This Week In Your Wallet: Officially Meet myRA
This week, we’ve got news on retirement, interest rates and how pricey your lunch likely is. Before we jump in, though, I wanted to reach out and ask if any of you would like a spending detox before we head into the holidays? I’m working on a TODAY show series and am looking for a few folks who’d like to trim their spending — and work with me to do it. If that’s you, please send me a note (today) at jean@jeanchatzky.com. Now…the news.
About half of all American workers don’t have access to 401(k)s or pensions at work. If you’re one of them, meet myRA, the new retirement savings account backed by the federal government and geared towards millions of workers like you. There are, as with the Roth IRA, income limitations. To qualify, singles need to earn less than $131,000; married couples less than $193,000. This all comes after a year-long pilot program, though ICYMI: We first heard of myRA in last year’s State of the Union address.
If you decide to opt in, CNNMoney says there are three ways to take this on. First – if your employer offers direct deposit – you can transfer after-tax dollars from your paycheck into your account (without a pit stop in your bank account). You can schedule one-time or regular contributions from a checking or savings account. Or, you can elect to funnel some of your federal tax return that way.
The myRA has no fees or minimum balance requirements. And you don’t have to worry about losses. The government guarantees your principal, which is invested into a Treasury Securities Fund that offered a return of 2.3% last year – and an average 3.2% over the last 10 years. Like a Roth IRA, you can withdraw your contributions at any time, however you’ll be penalized if you take out your earnings from interest before age 59 1/2 (with a couple of exceptions including using the money to buy a first house or pay for college).
You can contribute up to $5,500 a year (or $6,500 if you’re 50 or older). If you’re simultaneously contributing to a traditional IRA or Roth, your total contributions to all of your IRAs cannot exceed those caps. Finally, once your myRA balance hits $15,000 (or has been open for 30 years) you’ll need to transfer your earnings into a private-sector Roth.
Yellen: “A Live Possibility”
Last week Fed Chairwoman Janet Yellen told the House Financial Services Committee that if the U.S. economy continues performing well, raising interest rates in “December would be a live possibility.” For my Fortune column on the matter, I spoke with Mark Zandi, Chief Economist of Moody’s Analytics, who said that assuming Friday’s jobs number came in at more than 150,000, they’d raise in December. Well, it came in (hot) at 271,000. Following December’s (now likely) raise, Zandi predicts a slow pace of rate increases (maybe three or four times) in 2016, and a more aggressive stance in 2017 and 2018 with a target of 3.5%.
So what are investors to do? Your answer depends on how far away you are from retirement. If you’re 20 or more years away from retirement, then having a balanced portfolio with more in stocks is a safe bet. Now, if you’re only several years away, Zandi suggests beefing up your cash position (e.g. if you’ve been sitting at 5-10%, move up the dial to 25%). Continue reading on Fortune.com.
Countering Makes Cents
When your current employer offered you your job and salary, did you counter? Half of all job applicants say they happily accept the first offer extended to them — without countering for a higher salary. That’s several thousands of dollars a year you could miss out on (In fact, recent research shows job applicants who negotiate can increase their starting salaries by an average of $5,000.)… And not trying breaks Money Rule No. 4: If you don’t ask for more money, the answer will always be “no.” Watch the full video on Bankrate.
Your $3,000 Lunch Tab
A new survey from Visa reveals the average American spends $2,746 a year on lunch – this includes the costs for both dining out and groceries for brown bagging it. Overall, Americans are heading out for lunch just a couple of times a week, but it costs them almost twice as much as bringing food from home — $11 vs. $6.30, respectively. Enter: An opportunity to save.
Use these numbers to check in on your own lunch bill, and even better – as we near 2016 – have it be a part of an annual financial checkup. USA TODAY has a checklist for you to run through, and one is finding opportunities to up your retirement savings towards the end of the year. Perhaps this could be one of them. If you’re dining out everyday, you can bag extra savings (literally) by rotating in a homemade lunch. So, for example, let’s say you’re the average and dine out twice a week, spending $11 an outing. By switching to homemade, you’d save $9.40 a week, or almost $500 a year, which could go straight into a myRA account or an IRA.
Have a great week,
Jean
