This Week In Your Wallet: How Far $1 Million Will Go
How are you seeing things today? Like many (perhaps even most) of you, I caught a few minutes of the total eclipse yesterday. Here in suburban NYC, we weren’t in the path of totality, but it was still a nice reminder that even in what seems like a period of volatility (capped off by the President’s announcement about our involvement in Afghanistan last night), there are things that are bigger than we are.
These are the kind of things that make you take a step back and reflect. Financial journalist Paul B. Brown co-authored a couple of books on retirement in his 30s and 40s, and now that he’s over 60 and nearing retirement himself, he did just that. I loved his piece in The New York Times where he acknowledged that he wouldn’t change the advice he’s given in the past — he’d just give it with more empathy (and maybe some more real-world experience). One example? “I wrote it was just a no-brainer to work until age 70, if you can,” he writes. “While my math was right, what I now realize is just how hard it is to keep working as you age.” (That couldn’t be more true. AARP has documented that while most people say they plan on working — for pay — in retirement, only about 25 percent are finding it’s actually possible.)
That means you need to lean harder on the advice to save as much as you can now to plan for later, taking full advantage of employer matching dollars (if they’re offered) and trying to nudge up contributions by 2 percent a year until you’re consistently putting away 15 percent of what you’re earning. If that’s not possible based on your standard of living, you can look at making a bigger lifestyle shift now (i.e. downsizing or moving) to enable you to save more. Or you can plan to do it when you actually leave your day job. GOBankingRates outlined how far $1 million will go in each state for retirement. On one end of the spectrum: $1 million should last about 11 years and 11 months in Hawaii. On the other: Mississippi retirees can probably stretch the sum for 26 years and four months. Ole Miss sounds pretty good to me.
Double The Debt
Just as I’m packing up my daughter to head back to college — and I know many of you are doing likewise — CNBC is out with these distressing facts: The percentage of college graduates owing $20,000 in student debt has doubled in ten years. The percentage of borrowers with $50,000 in student debt tripled in the last decade. And outstanding student loan balances are nearing $1.4 trillion. Ouch.
That’s why the spate of states offering workarounds has been capturing our attention. Following New York, Oregon and Tennessee, Rhode Island recently made community college tuition free for qualifying students by way of The Promise Scholarship, reports CNN Money. It’s a four-year pilot program starting this fall, and eligible students must be state residents, have graduated high school or received their GED the previous spring and stay enrolled full-time while maintaining a 2.5 GPA. Another requirement is that students who accept the scholarship must live, work or continue their education in the state after graduation. The Penny Hoarder has more information on the other three states offering this type of scholarship.
And note: If you’re on the flip side of racking up debt and are now dealing a soon-to-expire grace period and starting to repay what you owe, services like Student Loan Hero also allow you to organize your loans in a dashboard-like overview. Make sure every lender has your correct contact information — this is important so you don’t get any negative surprises down the line — and for each loan, take your other fixed expenses into account and see if you can afford payments. If you’ve got federal loans, you may be able to make your payments more affordable by opting for an Income-Based Repayment program. Refinancing to lower your interest rate is also an option to consider (there’s a list of refi options at MagnifyMoney.com). Just note that if you refi a federal loan with a private lender, you lose the option to dive into income-based federal options, as well as deferment programs that put your payments on pause.
Materialism Hits At Middle School
If you’re sending younger kids back to school? We found some interesting research showing that materialism often rears its head around the time of middle school. Avoiding a few parenting strategies can help keep your kids grounded, according to a study from the University of Missouri. Things to steer clear of: rewarding kids with things, showing affection by way of material items and punishing kids by taking items away. And overall, for kids to learn how to manage money, they need to have some of it. Using an allowance as a teaching tool is a good first step. You can find my recommendations for how much to give at each age range in my recent TODAY segment and this NBC News piece.
Blast From The Past Updated
Finally, for everyone who wanted a Mystery Machine of their very own, I’m delighted to be able to tell you that the folks at VW are rolling out an electric version of their Microbus. Sadly, it won’t be here until 2022. Happily, that gives us time to open automatic savings accounts and start amassing slush funds for that future purchase. (Note to purists: Yes, I’m aware the Scooby-and-friends-mobile isn’t exactly the same. It is in my mind.)
Have a great week,
Jean
