a retired teacher of special-needs children in Greenville, S.C., preferred household names like 3M, General Foods and Heinz that paid dividends, according to a story about her in the Greenville News. Southern reportedly liked having the dividend checks to buy whatever she wanted. When Southern died at 94, she bequeathed $8.4 million to the Community Foundation of Greenville to benefit children and animals.

Let it grow

Long lives mean that even small amounts invested over time have the decades they need to grow into real wealth. (As an example, $10,000 can grow to $100,000 in 30 years with an 8 percent average annual return, which is a typical long-term gain for stocks. In 40 years, that $10,000 would grow to $200,000. In 50 years, you’d have nearly $500,000.) You can’t control how long you live, but you can take advantage of long-term compounding by starting to invest as early as you can and leaving the money alone to grow.

These secret millionaires tend to be pretty vital, too: Elinor Sauerwein of Modesto, California, painted her own house, mowed her own lawn and harvested her own fruit from atop a ladder into her nineties, according to an ABC News report. Sauerwein left $1.7 million to the Salvation Army.

Don’t live too poor

Living below your means is essential to growing wealth, but it is possible to go overboard. Helen Dyrdal of Renton, Washington lived with broken furniture and wore tattered clothes, leaving her best friend with the impression she was impoverished, according to a KOMOnews.com report. Dyrdal was actually worth more than $3 million, which she left to Seattle-area charities when she died at 91.

Eugenia Dodson, meanwhile, was desperate to find a cure for diabetes, the illness that killed her two brothers. That’s why she gave two-thirds of her fortune to the University of Miami’s Diabetes Research Institution Foundation. (A lung cancer survivor, Dodson left the other third to the university’s cancer research center.) But she wasn’t able to give money away during her lifetime, Kubit says.

“She would have been treated royally by her charitable beneficiaries,” Kubit says. “But she was always afraid that she might need the money.” If Dodson, Dyrdal and other secret millionaires had been able to address their fears about money, they may have died a bit less wealthy — but they might have been happier. The best part of money is enjoying it while you’re alive, even if you want to benefit others when you die.

Please check out my other DailyWorth columns here.

 

Wednesday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story : How to avoid annoying mortgage hurdles. Also in the news: A financial health checkup, how to keep your online tax returns safe, and what to do if you win tonight’s Powerball jackpot.

4 Annoying Mortgage Hurdles & How to Overcome Them
How to have all your ducks in a row.

The 4 Most Important Money Issues That Determine Your Financial Health
Time for a temperature check.

Tips for Keeping Online Tax Returns Safe From Thieves
How to protect your money and your information.

What You Should Do If You Win the Powerball Jackpot
Besides fainting from shock.

10 Simple Money-Saving Tips That Carry A Big Bang At The End Of The Year
Small actions that could lead to big savings by the end of the year.

Q&A: Maxing out retirement savings

Dear Liz: My husband and I are in our late 40s. We’re in a good financial position and trying to max out our retirement savings. We have small traditional IRAs and are now above the income limit to deduct contributions to it. We have Roth IRAs that we converted from traditional IRAs several years ago (our income is borderline for being able to contribute directly to a Roth). We also recently got a Health Savings Account that we are maxing out and saving for retirement. But the bulk of our retirement savings is in our 401(k)s, which we max out every year. I hear I should have a mix of pre-tax and after-tax sources of income in retirement. Can I wait until the first year we retire and roll some of my 401(k) into a traditional IRA and then convert it to a Roth, at presumably a lower tax rate due to lower income? Or would it be better to contribute now to a Roth 401(k) at work instead of a regular 401(k), even knowing that our tax rate will probably be lower in retirement?

Answer: You already have a mix of pre- and after-tax sources of income in retirement. Withdrawals from your Roth IRAs will be tax free in retirement, as will your HSA withdrawals if they’re used for medical expenses.

Roth conversions and contributions to Roth 401(k)s make the most sense when you expect to be in a higher tax bracket in retirement, rather than a lower one. Otherwise, you’re giving up a tax break now (your deductible contributions) for what’s likely to be a lesser tax benefit later. Conversions at retirement are particularly tricky, since you may not have decades of tax-free compounding ahead of you to make up for the fact that you accelerated the tax bill.

Talk to a tax pro, but it’s likely that maxing out your regular 401(k)s is the best move.

Friday’s need-to-know money news

HealthCare-Medical-Identity-TheftToday’s top story: What to do if you’re an Anthem insurance customer. Also in the news: TurboTax stops state filings, how your own personal lottery can add up to big savings, and how your pet can fetch a tax deduction.

Millions of Anthem Customers Exposed: What It Means for You
Find out what you should do if you’re an Anthem customer.

TurboTax halts state filings amid fraud outbreak
What this means for TurboTax customers.

Pay Your Own Personal “Lottery” to Save Money Regularly
Then ten dollar a day habit that could add up to big bucks.

How Your Pet Can Dig Up a Tax Deduction
A deduction, not a dependent.

4 frequent flier mile pro tips that anyone can use
Getting the most from your miles.

Friday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: Why you should treat your savings like the government treats your taxes. Also in the news: The hidden costs of your shopping habits, a 12-month guide to staying on the right financial track, and how to optimize your student loans in the new year.

Treat Savings Like a Tax to Ensure You Do It
Government-style savings.

The Real Cost of Your Shopping Habits
“The road to bankruptcy is paved with good deals.”

Your 12-Month Guide to Staying on the Right Financial Track in 2015
Taking it month-by-month.

5 Ways to Optimize Your Student Loans in 2015
How to cut costs and pay them off sooner.

Does Everyone Need a Credit Card?
You’d be surprised.

Wednesday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: A month-by-month guide to staying on financial track. Also in the news: How to avoid making a big financial mistake, why you should consider a “money diet”, and how to simplify your 2015 finances.

A month-by-month guide to staying on financial track in 2015
Taking it one month at a time.

Don’t Make This Big Personal Finance Mistake
Why not having a credit card could do more harm than good.

Spending Hangover? Time For A Financial Cleanse
Clearing the financial fog.

Consider a Month-Long “Money Diet” to See How Savings Add Up
No cheating.

5 Ways to Simplify Your Finances in 2015
How to make things easier.

Tuesday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: How to choose your first credit card. Also in the news: Creating a secret financial goal number, unnecessary purchases that are killing your budget, and how to decide between a bank or a credit union.

You’re Finally Getting Your First Credit Card: How to Choose
Finding the card that best suits your needs.

Create a “Secret Number” to Make Your Financial Goal More Specific
Having a personalized number will help keep your goal in sight.

10 Unnecessary Purchases That Are Eating Up Your Budget
Small everyday purchases can add up to big bucks.

The Pros and Cons of a Credit Union Versus a Bank
Which one is right for you?

5 New Year’s Resolutions to Save on Taxes
How to keep more money in your pocket instead of the government’s.

Wednesday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: What the experts think you should do with you money in 2015. Also in the news: Saving money on winter driving, tax strategies to use before the end of the year, and how to survive living paycheck to paycheck.

Here’s What the Experts Are Saying You Should Do With Your Money in 2015
New strategies for the new year.

5 Ways to Save Money, Your Sanity for Winter Driving
Surviving the winter in one piece.

11 year-end tax strategies to use before Dec. 31
Tick tock.

Living Paycheck to Paycheck: 7 Strategies for Survival
Getting through the tough times.

7 Holiday Savings Tips for Newlyweds
Your first holiday together doesn’t have to break the bank.

Tuesday’s need-to-know money news

santa-3-resized-600Today’s top story: How your procrastination is costing you money. Also in the news: Holiday shipping mistakes to avoid, which report you need to read before buying a house, and the digital piggy bank that could finally convince you to start saving.

5 Ways Procrastination Costs You Money
Time equals money.

Don’t make these costly shipping mistakes this season
The gifts were expensive enough.

The Report You Should Ask For Before Buying A House
Get a C.L.U.E.

This Digital Piggy Bank Could Finally Get You To Start Saving
Meet your new savings pal.

The Best Way to Tap Your IRA In Retirement
Using your IRA strategically.