Get smart with your money
How to Manage Your Elderly Parent’s Money
Protecting elderly parents from identity theft.
The Best Personal Finance Tips from Evil Millionaires
Who better to learn from?
How to Make Smart Benefits Choices for 2014
How to approach open enrollment season for 2014.
7 Tips to Cut Flight Costs During the Holidays
How to arrive at your holiday destination for less.
Treasury Loosens Rules on Health Spending Accounts
Up to $500 can be rolled over to the next year IF your company offers the option.
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Tips on tipping.
Today’s top story: Tackling your financial fears. Also in the news: How to trust your financial advisor, curbing holiday spending, and how to sell your haunted house.
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It’s time to face your fears head-on.
How Do I Know I Can Trust My Financial Advisor?
Trust is key.
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3 Ways to Curb Pre-Holiday Money Stress
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Real Haunted Houses: What Owners Need to Know
How to sell your house and the spirits hanging out in the attic.
Today’s top story: What veterans need to know about VA mortgages. Also in the news: Generation Y and retirement, the dangers of car title loans, and what the World Series and retirement have in common.
What Veterans Need to Know About Getting a Home Loan
Navigating the world of VA mortgages.
Retirement Tip for Gen Y: Save Now!
Taking control of your financial future.
The Consumer Perils of a Car Title Loan
Easy money can come at a huge price.
7 Things the World Series Can Teach Us About Retirement
Be prepared for extra innings.
The five worst things you can do with your money
Short of just setting it on fire.
Dear Liz: I’m in my late 60s and plan to retire in about two years. I have a pension that will pay close to my current take-home income. I also have about $500,000 in annuities and IRAs. These plus Social Security make retirement look good. But right now finances are tight. Should I continue to put $1,300 a month into my retirement plan or use that money for expenses and travel now — while we’re still relatively young?
Answer: You appear to be in the fortunate position of being able to try a “practice retirement.”
The term was created by mutual fund company T. Rowe Price after it discovered that people who have saved substantial amounts for retirement by age 60 may not have to save much more to have a comfortable retirement. Just putting off the day when they take Social Security and tap their retirement funds may be enough. That’s because Social Security benefits grow about 7% to 8% a year, plus inflation adjustments, for each year you delay starting your checks. Not starting retirement plan distributions also allows your nest egg to grow, and the delay shortens the length of retirement you’ll need to cover.
T. Rowe Price found that people who have saved four to eight times their annual income by their early 60s may be able to crank back on their retirement contributions. Instead, they could use the money to “practice retirement” by taking some trips and doing some of the other things they had planned for golden years while continuing to work.
The company recommends practice retirees continue to contribute enough to employer retirement plans to get any available match (it’s free money, after all), while delaying the start of Social Security to age 70 if possible.
T. Rowe Price researchers assumed that its practice retirees would live only on their savings and Social Security. The fact that you have such a generous pension means you may not need as much saved as they recommend. In any case, if this idea appeals to you, run it past a fee-only financial planner who can review your situation and ensure the plan is viable for you.
Dear Liz: I’m beginning to realize that I have no idea how to budget. I make plenty of money but always seem to come up short. I’m trying to find the best person to help me make a budget. Do I talk to a CPA or a financial counselor? If so, how do I find the right person?
Answer: Budgeting has three basic steps: figuring out where your money is going now, deciding where you want it to go in the future, and monitoring your spending to make sure you stay on track with those goals.
Just because something is simple doesn’t mean it’s easy, however. People often fail to account for predictable but irregular expenses, such as car repairs. Once those crop up, the budget is thrown into disarray and people often give up on the spending plan.
Budgeting also can be difficult if you’re overspending on your overhead. If too much of your income is going for basic expenses, you may not have enough left over to live a comfortable life, pay off debt and save for the future, regardless of how many other expenses you trim. People who spend too much on shelter (mortgage or rent) and transportation (car payments and attendant costs) in particular often find they can’t create a balanced budget. Your “must haves” — shelter, transportation, food, utilities, insurance and minimum loan payments — ideally should be 50% or less of your after-tax income to create a workable budget.
Some people find that online solutions, such as the Mint.com financial tracking site, are enough to get them started with a budget. Other people need hands-on help. If your tax pro or financial advisor has experience helping people create and monitor budgets, that’s certainly one place to turn. Otherwise, check to see whether your local community college offers basic money management courses. Another option is a nonprofit agency affiliated with the National Foundation for Credit Counseling at http://www.nfcc.org. Many of these agencies offer classes or hands-on help creating budgets.